Explanation

This risk was not identified in the FDD package. As a new franchise system with no operating franchisees as of the FDD issuance date, there is no history of franchisee turnover to analyze. High turnover is generally a critical red flag indicating potential systemic problems, so the lack of this data is a different kind of risk associated with a new system.

Potential Mitigations

• You should ask your attorney to help you understand the risks of being one of the first franchisees in a new system.
• Discuss the franchisor's support plans and success metrics for its initial franchisees with a business advisor.
• It is important for your accountant to project a longer timeframe to reach profitability without a track record of other franchisees to benchmark against.

Explanation

This risk was not identified in the FDD package. The business of providing windowbox and container planting services is a niche within the larger, established gardening and landscaping industry. While subject to seasonal trends, it does not appear to be based on a short-lived fad. However, its long-term success will depend on sustained consumer demand for specialized, high-end container gardening services.

Potential Mitigations

• Engaging a business advisor to research long-term consumer trends in home and garden services in your local market is recommended.
• An accountant can help you assess the business model's resilience to economic downturns or shifts in discretionary spending.
• You should evaluate the franchisor's plans for service innovation and adaptation to stay relevant.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is a new, private LLC and does not disclose any ownership by a private equity firm. The risks associated with private equity ownership, such as a focus on short-term returns over franchisee health, do not appear to be present based on the provided documents.

Potential Mitigations

• It is still prudent to have your attorney verify the ownership structure of the franchisor LLC.
• Your business advisor can help you understand the potential long-term implications if the franchise is sold to a new owner in the future.
• A discussion with your attorney about the 'Assignment' clause in the Franchise Agreement is important to understand your rights if ownership changes.

Explanation

This risk was not identified in the FDD package. The FDD discloses the existence of an affiliate, WOW IP Holding LLC, which owns the trademarks. However, the franchisor does not appear to be a subsidiary of a larger parent company whose financials would be material to understanding the full scope of the business. The franchisor entity itself is presented as the primary operator of the franchise system.

Potential Mitigations

• Your attorney should confirm the relationship between WOW Franchise Co LLC and WOW IP Holding LLC to ensure there are no other undisclosed parent entities.
• An accountant can help verify that the financial statements provided are for the correct legal entity offering the franchise.
• Understanding the licensing agreement for the trademarks between the two affiliated entities would be a valuable discussion to have with your attorney.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD states that the franchisor has no predecessor. The business concept was developed by the founder and his mother, and the franchise company is a new entity created to franchise that concept. Therefore, there is no history of a prior company's performance, litigation, or franchisee turnover to analyze.

Potential Mitigations

• Your attorney should confirm that there are no other entities that should have been disclosed as a predecessor under FTC rules.
• A business advisor can help you research the history of the affiliate's operating business to understand the concept's background.
• It is important to discuss with current employees of the affiliate company, if possible, to understand the business's history.

Explanation

This risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. As a new franchisor with no franchisees, there is no history of litigation with franchisees. This is a positive finding, but it also reflects the system's infancy, meaning there has been no opportunity for such disputes to arise.

Potential Mitigations

• While there is no litigation history, your attorney should still carefully review the dispute resolution clauses in the Franchise Agreement.
• A business advisor can help you assess the potential for future disputes based on the one-sided nature of the contract.
• It is wise to have your attorney conduct a public records search on the franchisor's principals to check for any relevant personal litigation history.