Alloy Wheel Repair Specialists Logo

Alloy Wheel Repair Specialists

Alloy Wheel Franchise, LLC
https://www.awrswheelrepair.com
1-770-903-1236
3100 Medlock Bridge Road, Suite 305, Norcross, GA 30071

Initial Investment Range

$99,000 to $638,500

Franchise Fee

$40,000 to $110,000

Alloy Wheel Franchise, LLC 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 Repair Specialists September 15, 2024 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
4
3
3

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

Financial statements for the predecessor entity show significant recurring losses, a large members' deficit (negative net worth), and a 'going concern' warning from auditors for 2021, indicating substantial doubt about its ability to continue operating. While a 2023 acquisition has led to new, audited financials for Alloy Wheel Franchise, LLC (AWRS) that appear healthier, this history suggests significant underlying business and financial instability. Furthermore, the 2022 financials are unaudited, a major compliance and transparency concern.

Potential Mitigations

  • Your accountant must conduct a thorough review of all historical and current financial statements, including the 'going concern' notes and the impact of the recent acquisition.
  • A discussion with your financial advisor is essential to assess the risk associated with the predecessor's poor performance and the stability of the new entity.
  • It is wise to ask your attorney about the implications of the unaudited 2022 financial statements and the historical debt covenant violations mentioned in the auditor's notes.
Citations: Item 21, Exhibit M

High Franchisee Turnover

High Risk

Explanation

The FDD's tables in Item 20 show a consistent net decrease in the number of franchised outlets over the past three years, with a total of 18 franchises ceasing to be part of the system during that period. The majority of these exits are categorized as 'Ceased Operations - Other Reasons' or 'Reacquired by Franchisor'. This pattern of franchisee churn may indicate potential issues with the business model's profitability, franchisee satisfaction, or operational challenges within the system.

Potential Mitigations

  • Analyzing the multi-year turnover data with your accountant is critical to understanding the rate and reasons for franchisee exits.
  • You should contact a significant number of former franchisees from the provided list to inquire directly about their reasons for leaving the system.
  • A conversation with your business advisor can help put these turnover figures into the context of the broader industry.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. A franchisor growing too quickly may outstrip its ability to provide necessary support to new and existing franchisees. This can lead to diluted brand quality and franchisee dissatisfaction if the support infrastructure, such as training, marketing, and operational guidance, does not keep pace with unit growth. The data in Item 20 for this franchise shows a system that is shrinking, not undergoing rapid growth.

Potential Mitigations

  • Your business advisor can help you analyze the franchisor's growth plans relative to their stated support capabilities.
  • An accountant should review the franchisor's financial statements to assess if they have the capital to support their growth projections.
  • Speaking with both new and established franchisees can provide insight into the current quality of franchisor support.
Citations: Not applicable

New/Unproven Franchise System

Medium Risk

Explanation

While the business concept has existed since 2000, the current franchisor entity, AWRS, was formed more recently and underwent a significant business combination in mid-2023. This resulted in new ownership and management elements, including directors from a private equity background who joined in 2023. This recent structural and ownership change introduces risks associated with a new leadership team and strategy, even within an established brand, potentially affecting system stability and support.

Potential Mitigations

  • It is important to investigate the track record of the new management and parent companies with your business advisor.
  • Consulting with your attorney is necessary to understand the full implications of the recent business combination and change in control.
  • Discuss the recent changes and the quality of support with long-term franchisees who have experienced the transition.
Citations: Items 1, 2, 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. Wheel repair is a long-established segment of the automotive after-market services industry. The business model is not based on a recent or fleeting trend. Therefore, the risk of the business being a short-term fad with limited long-term viability appears to be low.

Potential Mitigations

  • A business advisor can help you research the long-term demand and competitive landscape for the specific services offered.
  • Reviewing the franchisor's plans for innovation and adaptation in Item 11 can provide insight into their long-term strategy.
  • An accountant can help you evaluate the business model's resilience to economic shifts and changing consumer behavior.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

Item 2 indicates that several key management and board members are recent additions, having joined in June 2023 as part of a business combination. This includes individuals from a private equity background who may be experienced in finance but new to this specific franchise system and industry. A new leadership team can introduce a period of strategic change and potential instability as they learn the business, which could impact the quality and consistency of support for franchisees.

Potential Mitigations

  • With your business advisor, you should research the professional backgrounds and track records of the new management team members.
  • Inquiring with existing franchisees about their perception of the new leadership and any changes in support is a crucial step.
  • Your attorney can help you formulate questions for the franchisor about the new team's strategic vision for the system.
Citations: Item 2

Private Equity Ownership

High Risk

Explanation

Item 2 discloses that two board members are co-founders of Breck Partners, a private equity firm, and joined the board in June 2023. The 2021 financial notes also detail a lender exercising equity pledge rights. Private equity ownership can introduce a focus on short-term profitability and a quick exit strategy, which may not always align with the long-term health of the franchisees. This could potentially lead to increased fees, reduced support, or pressure to achieve aggressive financial targets.

Potential Mitigations

  • It is advisable to research the private equity firm's reputation and its history with other franchise systems.
  • A thorough discussion with existing franchisees about any changes in culture, fees, or support since the new directors joined is critical.
  • Your attorney should review the assignment clauses in the Franchise Agreement to understand the implications if the system is sold again.
Citations: Items 1, 2

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 appears to properly disclose the parent company structure, including Alloy Wheel Holdco, LLC and Alloy Wheel Repair, Inc. Furthermore, the financial statements provided in Exhibit M include financials for these parent and predecessor entities, providing a more complete picture of the overall organization's financial health, rather than concealing it. This level of disclosure appears to meet regulatory requirements.

Potential Mitigations

  • An accountant should always confirm that the financials of any parent company guaranteeing the franchisor's obligations are included and properly audited.
  • Your attorney can help verify the corporate structure and ensure all relevant entities have been disclosed.
  • Understanding the relationships between the franchisor, its parent, and any affiliates is crucial for assessing overall risk.
Citations: Not applicable

Predecessor History Issues

Medium Risk

Explanation

Item 1 discloses that the current franchisor acquired the assets of a predecessor, Wheel Repair Solutions, International, Inc. (WRSI), in 2015. Item 3 then discloses that this predecessor was subject to regulatory enforcement actions in both Washington and Maryland for selling franchises without proper registration. While this history is disclosed as required, it points to significant compliance failures in the system's past, which could be a concern for a prospective franchisee.

Potential Mitigations

  • Your attorney should carefully review the details of the disclosed predecessor history and related litigation in Item 3.
  • It may be beneficial to ask the current franchisor what specific compliance changes have been implemented since these past events.
  • Speaking with long-term franchisees who were in the system during the predecessor's time could provide valuable context.
Citations: Items 1, 3

Pattern of Litigation

High Risk

Explanation

Item 3 discloses two separate past regulatory actions against the franchisor's predecessor. In 2005, the company entered a Consent Order in Washington for selling franchises before registration was effective. In 2007, a similar action occurred in Maryland for selling an unregistered franchise and failing to defer fees. While these events are dated, a history of repeated, significant regulatory violations in multiple states indicates a past pattern of non-compliance with franchise law, which is a serious red flag.

Potential Mitigations

  • A franchise attorney must evaluate these past regulatory actions and advise on their potential implications for the current franchisor's compliance culture.
  • It would be prudent to ask the franchisor about the specific compliance systems they have implemented since these events occurred.
  • Consider these past actions a significant indicator of risk and weigh them heavily in your decision-making process.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
3
9

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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3

Financial & Fee Risks

Total: 10
2
5
3

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

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4

Legal & Contract Risks

Total: 16
5
4
7

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

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5

Territory & Competition Risks

Total: 5
1
2
2

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.

6

Regulatory & Compliance Risks

Total: 10
2
2
6

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.

7

Franchisor Support Risks

Total: 4
2
1
1

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.

8

Operational Control Risks

Total: 12
4
6
2

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.

9

Term & Exit Risks

Total: 18
8
5
5

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.

10

Miscellaneous Risks

Total: 1
1
0
0

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.