Degree Wellness
Initial Investment Range
$348,487 to $877,332
Franchise Fee
$57,500 to $137,500
Degree Wellness studios are business-to-consumer franchises with an easy operating system that provides innovative self-care solutions that leverage heat, cold, light and advanced nutrients to enhance physical and mental health.
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Degree Wellness April 19, 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor, Degree Wellness Franchise, LLC (Degree Wellness), is a new company with a limited financial history. Its audited financial statements in Item 21 show a significant net loss and negative members' equity for its initial period of operations. A note from the auditor discusses uncertainty about the company's ability to continue as a going concern, relying on continued financial support from its members. This financial weakness could impact its ability to provide promised support.
Potential Mitigations
- An experienced franchise accountant should review the franchisor's complete financial statements, including all footnotes and the auditor's going concern note.
- Investigating the financial strength and commitment of the parent members providing support is a crucial step for your business advisor.
- Your attorney should review any state-mandated financial assurances, like bonds or escrows, that may be required due to this financial condition.
High Franchisee Turnover
Low Risk
Explanation
The FDD does not indicate a risk of high franchisee turnover because the system is new and has no operating franchisees as of the end of the last fiscal year. While this means there is no negative history, it also means there is no track record of franchisee success or satisfaction to evaluate. Future turnover rates will be a key indicator of system health once franchises begin to operate.
Potential Mitigations
- Your business advisor can help you monitor the franchisor's future FDDs for franchisee turnover trends as the system matures.
- Engaging an attorney to understand the termination and non-renewal provisions in the Franchise Agreement is important for assessing future risks.
- Once franchisees are open, an accountant can help you benchmark your performance against any future financial data disclosed by the franchisor.
Rapid System Growth
High Risk
Explanation
Item 20 shows that while no franchised units are yet open, 23 franchise agreements have been signed. For a new franchisor with negative equity and significant operating losses, this rate of expansion presents a risk. The company's resources for providing site selection, training, and opening support could be stretched thin, potentially leading to inadequate assistance for you and other new franchisees.
Potential Mitigations
- A business advisor can help you question the franchisor about their capacity and plans for scaling their support infrastructure.
- It is important to have your accountant review the franchisor's financials in Item 21 to assess if they have the resources to support this growth.
- Speaking with other franchisees who have recently signed agreements about the quality and timeliness of support received can provide valuable insight.
New/Unproven Franchise System
High Risk
Explanation
Degree Wellness is a new franchise system, formed in February 2024 and beginning to offer franchises in May 2024. As highlighted in the FDD's 'Special Risks' section, it has a limited operating history and no open franchised units. This presents a higher level of risk, as the business model, brand recognition, and franchisee support systems are unproven in the marketplace. The success of the four affiliate-owned locations may not be representative of a franchisee's potential experience.
Potential Mitigations
- With your business advisor, conduct extensive due diligence on the founders' and management's experience in both the wellness industry and in franchising.
- Having your accountant deeply scrutinize the financial projections is critical, given the lack of a franchisee performance track record.
- Your attorney may be able to negotiate more franchisee-favorable terms to compensate for the higher risk associated with a new system.
Possible Fad Business
Medium Risk
Explanation
The business model centers on innovative self-care solutions like cryotherapy, IV hydration, and red light therapy, which are part of a rapidly growing wellness trend. There is a risk that some services may be perceived as fads with limited long-term consumer demand. If market interest wanes, your business could suffer, but your long-term contractual obligations to the franchisor would remain. Assessing the sustainability of these services is important.
Potential Mitigations
- A business advisor can help you independently research the long-term market demand and sustainability for the core services offered.
- It is prudent to evaluate the franchisor's plans for innovation and adaptation to evolving consumer wellness trends.
- Consider working with a financial advisor to model the business's resilience to shifts in consumer preferences or economic downturns.
Inexperienced Management
Medium Risk
Explanation
The franchisor has engaged Franworth, a third-party company, to provide franchise development and support services. While the individuals from Franworth listed in Item 2 have franchise experience, this structure means some core support functions are outsourced. You will be relying on the performance and continued relationship with this third-party company, which adds a layer of complexity and potential risk if the relationship between Degree Wellness and Franworth changes.
Potential Mitigations
- Your business advisor should help you investigate Franworth's reputation and track record in the franchise industry.
- In your discussions with the franchisor, it would be beneficial to clarify the specific roles and responsibilities of Franworth versus in-house staff.
- Consulting your attorney to understand the terms of the franchisor's engagement with Franworth could provide clarity on the stability of support.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD Package. Private equity ownership can sometimes lead to a focus on short-term profitability over the long-term health of the brand, potentially through increased fees or reduced franchisee support. It is always wise to understand the ownership structure of a franchisor.
Potential Mitigations
- A business advisor can help you research the ownership structure of the franchisor and any parent companies.
- It is wise to ask your attorney to review any clauses in the Franchise Agreement that permit the franchisor to sell or assign the brand.
- Discussing the long-term vision for the brand with the franchisor's leadership team can provide valuable context.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchisor does not appear to have a parent company whose financials would be material to the franchisee. However, it is important to understand the complete corporate structure of a franchise system, as the financial health of a parent company can directly impact the support and stability of the franchisor subsidiary.
Potential Mitigations
- Your attorney should always verify the full corporate structure of the franchisor.
- If a parent company exists and guarantees the franchisor's performance, an accountant should review the parent's financial statements.
- Understanding any financial interdependencies between a franchisor and its parent is a key due diligence step for your financial advisor.
Predecessor History Issues
Low Risk
Explanation
The franchisor discloses a predecessor, Degree Wellness, Inc., whose assets were purchased in 2020 by the franchisor's affiliate, Degree LLC. While the FDD provides this basic information, it is important to understand the history of the brand and system under previous ownership. Any undisclosed issues from the predecessor's time, such as franchisee disputes or financial problems, could potentially impact the system you are joining.
Potential Mitigations
- A business advisor can help you investigate the history and reputation of the predecessor company.
- If possible, speaking with any long-term employees or customers familiar with the brand under its predecessor could offer valuable insights.
- Your attorney should ensure that the FDD's disclosures regarding the predecessor's litigation and bankruptcy history are complete.
Pattern of Litigation
Low Risk
Explanation
Item 3 of the FDD states, 'No information is required to be disclosed in this Item.' This indicates that the franchisor, its predecessors, and its management team have not been involved in the types of material litigation that require disclosure, such as actions involving fraud, franchise law violations, or other significant legal disputes. The absence of such litigation is a positive indicator, though it does not guarantee a dispute-free relationship.
Potential Mitigations
- Your attorney can conduct an independent public records search to verify the absence of significant litigation.
- It's beneficial to ask existing franchisees about their experiences with dispute resolution, even if no formal litigation is disclosed.
- Maintaining clear and documented communication with the franchisor can help prevent future disputes.
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
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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.
