Explanation

This risk was not identified in the FDD package. The data in Item 20 indicates a very low franchisee turnover rate over the last three years, which is a positive indicator for system stability. High turnover can often signal systemic problems, such as franchisee unprofitability, dissatisfaction, or poor franchisor support. It is a critical metric for assessing the health of a franchise system.

Potential Mitigations

• To confirm the positive data, you should still contact a representative sample of current and former franchisees from the lists provided in Exhibit C.
• Your business advisor can help you formulate questions for these franchisees regarding their satisfaction and profitability.
• Ask the franchisor about the support systems in place that contribute to high franchisee retention, with help from your business advisor.

Explanation

This risk was not identified in the FDD package. Item 20 data shows a large, mature system with stable, not excessively rapid, growth. Uncontrolled growth can strain a franchisor's ability to provide adequate training and support to all franchisees. It is a potential risk in younger or aggressively expanding systems, where support infrastructure may not keep pace with unit sales.

Potential Mitigations

• It is still wise to discuss the franchisor's franchisee support structure with current owners to ensure it is robust and responsive.
• Your business advisor can help you evaluate whether the franchisor's management team and support staff seem adequate for the current system size.
• Asking the franchisor about their future growth plans can provide insight into how they manage system expansion.

Explanation

This risk was not identified in the FDD package. LIVING ASSISTANCE SERVICES, INC. (LAS) has been franchising since 1998 and has a large, established system with over 500 outlets. The business model is proven, and management has extensive experience. An unproven system presents higher risks, including the potential for an unrefined business model, inadequate support, and minimal brand recognition, which do not appear to be primary concerns here.

Potential Mitigations

• Even with an established system, speaking with franchisees who joined at different times can provide a broad perspective on the system's evolution.
• A business advisor can help you analyze how this mature brand is positioned against newer competitors in the market.
• Reviewing the company’s financial history with your accountant will offer a clear view of its long-term stability.

Explanation

This risk was not identified in the FDD package. The non-medical home care industry serves a growing demographic of aging adults and is based on sustained consumer need rather than a short-term trend. A fad-based business carries the risk that consumer interest will decline, potentially leaving you with a long-term contractual obligation for a business with a limited lifespan. This does not appear to be the case here.

Potential Mitigations

• Engaging a business advisor to research local demographic trends can help confirm the long-term demand for these services in your specific area.
• Discuss the company's strategies for adapting to changes in the healthcare and senior care markets with the franchisor.
• Your own market research into local competitors and demand will be a valuable step in your due diligence process.

Explanation

This risk was not identified in the FDD package. The executive team described in Item 2 has extensive and long-term experience in the home care and franchise industries. The presence of inexperienced management can pose a significant risk, as it may lead to flawed strategies, insufficient support systems, and a lack of understanding of franchisee challenges. The disclosed experience of the LAS team is a positive factor.

Potential Mitigations

• When speaking with current franchisees, it's still a good idea to ask about their direct experiences with the management team's responsiveness and support.
• Your business advisor can help you research the professional backgrounds of the key executives mentioned in Item 2.
• During your own interactions, assess the professionalism and knowledge of the franchisor's team.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that LAS is owned by a private equity firm. Private equity ownership can introduce risks, such as a focus on short-term profitability over the long-term health of the brand, which could lead to increased fees or reduced franchisee support. The franchisor appears to be privately held by its founders.

Potential Mitigations

• To confirm the ownership structure, you can have your attorney review corporate records.
• Asking the franchisor directly about any potential future sale of the company can provide insight into their long-term vision.
• A business advisor can help you understand the typical operational differences between founder-led and PE-owned franchise systems.

Explanation

This risk was not identified in the FDD package. Item 1 discloses that LAS has no parent company. The financial statements provided in Item 21 are for the franchisor entity itself. In situations where a franchisor is a subsidiary of a larger corporation, the financial health of that parent can be material, and its non-disclosure could hide potential risks. That concern is not applicable here.

Potential Mitigations

• Your attorney can independently verify the corporate structure of the franchisor to confirm there are no undisclosed parent entities.
• An accountant should always review the provided financial statements to ensure they are complete and prepared for the correct legal entity.
• In any franchise review, understanding who you are contracting with is a crucial step for your attorney to confirm.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. A history with predecessor companies can sometimes introduce risks if those prior entities had financial problems, litigation, or high franchisee turnover. Since the current company developed the franchise program itself, there is no predecessor history to analyze for potential inherited issues.

Potential Mitigations

• Verifying the franchisor's incorporation date and business history is a standard part of due diligence your attorney can perform.
• Speaking with the longest-tenured franchisees can provide historical context about the system's early days and development.
• Your business advisor can research the company's public history to confirm its origins.