Not sure if Engel & Völkers is right for you?
Take our 1-minute franchise matching quiz to get in touch with a Franchise Advisor that can match you with your perfect franchise based on your goals, experience, and investment range.
Take the Quiz & Get MatchedEngel & Völkers
How much does Engel & Völkers cost?
Initial Investment Range
$91,690 to $423,592
Franchise Fee
$35,690 to $43,092
The franchise offered is the right to own and operate an Engel & Völkers Residential Real Estate Brokerage for the marketing of residential property.
Enjoy our complimentary free risk analysis below
Unlock the full risk analysis to access 9 more categories covering 100+ risks.
Engel & Völkers March 31, 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’s 2024 audited financials in Exhibit I show a net loss of over $4 million, primarily due to a $4.9 million litigation settlement. Total liabilities nearly doubled from the prior year while shareholders' equity declined by over $4 million. This significant negative event indicates financial strain that could potentially affect the franchisor’s ability to provide support or invest in the system, increasing your risk as a franchisee.
Potential Mitigations
- Your accountant must conduct a thorough review of the complete audited financial statements, including all footnotes and the statement of cash flows.
- Discuss the franchisor's plan for returning to profitability and managing its increased liabilities with a business advisor.
- Ask your attorney about the implications of the parent company's financial stability, as the franchisor is part of a larger international structure.
High Franchisee Turnover
Medium Risk
Explanation
The systemwide data for 2024 in Item 20 shows a net decrease of two outlets. There were 19 total exits (terminations, non-renewals, ceased operations) on a starting base of 239 franchised units, representing a churn rate of nearly 8%. Twelve of these exits were listed under 'Ceased Operations - Other Reasons,' a category that can mask underlying issues. This trend suggests potential challenges with franchisee profitability or satisfaction within the system.
Potential Mitigations
- Contacting a broad sample of current and former franchisees listed in Item 20 is critical to understanding the reasons for these exits.
- A business advisor can help you analyze the turnover data in the context of the real estate brokerage industry.
- Your accountant should help you build financial models that account for the potential risks suggested by this turnover rate.
Rapid System Growth
Low Risk
Explanation
This specific risk was not identified in the FDD package. Rapid system growth can be a risk if a franchisor's support infrastructure cannot keep pace, leading to inadequate assistance for new franchisees. It is important to assess whether a franchisor has the resources and personnel to manage its expansion effectively.
Potential Mitigations
- A business advisor can help you evaluate the franchisor's growth plans against its stated support capabilities in Item 11.
- Discussing the quality and timeliness of support with both new and established franchisees can provide valuable insight.
- Your accountant should review the franchisor's financial statements to assess if they are sufficiently capitalized to support their growth.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified in the FDD package. Engel & Völkers is an established international brand with decades of experience. An unproven system presents higher risks, as it may lack a refined business model, established brand recognition, or a management team experienced in supporting franchisees, which can impact your potential for success.
Potential Mitigations
- Even with an established brand, consulting a business advisor to research the franchisor’s history and management experience is a valuable step.
- Reviewing the franchisor's litigation history in Item 3 with an attorney can provide insight into its relationships with franchisees.
- Engaging with long-term franchisees can help you understand the system's evolution and the consistency of franchisor support.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package, as residential real estate brokerage is a long-established industry. A fad business is one tied to a fleeting trend, which can be risky for a long-term investment like a franchise. If consumer interest wanes, you could be left with a failing business but still be bound by the franchise agreement's long-term financial obligations.
Potential Mitigations
- A business advisor can help you research the long-term market demand and competitive landscape for any franchise opportunity.
- Evaluating a business concept's resilience to economic cycles and changing consumer tastes is a critical part of due diligence.
- Your financial advisor can help assess if the business model is sustainable beyond any current hype or trends.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD package. The executive team described in Item 2 appears to have extensive experience in the real estate and franchising industries. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, inadequate franchisee support, and an underdeveloped operational system, hindering your ability to succeed.
Potential Mitigations
- A business advisor can help you vet the backgrounds of the key management personnel listed in Item 2.
- Speaking with existing franchisees about their perception of the management team's competence and vision provides direct insight.
- Your attorney can help you understand the stability of the management team and any recent high-level turnover.
Private Equity Ownership
High Risk
Explanation
The franchisor's ultimate parent company is Permira, a Luxembourg-based private equity (PE) firm. PE ownership can create risk if the firm prioritizes short-term investor returns over the long-term health of the franchise system. This could potentially lead to reduced franchisee support, increased fees, or pressure to use affiliated vendors. The recent significant litigation settlement may increase pressure from the PE owner.
Potential Mitigations
- It is prudent to research the PE firm's reputation and track record with other franchise systems it has owned.
- Discussing any changes in operational focus or support levels since the PE acquisition with long-term franchisees is recommended.
- Your attorney should review any clauses in the Franchise Agreement that give the franchisor broad rights to sell or assign the system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor discloses its complex parent and affiliate structure. A failure to disclose a parent company, or not providing its financial statements when it guarantees the franchisor's obligations, can hide significant risks. It is crucial to understand the complete financial and operational structure of the entity you are contracting with.
Potential Mitigations
- Your attorney can help verify the franchisor's corporate structure and identify all relevant parent and affiliate companies.
- If a parent company provides a guarantee, your accountant should ensure their financial statements are included and properly reviewed.
- A business advisor can help you understand the potential influence that parent companies may have on the franchise system's operations.
Predecessor History Issues
Medium Risk
Explanation
The franchisor discloses several predecessors and a complex history of mergers and name changes. More importantly, Item 3 discloses historical litigation from 2011 involving a former master franchisee related to improper earnings claims. While these cases were settled years ago, this history is relevant as it points to past issues within the system that could have lingering effects or indicate a pattern of behavior.
Potential Mitigations
- Your attorney should carefully review the disclosed history of predecessors and related litigation.
- Discussing the system's history with long-tenured franchisees can provide valuable context beyond the FDD's text.
- A business advisor can help you research the reputation of any named predecessors to understand the system's lineage.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses significant and recent litigation. The franchisor is part of a major antitrust class-action lawsuit that resulted in a $6.9 million settlement agreement, which is currently under appeal. A separate franchisee-initiated lawsuit alleging encroachment was also recently settled for $200,000. This pattern of litigation, particularly the costly antitrust case which impacts the entire industry, presents a considerable legal and financial risk to the system.
Potential Mitigations
- A thorough review of the details and potential implications of the antitrust settlement with your franchise attorney is essential.
- Discussing how this litigation might affect future operations and commission structures with the franchisor and a business advisor is critical.
- Contacting franchisees to understand their perspective on system-related disputes can provide valuable insight.
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
Unlock Full Risk Analysis
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
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
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
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
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
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
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
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