Company: LRHC
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032211
Chunk: 303

Company: La Rosa Holdings Corp.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 1A
Chunk 303
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. Further, if franchisees fail to renew their franchise agreements our revenue from ongoing monthly fees may decrease,
and profitability may be lower than in the past due to reduced ongoing monthly fees.

We are dependent upon
the truthfulness of our franchisees to provide accurate reports and accounting to us.

While we have significant
insight into the business activity of our domestic and international regional franchisees and are able to observe their books and records
in real time, the franchisees self-report their agent counts, agent commissions and fees due to us. Our tools to validate or verify these
reports are not equipped to ferret out under or erroneous reporting, even if unintentional or intentional fraud. If any of those circumstances
occur, we may not receive all of the annual agent dues or monthly ongoing fees due to us. In addition, to the extent that we are underpaid,
we may not have a definitive method for determining such underpayment. If a material number of our franchisees were to under report or
erroneously report their agent counts, agent commissions or fees due to us, it could have a material adverse effect on our financial performance
and results of operations.

23

Our franchise operations
are subject to additional business risks.

Our franchise business is
exposed to other business risks which may impact our ability to collect recurring, contractual fees and dues from our franchisees, may
harm the goodwill associated with our brand, and/or may materially and adversely impact our business, results of operations, financial
condition and prospects. One such risk is that one of our franchisees could declare bankruptcy which could have a substantial negative
impact on our ability to collect fees and dues owed under such franchisee’s franchise arrangements. In a franchisee bankruptcy,
the bankruptcy trustee may reject its franchise contract pursuant to Section 365 under the U.S. Bankruptcy Code, in which case there
would be no further payments for fees and dues from such franchisee. Other risks include the risk that our franchisees may be uninsured
or underinsured against certain business hazards or that insurance may be unavailable, as was hurricane insurance in Florida for a number
of years. Any casualty loss happening to our franchisees could put their entire business at risk and potentially result in its failure
and the termination of our franchise agreement. Any such loss or delay in an insurance payment could have a material and adverse effect
on a franchisee’s ability to satisfy its obligations under its franchise agreement with us, including its ability to make payments
for contractual fees and dues or