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California Closets
How much does California Closets cost?
Initial Investment Range
$872,000 to $1,776,400
Franchise Fee
$77,500 to $85,500
We offer franchisees the right to operate a retail showroom or design center with a manufacturing facility, referred to as a Manufacturing and Showroom or Design Center California Closets® franchise, that offer, manufacture, and install customized closet, office, garage, and other storage systems for residential and commercial customers.
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California Closets March 25, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 19, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
Low Risk
Explanation
The FDD provides audited financial statements for the parent company, FS Brands, Inc., which guarantees performance. These financials show consistent revenue and net income growth, a healthy balance sheet with positive net worth, and a standard unqualified audit opinion. This suggests the parent company has the financial ability to support the franchise system, reducing the risk of instability for you.
Potential Mitigations
- An experienced franchise accountant should review the parent company's financials, including footnotes, to confirm this assessment of financial health.
- It is important for your attorney to review the Guarantee of Performance to understand the extent and enforceability of the parent's backing.
- Discuss the franchisor's capitalization and reinvestment strategies with your business advisor to gauge their long-term commitment to the brand.
High Franchisee Turnover
Low Risk
Explanation
The FDD's Item 20 tables show a stable franchise system with no terminations, non-renewals, or cessations for other reasons over the last three years. The two franchisee outlets that left the system were reacquired by an affiliate. Low turnover is generally a positive indicator of franchisee satisfaction and system health, as high turnover can signal underlying problems with profitability or franchisor support.
Potential Mitigations
- To confirm the positive data, contacting a representative sample of current franchisees from the list in Exhibit F is a valuable step.
- A discussion with your business advisor can help put these low turnover numbers into the context of the broader industry.
- Your attorney can help you formulate questions for franchisees about their relationship with the franchisor and overall satisfaction.
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD package. Item 20 data indicates a mature and stable franchise system with slow, controlled growth rather than rapid expansion. While rapid growth can strain a franchisor's support systems, this does not appear to be a concern here. A stable system can offer proven operational models and established brand recognition.
Potential Mitigations
- Discuss the franchisor's strategic growth plans with them to understand their vision for the future of the brand.
- A conversation with your business advisor can help evaluate whether the mature state of the system aligns with your personal growth ambitions.
- Your attorney can review the franchise agreement for any development obligations you might have.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified. Item 1 shows the franchisor has been in business since 1981 and franchising since 1980, indicating a very mature and proven system. An established system often provides the benefit of refined operating procedures, a developed brand, and experienced support staff, which contrasts with the risks associated with a new, unproven franchise concept.
Potential Mitigations
- In discussion with current franchisees, inquire about the system's ability to innovate and adapt over time.
- Your business advisor can help you assess the pros and cons of joining a mature system versus a newer, high-growth concept.
- Review the franchisor's recent initiatives and support structures with them to ensure they are not resting on their laurels.
Possible Fad Business
Low Risk
Explanation
The business of providing customized closet and storage systems, as described in Item 1, is a well-established segment of the home improvement industry and does not appear to be a fad. Investing in a business with sustained, long-term consumer demand is generally less risky than investing in a concept based on a fleeting trend, which could see demand disappear quickly.
Potential Mitigations
- Engaging a business advisor to research the long-term outlook and competitive landscape for the home organization industry in your local market is recommended.
- Discuss the franchisor's strategies for product innovation and adaptation to changing design trends and consumer tastes.
- Your accountant can help you model financial performance based on various economic scenarios for the housing and home improvement markets.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. Item 2 shows a management team with extensive and long-term experience both within the California Closets system and its parent companies, as well as in the franchising industry generally. An experienced management team is a significant asset, as it can provide stability, effective leadership, and knowledgeable support for franchisees.
Potential Mitigations
- When speaking with current franchisees, it is still prudent to ask about their direct interactions with and the responsiveness of the management team.
- Researching the public reputation of the key executives and parent companies can provide additional comfort.
- Your business advisor can help assess how the management team's experience aligns with the company's strategic direction.
Private Equity Ownership
Low Risk
Explanation
This specific risk was not identified. The franchisor's ultimate parent, FirstService Corporation, is described in Item 1 as a publicly owned real estate services company, not a private equity firm. While any corporate owner has obligations to shareholders, a publicly traded company may have a different, often longer-term, investment horizon compared to a typical private equity fund, which can influence system stability.
Potential Mitigations
- It is still valuable for your business advisor to research the parent company's public filings and overall strategy regarding its franchise brands.
- Discuss with current franchisees whether the parent company's ownership has positively or negatively impacted the system.
- Your attorney can clarify the franchisor's right to sell or assign the franchise system as outlined in the Franchise Agreement.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. The FDD's Item 1 clearly discloses the multi-layered parent company structure, and Item 21 provides audited financial statements for the parent, FS Brands, Inc., along with a Guarantee of Performance. This level of transparency allows you and your advisors to properly assess the financial backing of the entity guaranteeing the franchisor's obligations.
Potential Mitigations
- A thorough review of the provided parent company financial statements with your accountant is still a critical due diligence step.
- Your attorney should examine the specific terms and enforceability of the Guarantee of Performance from FS Brands, Inc.
- Inquire with the franchisor about the role and influence of the ultimate parent, FirstService Corporation, on the franchise system.
Predecessor History Issues
Low Risk
Explanation
This FDD package does not indicate any predecessor history that would pose a risk. Item 1 states there are no predecessors. Having a clean history without the inherited issues that can sometimes accompany a business acquisition (such as prior litigation or franchisee discontent) can be a positive factor, suggesting a more straightforward operational history for you to evaluate.
Potential Mitigations
- Confirm with long-tenured franchisees that their experience has been consistently with the current franchisor entity.
- Your attorney should verify the corporate history to ensure no undisclosed predecessors exist.
- Your business advisor can help assess the stability that comes from a long, consistent ownership and operational history.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. The absence of significant litigation, especially claims of fraud or misrepresentation from other franchisees, is a strong positive indicator for a mature system. It suggests a generally healthy relationship between the franchisor and its franchisees.
Potential Mitigations
- It is still wise to ask current and former franchisees about any informal disputes they may have had and how they were resolved.
- Your attorney may suggest conducting an independent search for litigation involving the franchisor or its affiliates as a final check.
- Understanding the dispute resolution process in Item 17 is still important for any future disagreements.
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.