Explanation

The FDD discloses consistent and significant growth in the number of franchised outlets over the past three years. While growth can be positive, rapid expansion can sometimes strain a franchisor's ability to provide adequate support, training, and resources to all franchisees. You should verify that the support infrastructure has scaled effectively along with the system's growth to ensure you receive the assistance necessary for your success.

Potential Mitigations

• Speaking with franchisees who opened at different stages of the company's growth can provide insight into the consistency of support.
• A business advisor can help you evaluate whether the franchisor's support team and resources seem adequate for the current system size.
• Your accountant should review the financials to see if investment in support infrastructure corresponds with the growth in franchise sales.

Explanation

This specific risk was not identified in the FDD package. The franchisor, Two Maids, has been in operation since 2013 and is part of a large, established parent company. However, when evaluating any franchise, it is important to consider whether the system is new or unproven, as this can increase risks related to brand recognition, operational support, and the franchisor's long-term stability.

Potential Mitigations

• For any franchise, a thorough review of the franchisor's history in Item 1 with your attorney is crucial.
• A business advisor can help assess the maturity and stability of a franchise system, regardless of its age.
• Consulting with an accountant to review the financial track record in Item 21 provides insight into the system's viability.

Explanation

The residential cleaning industry is well-established, not typically considered a fad. However, success depends on adapting to market trends and competition. The FDD indicates a competitive market including both local businesses and national franchises. Your long-term success will rely on the franchisor's ability to maintain a competitive advantage and brand relevance, and on your ability to execute the business model effectively in your local market.

Potential Mitigations

• A business advisor can help you research the long-term stability and competitive landscape of the residential cleaning market in your area.
• Discuss the brand's strategies for innovation and staying competitive with current franchisees.
• Your own market research should be conducted to validate sustained consumer demand for this type of service.

Explanation

This risk was not identified in the FDD package. Item 2 details the business experience of the management team for both Two Maids and its parent company, Home Franchise Concepts, LLC. The executives listed appear to have considerable experience in franchising, brand management, and related industries. When evaluating any franchise, however, you should always assess the depth and relevance of the leadership team's experience as it directly impacts the quality of support you may receive.

Potential Mitigations

• With any franchise, it is wise to have a business advisor help you research the backgrounds of the key management personnel listed in Item 2.
• Speaking with current franchisees can provide valuable insight into their perception of the management team's competence and support.
• Your attorney can help you understand the roles and responsibilities of the key executives as described in the FDD.

Explanation

This specific risk was not identified in the FDD package. Item 1 clearly discloses the parent companies, Home Franchise Concepts, LLC and JM Family Enterprises, Inc. Furthermore, the financial statements provided in Exhibit B are for the franchisor entity, Two Maids Franchising, LLC, and include detailed notes on related party transactions with the parent. This level of disclosure appears to meet regulatory requirements.

Potential Mitigations

• An accountant's review of Item 21 is always critical to confirm the financial health of the specific franchising entity you are contracting with.
• Your attorney should verify that the disclosures regarding parent companies and affiliates in Item 1 appear complete.
• Always ask a business advisor to help you understand the relationships between the franchisor, its parent, and any affiliates.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. Therefore, you do not face risks associated with an undisclosed or troubled history from a prior entity. This can simplify due diligence, as the operational and legal history is contained within the current franchisor entity.

Potential Mitigations

• Confirming the lack of a predecessor with your attorney is a good practice during your FDD review.
• A business advisor can help you focus your due diligence on the track record of the current franchisor entity and its management.
• An accountant can analyze the existing financial history in Item 21 without needing to account for a predecessor's performance.

Explanation

This risk does not appear to be present. Item 3 discloses one past administrative action from 2006 involving an affiliate, Aussie Pet Mobile, which occurred under previous ownership. There is no disclosure of a pattern of recent or franchisee-initiated litigation against Two Maids alleging fraud or misrepresentation. The lack of significant, recent, or systemic litigation is a positive indicator, but you should always consider any legal actions disclosed.

Potential Mitigations

• Your attorney should always review Item 3 to assess the nature and potential impact of any disclosed litigation, even if minor.
• A business advisor can help you put any disclosed litigation into a broader business context.
• Asking current franchisees if they are aware of any widespread disputes can provide additional insight.