Explanation

This risk was not identified in the FDD package. Item 20 data shows the system has been shrinking or growing only modestly in recent years, not expanding at a rate that would likely strain support systems. Rapid growth can be a concern if a franchisor's support infrastructure cannot keep pace, potentially harming franchisee performance. However, that does not appear to be the case here.

Potential Mitigations

• A business advisor can help you analyze the system's growth trajectory outlined in Item 20 to understand its market position.
• Speaking with franchisees who joined at different times can provide insight into the consistency of franchisor support, which your attorney can facilitate.
• Having an accountant review the franchisor's financials can help determine if they have the resources to manage future growth responsibly.

Explanation

This risk was not identified in the FDD package. The franchisor, National Internet Corporation, was founded in 1995 and has been franchising for many years, indicating it is a mature and established system. A new or unproven system can carry higher risks due to a lack of brand recognition and tested operational procedures, but that does not seem to be a concern in this case.

Potential Mitigations

• A discussion with your business advisor can help you evaluate the benefits and drawbacks of joining a mature versus a new franchise system.
• Your attorney can help you investigate the franchisor's history and market reputation through publicly available records.
• Reviewing the company's history in Item 1 with an accountant can provide additional context on its long-term stability.

Explanation

This risk was not identified in the FDD package. The franchise operates in the digital marketing industry, which is an established and integral part of the modern business landscape. While specific technologies change, the fundamental need for digital marketing services is not considered a short-term fad. A fad business poses a risk because demand can disappear, leaving you with a worthless investment.

Potential Mitigations

• To understand the long-term outlook of the digital marketing industry, it is wise to consult with a business advisor.
• Your accountant can help you analyze market trends to assess the sustainability of the services you would offer.
• Legal counsel can review the franchise agreement to determine your obligations if the market fundamentally changes.

Explanation

This risk was not identified in the FDD package. The executive biographies in Item 2 show that key personnel have extensive and long-term experience with the company and within the franchising industry. For example, the Senior VP of Franchise Development has been with the company since 1996. Inexperienced management can be a significant risk, but the leadership team here appears to be well-established and knowledgeable.

Potential Mitigations

• Contacting current franchisees to inquire about their direct experiences with the management team's competence and support is a valuable step.
• A business advisor can help you assess the leadership team's qualifications as detailed in Item 2.
• Your attorney can investigate the public records of key executives for any potential concerns not disclosed in the FDD.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives over the long-term health of the franchise system. However, this does not appear to be a factor in this offering.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor through corporate records.
• A business advisor can explain the potential impacts, both positive and negative, that different ownership structures can have on a franchise system.
• Discussions with long-term franchisees can reveal any history of ownership changes and their effects on the system.

Explanation

This risk was not identified in the FDD package. Item 1 clearly identifies the parent company as World Technology Group Inc. and provides its basic information. The franchisor's financial statements are also provided in Exhibit D. Therefore, there is no apparent failure to disclose a parent company or its relevant financial information where required.

Potential Mitigations

• An attorney should review Item 1 to confirm that the disclosures regarding parent companies and affiliates appear complete.
• If a parent company guarantees the franchisor's performance, an accountant should review the parent's financial statements if they are provided.
• A business advisor can help you understand the relationship between a franchisor and its parent company and how it might affect your franchise.

Explanation

This risk was not identified in the FDD package. Item 1 discusses the company's history and notes previous brand names like 'Worldsites' but does not indicate any undisclosed or problematic predecessor history. Items 3 and 4, which would disclose predecessor litigation or bankruptcy, are also clean. A hidden or troubled predecessor history can be a red flag for inherited systemic problems.

Potential Mitigations

• A thorough review of Item 1 with your attorney can help confirm that predecessor history is adequately disclosed.
• A business advisor can assist you in researching the public history of the franchisor and any named predecessors.
• Asking long-tenured franchisees about their experiences under any previous company names or ownership can provide valuable context.

Explanation

This risk was not identified in the FDD package. Item 3 explicitly states, 'No litigation is required to be disclosed in this Item.' This indicates an absence of the type of material litigation that must be reported under franchise law, such as patterns of franchisee lawsuits alleging fraud or significant actions initiated by the franchisor against its franchisees.

Potential Mitigations

• It is still prudent to have your attorney conduct an independent public records search for litigation involving the franchisor.
• A business advisor can help you understand that while a clean Item 3 is positive, it doesn't eliminate all business risks.
• You should always ask current and former franchisees about their experiences and whether they have had disputes with the franchisor.