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Alloy Wheel Franchise
How much does Alloy Wheel Franchise cost?
Initial Investment Range
$100,000 to $638,500
Franchise Fee
$40,000 to $110,000
AWRS offers franchises for the establishment, development and operation of a business that provides cosmetic restoration and structural repair of automobile wheels within protected territories.
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Alloy Wheel Franchise May 19, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 22, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor, Alloy Wheel Franchise, LLC (AWF), was formed in 2023 and acquired the assets of a predecessor which had a significant net loss and negative equity in 2022. FDD Item 21 states the 2022 financials are unaudited, which is a concern for a non-startup system. While AWF's subsequent audited financials show profitability, this recent history of instability in the franchise system presents a risk to its long-term ability to support franchisees.
Potential Mitigations
- A franchise accountant should meticulously analyze all provided financial statements, including footnotes and the auditor's reports, to assess the current stability and trends.
- Discuss the predecessor's financial performance and the new entity's capitalization with your financial advisor to understand the potential for future issues.
- Your attorney can help you formulate questions for the franchisor regarding the steps taken to ensure long-term financial health post-acquisition.
High Franchisee Turnover
High Risk
Explanation
Item 20 tables show a consistent net decline in the number of franchised outlets over the past three years, from 88 at the start of 2022 to 74 at the end of 2024. This includes a total of 13 terminations, non-renewals, cessations, and franchisor reacquisitions during that period. This pattern of unit closures and departures from the system could suggest underlying challenges with franchisee profitability, satisfaction, or the business model under the prior and current ownership.
Potential Mitigations
- It is crucial to contact a significant number of former franchisees listed in Exhibit L to understand their reasons for leaving the system.
- A business advisor can help you analyze the turnover data in Item 20 to calculate the churn rate and compare it to industry averages.
- Discuss the franchisee turnover rates and the reasons for the steady decline in unit numbers directly with the franchisor.
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchise system appears to be shrinking or stable rather than undergoing rapid expansion, as shown in Item 20. Rapid growth can strain a franchisor's ability to provide adequate support, so its absence can be a positive indicator. However, a shrinking system presents its own set of risks regarding brand value and system health.
Potential Mitigations
- Your business advisor can help you analyze the growth trajectory shown in Item 20 to understand its implications for brand recognition and market presence.
- Discuss the franchisor's strategic plans for future growth and franchisee support with their management team.
- In reviewing the financials with your accountant, assess whether the company has sufficient resources to support both existing and any new franchisees.
New/Unproven Franchise System
Medium Risk
Explanation
The franchisor entity, Alloy Wheel Franchise, LLC, was formed in May 2023 and acquired an existing system. While the business concept has a long history, you will be contracting with a very new company under new ownership, which includes a private equity firm. This newness presents risks related to potential changes in operational strategy, support levels, and corporate culture that may differ from the established system's history, creating uncertainty for franchisees.
Potential Mitigations
- Engage a business advisor to research the track record of the new parent company and its principals, particularly their experience with other franchise systems.
- It's advisable to speak with long-term franchisees to understand any changes in support or operations since the acquisition.
- Your attorney should review the assignment clauses in the Franchise Agreement to understand the implications of changes in ownership.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD Package. The business model, which involves the cosmetic and structural repair of automobile wheels, is an established service within the automotive repair industry. This type of business relies on consistent consumer and commercial demand rather than a short-term trend, suggesting a lower risk of becoming a fad with limited long-term viability.
Potential Mitigations
- A business advisor can help you research the stability and long-term trends of the automotive repair market in your local area.
- Review the franchisor's history in Item 1 to understand the longevity and consistency of the business model.
- Discuss the franchisor's plans for innovation and adaptation to future automotive trends with their management team.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 2 shows that the key operational executives, including the CEO, EVP of Operations, and VP of Franchise Relations, have extensive experience within this specific franchise system, some for over a decade. This level of direct, long-term experience in managing the core business suggests a strong understanding of franchisee operations and challenges, which is a positive factor.
Potential Mitigations
- When speaking with current franchisees, it is still prudent to inquire about their direct experiences with the management team's responsiveness and effectiveness.
- Your business advisor can help you review the biographies in Item 2 to confirm their relevance and tenure.
- Posing questions to the franchisor about their management philosophy and approach to franchisee relations can provide additional insight.
Private Equity Ownership
Medium Risk
Explanation
Item 2 discloses that two board members are co-founders of a private equity firm, indicating PE ownership. This can introduce risks, as PE firms may prioritize short-term returns for their investors over the long-term health of franchisees. This could potentially manifest as increased fees, reduced support to cut costs, or pressure for a quick sale of the franchise system, creating uncertainty about future ownership and direction.
Potential Mitigations
- A business advisor should help you research the private equity firm's reputation and its track record with other franchise brands it has owned.
- Speaking with franchisees who have been in the system before and after the PE involvement can provide valuable insight into any changes.
- Your attorney should analyze the Franchise Agreement's assignment clause to understand how a sale of the system would affect your rights.
Non-Disclosure of Parent Company
Medium Risk
Explanation
Item 1 discloses a parent company, and Note 5 of the audited financials in Exhibit M reveals a net outstanding receivable balance due from the Parent of over $1.7 million. Despite this significant financial relationship and interdependence, the FDD does not include the parent company's financial statements. This omission makes it difficult to fully assess the financial health and stability of the consolidated enterprise that supports your franchise.
Potential Mitigations
- Your accountant should carefully analyze the related-party transactions disclosed in the franchisor's financial statements and assess the potential risks.
- It is wise to ask the franchisor why the parent company's financial statements are not included, given the financial ties.
- An attorney can advise on whether the parent's financials might be legally required under state or federal rules given the circumstances.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 1 provides a reasonably clear history of the predecessors and the asset acquisition. While the financial history of the predecessor is a concern, this is more directly addressed by the 'Franchisor's Financial Instability' risk. The FDD does not appear to obscure any significant negative history, such as litigation or bankruptcy, related to its predecessors, as Items 3 and 4 disclose none.
Potential Mitigations
- A business advisor can still assist you in conducting independent research on the predecessor companies to see if any public information reveals past issues.
- When speaking with long-tenured franchisees, asking about their experience under previous ownership can provide valuable context.
- Your attorney should confirm that the disclosures in Items 1, 3, and 4 regarding predecessors are complete and consistent.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 3 states, 'No litigation is required to be disclosed in this Item.' This indicates that in the last fiscal year, there has not been any material litigation involving the franchisor, its predecessors, or management concerning fraud, franchise law violations, or other similar claims. The absence of such litigation is a positive indicator for a prospective franchisee.
Potential Mitigations
- An attorney can still perform an independent public records search to verify the absence of recent litigation.
- It remains important to ask current and former franchisees about their experiences and whether they have had any significant disputes with the franchisor.
- Your business advisor can help you understand that while no litigation is disclosed now, disputes can arise in the future.
Disclosure & Representation Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Financial & Fee Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Legal & Contract Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Territory & Competition Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Regulatory & Compliance Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Franchisor Support Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Operational Control Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Term & Exit Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
Miscellaneous Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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