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Carstar

Carstar Franchisor SPV LLC
https://www.carstar.com
1-704-377-8855
440 South Church Street, Suite 700, Charlotte, North Carolina 28202
FDD Version:

How much does Carstar cost?

Initial Investment Range

$23,500 to $804,300

Franchise Fee

$10,000 to $20,000

The franchise offered is to operate an automobile collision repair facility identified by distinctive trademarks and service marks, including the name CARSTAR, utilizing a system of regional marketing, preferred vendor relationships, and business and financial analysis, and providing services to the insurance industry, commercial accounts, and individual automobile owners.

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Carstar June 13, 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.

1

Franchisor Stability Risks

Start Here
Total: 10
3
2
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

Item 3 discloses that the franchisor's ultimate parent, Driven Brands Holdings Inc., is a defendant in multiple pending shareholder lawsuits, including a class action. The suits allege the parent company made material misstatements about its business and prospects. While the guarantor's financials appear stable, these serious allegations against the parent entity create significant uncertainty about the overall financial integrity and stability of the system you are joining.

Potential Mitigations

  • Your franchise attorney should analyze the pending litigation disclosed in Item 3 and explain the potential risks to the franchise system.
  • An accountant must review the financials for both the guarantor (Driven Systems LLC) and the parent (Driven Brands) to assess financial health.
  • Discuss the potential impact of this litigation on the brand and franchisor support with your business advisor.
Citations: Item 3, Item 21, Exhibit B, Exhibit O

High Franchisee Turnover

High Risk

Explanation

The data in Item 20 indicates a high rate of franchisee turnover. In the 2024 fiscal year, 31 franchises were terminated and 1 did not renew, representing approximately 7% of the total outlets at the start of the year. This level of turnover could be a significant indicator of potential issues within the system, such as franchisee unprofitability, dissatisfaction with franchisor support, or other systemic problems that may impact your potential for success.

Potential Mitigations

  • It is critical to contact a significant number of the 31 former franchisees listed in Exhibit H to understand why they left the system.
  • Your accountant should analyze the turnover data from Item 20 over the past three years to identify any negative trends.
  • Discuss the high turnover rate with the franchisor and have your attorney evaluate their explanation for this trend.
Citations: Item 20, Exhibit H

Rapid System Growth

Medium Risk

Explanation

The franchisor has experienced significant growth, as shown in Item 20. While growth can be positive, rapid expansion can strain a franchisor's ability to provide adequate support, training, and quality control to all franchisees. The complex corporate structure under a private equity owner, Driven Brands, could prioritize expansion over ensuring the support infrastructure keeps pace, potentially impacting the assistance you receive after opening.

Potential Mitigations

  • A business advisor can help you assess whether the franchisor's support infrastructure, as detailed in Item 11, seems adequate for its size and growth rate.
  • Inquire with a broad sample of franchisees from Item 20 about the quality and timeliness of the support they currently receive.
  • Your accountant should review the franchisor's financial statements to determine if sufficient capital is being allocated to support functions versus expansion.
Citations: Item 1, Item 11, Item 20, Item 21

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified. The franchisor and its predecessors have been franchising CARSTAR facilities since 1989 and the management team listed in Item 2 appears to have extensive experience in the automotive and franchise industries. An unproven system or inexperienced management does not appear to be a primary risk. However, you should still verify the franchisor's capabilities to support your business as the system is very large.

Potential Mitigations

  • A business advisor can help you evaluate the management team's experience as detailed in Item 2.
  • Even with an experienced franchisor, it is wise to speak with current franchisees about the quality of support they receive.
  • Your attorney should confirm that the franchisor's obligations in the Franchise Agreement are clearly defined and not just discretionary.
Citations: Item 1, Item 2

Possible Fad Business

Low Risk

Explanation

This specific risk was not identified in the FDD package. The auto body repair industry is a long-established and essential service sector, not a business model based on a fleeting trend. However, any business must adapt to changing technology and consumer preferences. While the core business is not a fad, you should consider how the franchisor plans to innovate and stay competitive in the long term.

Potential Mitigations

  • Engage a business advisor to research long-term trends and competitive pressures within the auto collision repair industry.
  • In discussions with the franchisor, inquire about their strategy for innovation and adapting to industry changes, such as electric vehicles.
  • Review Item 11 with your attorney to understand the franchisor's commitments to research and development.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This specific risk was not identified. The business experience of the officers and directors listed in Item 2 shows significant and long-term experience within the automotive service, collision repair, and franchise industries, both with CARSTAR and other major brands. A lack of management experience does not appear to be a concern. Your due diligence should still include speaking with franchisees about their direct experiences with the management team's performance and support.

Potential Mitigations

  • Your business advisor can help you review the executive biographies in Item 2 to confirm their backgrounds align with the needs of the system.
  • When speaking with franchisees, ask about their direct interactions with and the effectiveness of the corporate management team.
  • Ensure that the support personnel you will interact with are also experienced and well-regarded by other franchisees.
Citations: Item 2

Private Equity Ownership

Medium Risk

Explanation

CARSTAR is part of the Driven Brands portfolio, which is majority-owned by the private equity firm Roark Capital Management. Private equity ownership may introduce risks, such as a focus on short-term financial returns that could lead to increased fees, reduced franchisee support, or a quick sale of the company. The Franchise Agreement allows the franchisor to assign the agreement to a new owner without your consent, which could change the nature of your business relationship.

Potential Mitigations

  • It's beneficial to have a business advisor help you research the private equity firm's reputation and its track record with other franchise systems.
  • You should discuss with current franchisees whether they have experienced any negative changes since the private equity acquisition.
  • Your attorney can explain the implications of the assignment clause and any lack of protection you have if the system is sold.
Citations: Item 1, Item 17, FA § 14.J

Non-Disclosure of Parent Company

Low Risk

Explanation

This specific risk was not identified. The FDD is transparent about its complex corporate structure, identifying CARSTAR Franchisor SPV LLC as a subsidiary within the larger Driven Brands Holdings Inc. public company structure. Crucially, the FDD provides a Guarantee of Performance from the parent, Driven Systems LLC, and includes audited financial statements for both the guarantor and the ultimate parent company, Driven Brands, Inc., providing a more complete financial picture.

Potential Mitigations

  • It is important for your accountant to review the financial statements for the franchisor, the guarantor, and the parent company to understand the complete financial picture.
  • Your attorney should review the terms of the parent guarantee to ensure it is robust and covers the franchisor's key obligations.
  • A business advisor can help you understand the complex corporate structure outlined in Item 1.
Citations: Item 1, Item 21, Exhibit O

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 discloses CARSTAR Franchise Systems, Inc. ("CSI") as a predecessor. The document provides information regarding past litigation involving the predecessor. This appears to meet the disclosure requirements, giving you a basis for understanding the system's history. A thorough review of this history is still a crucial part of due diligence.

Potential Mitigations

  • Your attorney should carefully review all information disclosed about the predecessor in Items 1, 3, and 4.
  • When speaking with long-term franchisees, ask about their experience under the predecessor's management and any changes since the transition.
  • A business advisor can help you research the predecessor's public history for any additional context.
Citations: Item 1

Pattern of Litigation

High Risk

Explanation

Item 3 discloses that the franchisor's ultimate parent company, Driven Brands Holdings Inc., is defending multiple shareholder lawsuits. These include a putative class action and derivative lawsuits alleging that the company failed to disclose information and made material misstatements about its business and prospects. Such allegations against the highest level of the corporate structure, relating to the fundamental health and integrity of the business, represent a significant pattern of litigation risk.

Potential Mitigations

  • It is imperative that your franchise attorney analyze these specific lawsuits and explain their potential implications for the entire system.
  • You should discuss this litigation with the franchisor to understand their position and defense strategy.
  • Your business advisor can help you assess the risk that this litigation poses to the brand's reputation and the parent company's stability.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
7
1
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

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3

Financial & Fee Risks

Total: 10
4
4
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

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4

Legal & Contract Risks

Total: 16
4
7
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

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5

Territory & Competition Risks

Total: 5
4
1
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.

6

Regulatory & Compliance Risks

Total: 10
5
3
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.

7

Franchisor Support Risks

Total: 4
1
3
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

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8

Operational Control Risks

Total: 12
3
7
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
7
5
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.

10

Miscellaneous Risks

Total: 2
2
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.