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Culligan

Culligan International Company
https://www.culligan.com
1-847-430-2800
9399 West Higgins Road, Suite 1100, Rosemont, Illinois 60018

Initial Investment Range

$130,000 to $813,515.37

Franchise Fee

$53,513.37 to $113,513.37

The franchise offered is the right to supply certain authorized water-related products and services and air filtration equipment under Culligan’s proprietary marks.

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Culligan May 8, 2025 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
1
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The FDD does not contain financial statements for the franchisor, Culligan International Company (Culligan). Instead, it provides financials for an affiliated guarantor, Culligan Franchise Company, which appears to be a shell entity with minimal activity. This is a critical disclosure issue, as you cannot assess the financial health, stability, or performance of the actual company you are contracting with. This prevents a proper evaluation of Culligan's ability to support its franchise system.

Potential Mitigations

  • Your franchise attorney must address this critical lack of financial disclosure with the franchisor and advise on the associated risks.
  • An accountant should review the provided guarantor financials, but must emphasize to you that they do not reflect the operating company's health.
  • Given this significant information gap, you and your financial advisor must assume a higher level of risk regarding the franchisor's stability.
Citations: Item 21, Exhibit G

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals a significant negative trend in the number of franchised outlets, decreasing from 512 to 460 in two years. This is largely driven by a high number of units being reacquired by Culligan (33 in 2023 and 14 in 2024). This pattern suggests a potential strategic shift away from franchising toward company-owned stores, which could impact long-term support, brand focus, and the overall value proposition for franchisees.

Potential Mitigations

  • A business advisor should help you analyze the Item 20 data to understand the high rate of franchisee exits, particularly through buybacks.
  • It is critical to ask the franchisor about its long-term strategy regarding company-owned versus franchised locations.
  • You should discuss the high reacquisition rate with current and former franchisees to understand the circumstances behind these transactions.
Citations: Item 20

Rapid System Growth

High Risk

Explanation

Item 20 data indicates a significant increase in company-owned outlets, growing from 43 to 93 in two years, concurrent with a decrease in franchised units. This rapid growth in corporate stores could strain the franchisor's resources, potentially diverting attention, capital, and support away from the franchise system. You may find that franchisor support infrastructure does not keep pace with this dual expansion and re-acquisition strategy.

Potential Mitigations

  • Ask the franchisor about its capacity to support both its growing corporate infrastructure and its franchisee network.
  • A business advisor can help you question current franchisees about any noticeable changes in the quality or availability of support.
  • Your accountant should review the provided guarantor financials, noting that they offer no insight into the franchisor's ability to fund this expansion.
Citations: Item 20

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified in the FDD Package. Culligan is a long-established company, founded in 1936, and has been involved in franchising for many decades. This extensive history suggests a mature, well-developed business model and operational system, which can be a positive factor for a new franchisee. However, even mature systems can face challenges, making other risk factors important to consider.

Potential Mitigations

  • Even with a mature brand, a business advisor should help you assess its current market position and growth potential.
  • Your attorney can review the franchise agreement to ensure that the terms reflect a fair partnership, not just reliance on brand legacy.
  • Discuss with your accountant how a mature system's typical growth rates might affect your financial projections.
Citations: Item 1, Item 2, Item 20

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD Package. The water treatment industry serves a fundamental and ongoing consumer need for improved water quality, which is not typically subject to short-term fads. Culligan has operated for over 70 years, indicating a sustainable business model with long-term market demand. This longevity suggests the business is based on a stable consumer requirement rather than a passing trend.

Potential Mitigations

  • A business advisor can help you research local market demand and competition to validate the business's long-term viability in your area.
  • Discuss with current franchisees how their business has adapted to market changes over the years.
  • Your accountant can help you model the financial impact of potential shifts in technology or consumer preferences in the water industry.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk was not identified in the FDD Package. The executive team described in Item 2 appears to have significant and long-term experience with Culligan and within the industry. For example, the President and CEO has been in his role since 2012, and the Vice President of Franchise since 2001. This level of experience can be a positive indicator of stable leadership and deep institutional knowledge.

Potential Mitigations

  • A business advisor can help you research the professional backgrounds of the key executives mentioned in Item 2.
  • When speaking with current franchisees, inquire about their direct experiences and the quality of support from the leadership team.
  • Your attorney can help you understand the roles and responsibilities of the management team as they relate to franchisee support.
Citations: Item 2

Private Equity Ownership

Medium Risk

Explanation

Item 1 discloses that Culligan's ultimate parent, Osmosis Holdings, LP, is owned by investment funds affiliated with BDT Capital Partners, LLC, a private equity firm. This ownership structure may create a risk that decisions prioritize short-term investor returns over the long-term health of franchisees. This could manifest as increased fees, reduced support, or pressure to accept system changes that benefit the parent company's exit strategy rather than your profitability.

Potential Mitigations

  • Your business advisor should help you research BDT Capital Partners' reputation and track record with other franchise systems.
  • It is important to ask current franchisees about any changes in system policies or support since the acquisition by the private equity firm.
  • Your attorney should review the assignment clauses in the franchise agreement to understand what happens if the system is sold again.
Citations: Item 1

Non-Disclosure of Parent Company

High Risk

Explanation

This risk is present in a highly concerning manner. The FDD fails to provide the financial statements for the actual franchisor, Culligan International Company. Instead, it provides financials for a parent/guarantor entity. This prevents you from assessing the financial health of the company with whom you are signing a contract, creating significant risk. This issue is analyzed in greater detail under the 'Disclosure of Franchisor's Financial Instability' and 'Lack of Operating Franchisor Financials' risks.

Potential Mitigations

  • Your franchise attorney must advise you on the severe risks associated with not having access to the franchisor's actual financial statements.
  • You should request the financials for Culligan International Company directly, as their absence is a major due diligence impediment.
  • Your accountant can explain that the provided guarantor financials offer no insight into the operational viability of the franchisor.
Citations: Item 1, Item 21, Exhibit G

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 1 discloses that Culligan International Company is the successor by merger to Culligan Zeolite Company in 1986. No other predecessors are listed. This straightforward history does not suggest any obscured or problematic lineage that would pose a risk to you. A simple and clear corporate history is generally a positive sign.

Potential Mitigations

  • Your attorney can verify the corporate history through public records if there are any concerns.
  • A business advisor can help assess if the company's long operating history presents any legacy challenges you should be aware of.
  • When speaking to long-term franchisees, you could inquire about their experience through any corporate transitions.
Citations: Item 1

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." The absence of disclosed lawsuits, particularly those initiated by franchisees alleging fraud or breach of contract, is a positive indicator. It suggests a lower historical level of significant, systemic conflict between the franchisor and its franchisees.

Potential Mitigations

  • Your attorney can still conduct a public records search for litigation involving the franchisor as a precautionary due diligence step.
  • A business advisor can help you frame questions for current franchisees about how disputes are typically handled within the system.
  • Ensure you understand the dispute resolution procedures outlined in Item 17, as this is how future conflicts would be managed.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
4
0
11

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
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.

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

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
3
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.

6

Regulatory & Compliance Risks

Total: 10
2
3
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.

7

Franchisor Support Risks

Total: 4
0
4
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.

8

Operational Control Risks

Total: 12
1
7
4

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
5
4
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

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.