Dentsmart Logo

Dentsmart

Dentsmart LLC
https://www.dentsmart.com
1-866-336-8762
1333 El Camino Drive, Pekin, IL 61554

Initial Investment Range

$79,100 to $110,500

Franchise Fee

$25,000

The franchise offered is a vehicle paint-free dent removal ("PDR") business that will operate under the Dentsmart® brand, focusing on generating business through connections with body shops and insurance contacts.

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Dentsmart November 26, 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
2
4
4

Disclosure of Franchisor's Financial Instability

Medium Risk

Explanation

The franchisor, Dentsmart LLC (Dentsmart), is profitable but was only formed in July 2022, acquiring the system in December 2022. It has significant debt from this acquisition. The financial statements also note Dentsmart is not in compliance with Wisconsin franchise law and must offer rescission to a franchisee. This combination of a short operating history, high debt, and a disclosed compliance failure may present a risk to the company’s long-term stability and its ability to support you.

Potential Mitigations

  • Engage an accountant to thoroughly review the audited financial statements, including all footnotes regarding debt, related-party transactions, and the Wisconsin rescission contingency.
  • Discuss the franchisor's capitalization and plans for managing its acquisition debt with your financial advisor.
  • Your attorney should assess the potential impact of the disclosed compliance issues on the overall health of the franchise system.
Citations: Item 1, Item 3, Item 20, Item 21, Exhibit I

High Franchisee Turnover

High Risk

Explanation

Item 20 data indicates a potential pattern of franchisee turnover. In 2021, the system experienced a 13.3% churn rate from one non-renewal and one cessation of operations out of 15 starting units. The tables for 2022 show a net decrease in franchised units, with four locations being reclassified as affiliate-owned. A high turnover rate can be an indicator of potential systemic issues, such as franchisee dissatisfaction or problems with the business model's profitability.

Potential Mitigations

  • It is critical to contact a significant number of current and former franchisees listed in Item 20 to understand their experiences and reasons for leaving.
  • Your accountant should help you analyze the turnover data across all three years to assess the rate of churn.
  • A business advisor can help you evaluate whether the reasons for turnover might affect your own potential for success.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. Rapid, uncontrolled growth can strain a franchisor's ability to provide adequate support. It is a positive sign that Dentsmart does not appear to be growing at a rate that might compromise its support systems.

Potential Mitigations

  • A business advisor can help you evaluate the franchisor's controlled growth strategy and its capacity to support new franchisees.
  • In discussions with current franchisees, you should inquire about the quality and timeliness of the support they receive.
  • Your accountant can review the franchisor's financials to assess if they are investing adequately in support infrastructure as they grow.
Citations: Item 20

New/Unproven Franchise System

Medium Risk

Explanation

Dentsmart LLC is a new franchisor entity, formed in July 2022, that acquired an existing system. While this presents risks associated with new ownership, it is substantially mitigated because the new owners and management team have extensive prior experience as franchisees and managers within the predecessor's system since as early as 2008. This long history provides valuable operational knowledge, but the new entity itself has a very short track record as a franchisor.

Potential Mitigations

  • Your business advisor should help you evaluate the stability and strategic direction of the new ownership entity.
  • A thorough review of the new company's financial statements with your accountant is critical to assess its capitalization and viability.
  • Discuss with your attorney how the transfer of the system from the predecessor to the new company might impact your rights.
Citations: Item 1, Item 2, Item 21

Possible Fad Business

Medium Risk

Explanation

The business model, focusing on paint-free dent removal, is highly dependent on weather patterns, specifically the frequency and severity of hail storms. Item 1 states that your sales will be based in significant part on this factor and that the franchisor cannot predict or guarantee it. This reliance on unpredictable natural events could lead to significant fluctuations in revenue and presents a core business model risk that is outside of your or the franchisor's control.

Potential Mitigations

  • A business advisor can help you research historical weather data for your proposed territory to assess the potential frequency of revenue-generating events.
  • Discuss strategies for managing income volatility and developing non-hail related revenue streams with your financial advisor.
  • Your insurance broker should be consulted to explore business interruption insurance options that might cover periods of low demand.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk appears to be low. The executive team of Dentsmart, including the CEO and COO, have extensive, long-term experience within the Dentsmart system as franchisees and in other roles prior to acquiring the company. This history suggests they possess deep operational and industry-specific knowledge, which is a significant mitigating factor for a new franchisor entity.

Potential Mitigations

  • It is still advisable to discuss the management team's vision and strategic plans for the system with a business advisor.
  • When speaking with current franchisees, you should inquire about their perception of the management team's competence and support.
  • Your attorney can help you understand the roles and responsibilities of the key executives as outlined in the disclosure documents.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that Dentsmart is owned by a private equity firm. The owners appear to be individuals with long-term experience within the franchise system itself. This can be a positive indicator, as management's interests may be more aligned with the long-term health of the brand rather than a short-term exit strategy often associated with private equity ownership.

Potential Mitigations

  • Your attorney can help you verify the ownership structure of the franchisor through public records.
  • A business advisor can discuss the potential benefits and drawbacks of different franchisor ownership structures.
  • Investigating the backgrounds of the individual owners can provide further insight into their goals for the franchise.
Citations: Item 1

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Dentsmart does not appear to have a parent company. Item 1 describes the franchisor as Dentsmart LLC and does not list any parent entities. The financial statements in Item 21 are for Dentsmart LLC itself, and there is no mention of a parent or a requirement for a parental guarantee to ensure the franchisor's financial viability. Therefore, the risk of instability from an undisclosed or financially weak parent is not present.

Potential Mitigations

  • It is always prudent to have your attorney confirm the corporate structure of the franchisor.
  • Your accountant should review the provided financial statements to ensure they stand on their own without reliance on a parent company.
  • A business advisor can explain the different ways franchise systems can be structured and the associated risks.
Citations: Item 1, Item 21

Predecessor History Issues

Medium Risk

Explanation

The franchisor acquired the system from a predecessor, Dentsmart, Inc., at the end of 2022. The FDD discloses a 2011 regulatory action against this predecessor in Minnesota for selling a franchise without proper registration. While this event is dated and involved the prior owner, it is a material fact about the system's history. Understanding the full history of the system, including any challenges under previous ownership, is important for assessing its overall track record.

Potential Mitigations

  • Discuss the predecessor's history, including the disclosed litigation, with your attorney to understand any potential inherited risks.
  • Ask the franchisor how they have improved compliance systems and controls since acquiring the brand.
  • When speaking with long-term franchisees, inquire about their experience under the predecessor's management.
Citations: Item 1, Item 3, Item 20

Pattern of Litigation

High Risk

Explanation

A pattern of concerning legal or regulatory actions is present. Item 3 discloses that the predecessor, Dentsmart, Inc., was penalized in 2011 for selling a franchise in Minnesota without being registered. Furthermore, the franchisor's own audited financial statements in Item 21 (Note I) disclose a current compliance failure in Wisconsin, requiring an offer of rescission to a franchisee. This pattern suggests potential weaknesses in legal and regulatory compliance across different ownership structures.

Potential Mitigations

  • Your franchise attorney must carefully review these compliance failures and advise you on the potential implications.
  • It is important to ask the franchisor what specific steps have been taken to ensure full regulatory compliance in all states going forward.
  • A business advisor can help assess whether these issues indicate broader management or operational risks.
Citations: Item 3, Item 21, Exhibit I
2

Disclosure & Representation Risks

Total: 15
3
1
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
5
5
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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4

Legal & Contract Risks

Total: 16
5
6
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
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
2
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

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
4
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
8
7
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

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

10

Miscellaneous Risks

Total: 2
1
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.