Explanation

This risk was not identified in the FDD package. While the system has grown its company-owned outlets significantly through acquisitions, the franchised unit count has decreased. Rapid growth can strain a franchisor's ability to provide adequate support, so it is important to assess if their infrastructure can handle their operational scale. Franchisee support quality can diminish if a franchisor overextends its resources during expansion.

Potential Mitigations

• Inquire with current franchisees about the quality and timeliness of support you can expect from the franchisor.
• A business advisor can help you evaluate whether the franchisor's corporate structure seems equipped to support the current system size.
• Your accountant can review the financial statements to assess if resources are being allocated to franchisee support systems.

Explanation

This risk was not identified. Gimex Properties Corp., Inc. (Gimex) and its predecessors have been in the automotive service business since 1986, indicating a long operational history. However, the current franchisor entity, Gimex, was acquired by the Mavis Tire family of companies in 2016. While the brand is established, you should still evaluate the parent company's management and strategy, as they can significantly influence the system's direction and your potential for success.

Potential Mitigations

• Conduct extensive due diligence on the management team's experience in both the industry and in franchising with your business advisor.
• Speaking with franchisees who have operated both before and after the 2016 acquisition could provide valuable insight.
• An accountant's review of the affiliate's financial statements can help assess the current financial stability under the new ownership structure.

Explanation

This risk was not identified in the FDD package. The automotive repair and maintenance industry represents a long-standing consumer need rather than a fleeting trend. However, you should still evaluate how the franchisor is adapting to industry changes like electric vehicles. A business that appears stable can still be threatened if it fails to innovate, so assessing the franchisor's long-term strategy is important for any franchise investment.

Potential Mitigations

• Assess the long-term market demand for the specific services offered with your business advisor.
• Evaluate the franchisor's plans for innovation and adaptation by speaking with existing franchisees.
• Consider the business model's resilience to economic downturns with your financial advisor.

Explanation

The management team detailed in Item 2 appears to have extensive experience in the automotive service industry and with the franchisor or its affiliates. For example, key directors have been with the parent company since 2012, and the Director of Marketing has been with the Tuffy system since 2003. This level of experience may indicate a stable leadership team with deep knowledge of the business, which can be a positive factor for franchisee support and system strategy.

Potential Mitigations

• A thorough review of the backgrounds of the key management personnel with your business advisor is still a prudent step.
• When speaking with current franchisees, inquire about their direct experiences with the management team's competence and accessibility.
• Your attorney can help you understand the roles and responsibilities of the individuals listed in Item 2.

Explanation

Item 1 identifies Tuffy Associates Corp. as the franchisor's predecessor. The document appears to provide the required historical information. However, a deep history involving predecessors can sometimes mask underlying issues that carry over to the new entity. Understanding the full lineage of the brand and system is an important part of due diligence, as past performance and issues can be indicative of future challenges.

Potential Mitigations

• Ask your attorney to carefully review the predecessor information in the FDD for any signs of past trouble.
• If possible, a business advisor can help you research the predecessor's public track record for any news or franchisee complaints.
• When speaking with long-term franchisees, ask about their experiences operating under the predecessor entity.

Explanation

This risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. While the absence of litigation is a positive sign, it does not guarantee a dispute-free history, as some disputes may be settled before a lawsuit is filed. It remains important to conduct due diligence with current and former franchisees to understand the franchisor's relationship with its network.

Potential Mitigations

• Your attorney can conduct a public records search to confirm the absence of significant litigation beyond what is disclosed.
• Discuss the franchisor's dispute resolution history with a broad selection of current and former franchisees.
• A business advisor can help you evaluate the overall health of the franchisee-franchisor relationship.