Explanation

This risk was not identified. The audited financial statements in Exhibit C for the years ending 2022, 2023, and 2024 show that WINDOW WORLD, INC. (WWI) appears to be financially stable. The company has substantial cash reserves, consistent profitability, and a strong positive net worth. A significant long-term debt was eliminated in 2023, further strengthening the balance sheet. This financial health suggests WWI has the resources to support its franchisees and grow the brand.

Potential Mitigations

• An experienced franchise accountant should still review the complete financial statements, including all notes, to confirm the assessment of financial stability.
• It is beneficial to have your accountant analyze the franchisor’s reliance on royalty streams versus initial franchise fees for revenue.
• Discussing the franchisor's financial health and their plans for future investments in the system with your business advisor is a useful step.

Explanation

This risk was not identified. The data in Item 20 tables shows a very low rate of franchisee turnover for the years 2022, 2023, and 2024. The number of terminations, non-renewals, and franchisor reacquisitions is minimal relative to the total number of operating units. This low turnover rate suggests a stable franchise system and may indicate general franchisee satisfaction with the business model and the franchisor relationship.

Potential Mitigations

• It is still advisable to contact a random sample of current and former franchisees from the lists in Item 20 to discuss their experiences.
• Your business advisor can help you compare these low turnover rates against any available industry benchmarks for context.
• In discussions with the franchisor, you might inquire about the reasons for the few exits that did occur to gain further insight.

Explanation

This risk was not identified. While the system shows steady growth, the data in Item 20 does not suggest a rate of expansion that would outpace the franchisor's ability to provide support. The number of new outlets opened each year appears manageable for an established system of this size. The franchisor's strong financial position, as seen in Item 21, further suggests it has the resources to support its franchisees.

Potential Mitigations

• It is prudent to discuss the franchisor's infrastructure for training and support with both the company and current franchisees.
• A business advisor can help you evaluate whether the support team's size and experience are adequate for the current number of franchisees.
• During due diligence calls, you could ask newer franchisees about the quality and timeliness of the support they received during their launch phase.

Explanation

This risk was not identified. The FDD indicates that WWI has been in business since 1997 and franchising since 1998 (initially as licenses). Item 20 shows a large and stable network of over 200 franchisees. This long history and established system size suggest the business model is proven and not a new or untested concept. The franchisor has extensive operational experience in the industry.

Potential Mitigations

• A business advisor can help you investigate the franchisor’s reputation within the home remodeling industry.
• Speaking with long-term franchisees about the evolution of the system and the support they have received over the years can provide valuable perspective.
• Your attorney should review the FDD for any significant recent changes in ownership or management that could alter the company's direction.

Explanation

This risk was not identified. The business of exterior home remodeling, focusing on windows, siding, and doors, is a well-established industry with consistent consumer demand. It is not based on a short-term trend or novelty. The franchisor's long history, as described in Item 1, further indicates the sustainability and long-term viability of the business model.

Potential Mitigations

• Engaging a business advisor to research the home remodeling market in your specific territory can help validate long-term demand.
• It is useful to ask the franchisor about their plans for future product and service innovation to stay competitive.
• Reviewing local competition with a business advisor will help you understand the established nature of the market.

Explanation

This risk was not identified. Item 2 of the FDD lists the franchisor's key management personnel. Many individuals on the management team and board of directors have extensive, long-term experience with WWI, some spanning over a decade. Several directors also have direct experience as franchisees themselves. This depth of experience within both the specific company and the franchise model is a positive indicator.

Potential Mitigations

• It is still beneficial to discuss the management team’s accessibility and relationship with franchisees during your due diligence calls.
• A business advisor can help you research the professional backgrounds of key executives for additional context.
• You might ask the franchisor about their management structure and the roles of key personnel in supporting franchisees.

Explanation

This risk was not identified. Item 1 indicates the franchisor, WWI, is a privately held corporation and does not disclose ownership by a private equity firm. The management team appears stable with long tenure, as shown in Item 2. This suggests that operational and financial decisions are likely focused on the long-term health of the brand rather than short-term investor exit strategies often associated with private equity ownership.

Potential Mitigations

• Your attorney should confirm the ownership structure of the franchisor entity during the due diligence process.
• It is still wise to ask the franchisor about any potential plans for a future sale or change in ownership.
• A review of the assignment clause in the Franchise Agreement with your attorney is important to understand what happens if the franchisor is sold.

Explanation

This risk was not identified. Item 1 clearly identifies the franchisor, its affiliates, and their roles. For example, it states that WINDOW WORLD INTERNATIONAL, LLC owns the trademarks and licenses them to the franchisor. While the parent entity's financials are not provided, there is no indication that the franchisor is a thinly capitalized subsidiary or that the parent guarantees its obligations in a way that would require disclosure of its financials under franchise law.

Potential Mitigations

• Your attorney should review the roles of all affiliated entities mentioned in Item 1 to ensure you understand the corporate structure.
• An accountant should confirm that the provided franchisor financials are sufficient and that parent financials are not required under the circumstances.
• Clarifying any guarantees or obligations between the franchisor and its affiliates with your attorney is a prudent step.

Explanation

This risk was not identified. The FDD notes in Item 1 that from 1998 to 2010, the company offered licenses that it now treats as franchises for all purposes. There is no mention of a predecessor entity from which WWI acquired the business. The history provided appears to be that of a single, continuous business entity, suggesting there are no hidden issues from a prior owner.

Potential Mitigations

• Your attorney can help you verify the corporate history of WWI to confirm there are no undisclosed predecessors.
• Asking long-term franchisees about the early history of the company can provide additional comfort and context.
• A business advisor can assist in researching the company's historical branding and operations for consistency.