Indy Clover
Initial Investment Range
$159,450 to $215,800
Franchise Fee
$105,000
Our franchisees offer high-end retail clothing consignment services to the public under the Service Marks and the Indy Clover programs and systems.
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Indy Clover March 6, 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor's audited financial statements for the fiscal year ending June 30, 2023, reveal a significant financial weakness. The balance sheet for Indy Clover Franchising, LLC (Indy Clover LLC) shows total liabilities that are more than double its total assets, resulting in a negative net worth of ($177,719). This financial position could potentially impair Indy Clover LLC's ability to provide ongoing support and fulfill its obligations to you, jeopardizing your investment.
Potential Mitigations
- Your accountant should thoroughly analyze the franchisor's financial statements, including all footnotes and the sources of revenue and expenses.
- A business advisor can help you evaluate whether the franchisor's business model appears sustainable despite the current negative net worth.
- Discuss the franchisor's capitalization and plans for achieving financial stability with your attorney.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals that in 2023, two of the five operating franchises were transferred to new owners. For a young and small system, a transfer rate this high could be a significant indicator of potential issues, such as franchisee dissatisfaction or a lack of profitability. While these are not terminations, it suggests a substantial portion of the initial franchisee base exited the system within a very short period, creating risk for your investment.
Potential Mitigations
- It is critical to contact the two former franchisees listed in Exhibit G to understand their reasons for selling their businesses; your attorney can help frame the questions.
- Discuss the high transfer rate with current franchisees to gauge their perspective on system health and support.
- Your business advisor should help you assess whether these transfers signal underlying problems with the business model or franchisor support.
Rapid System Growth
High Risk
Explanation
Item 20 data shows the system is growing rapidly, from zero to nine operating franchises in about 18 months, with seven more planned. When combined with the franchisor's negative net worth as shown in its financial statements, this rapid expansion creates a risk that support systems like training, marketing, and operational assistance may be strained. This could result in inadequate support for you as the system scales.
Potential Mitigations
- In discussions with the franchisor, inquire specifically about their plans and budget for scaling their support staff and infrastructure.
- A conversation with your business advisor is important to assess if the franchisor's support capabilities can realistically keep pace with its growth.
- Question current franchisees, especially recent ones, about the quality and responsiveness of the training and ongoing support they have received.
New/Unproven Franchise System
High Risk
Explanation
The franchisor was formed in June 2022 and only began offering franchises in 2023, as stated in Item 1. This means you would be joining a new and largely unproven franchise system. Such systems carry higher risks, including the potential for undeveloped operational procedures, minimal brand recognition, and a lack of a long-term track record of franchisee success, which could impact your business's viability and growth.
Potential Mitigations
- Engaging a business advisor to conduct extensive due diligence on the viability of the business concept itself is crucial.
- An in-depth review of the franchisor's financials with your accountant is needed to assess its capitalization and ability to survive the startup phase.
- It is essential to speak with all of the earliest franchisees listed in Item 20 about their experiences and the level of support provided.
Possible Fad Business
Low Risk
Explanation
The business model is focused on high-end clothing consignment. While this is an established retail sector, the success of this specific brand and its unique operational model is new and unproven. There is a potential risk that the brand's current appeal could be tied to short-term trends. You must evaluate if the business has long-term, sustainable consumer demand beyond its initial novelty.
Potential Mitigations
- A business advisor can help you research the long-term trends and competitive landscape in the upscale consignment market.
- Evaluate the franchisor's strategies for brand-building and differentiation to sustain demand over the long term.
- Discuss the model's resilience to economic cycles and changing fashion trends with your financial advisor.
Inexperienced Management
Medium Risk
Explanation
According to Item 2, the executive team has franchise-related experience since 2018, but with different business concepts. Their experience with the Indy Clover brand itself and in managing this specific franchise system is very recent, beginning in 2022. This relative lack of long-term experience in managing this particular system could present risks related to the maturity of its support, training, and operational protocols.
Potential Mitigations
- Engage a business advisor to help you assess whether the management team's prior experience is sufficiently relevant to this concept.
- In your discussions with current franchisees, specifically inquire about the quality of management's strategic decisions and operational support.
- Your attorney can help you understand the commitments for ongoing support outlined in the Franchise Agreement.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Ownership by a private equity firm can sometimes mean that decisions are driven by short-term financial returns rather than the long-term health of the brand. This can lead to increased fees, reduced support, or pressure to use certain vendors to maximize investor profits before the firm sells the company.
Potential Mitigations
- Your attorney can help you verify the ownership structure of the franchisor to confirm the absence of institutional investors.
- A business advisor can help research the background of the disclosed owners to understand their long-term vision for the brand.
- Discuss the franchisor's assignment rights with your attorney to understand what happens if the company is sold in the future.
Non-Disclosure of Parent Company
Medium Risk
Explanation
Item 1 discloses a parent company, Indy Clover LLC. However, the FDD does not include financial statements for this parent entity. Given that the franchisor entity is newly formed and has a negative net worth, the financial strength of its parent is a material fact for assessing the overall stability and backing of the franchise system. Without this information, your ability to conduct a full risk assessment is limited.
Potential Mitigations
- Your attorney should request the financial statements of the parent company, Indy Clover LLC, for a complete financial review.
- An accountant should help you assess the potential risks of investing in a thinly capitalized subsidiary without a clear view of the parent's financial strength.
- Inquire with your attorney about the possibility of obtaining a corporate guarantee from the parent company for the franchisor's obligations.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified, as Item 1 explicitly states there are no predecessor entities. When a franchisor has a predecessor, it is important to review the predecessor's history for issues like litigation, bankruptcy, or high franchisee turnover. A lack of such disclosure could hide a troubled past for the system, but in this case, the franchisor itself is new.
Potential Mitigations
- Your attorney can help confirm the franchisor's corporate history to ensure no predecessor entities have been omitted.
- A business advisor can assist in researching the business history of the individual principals listed in Item 2 for any relevant background.
- Focus due diligence on the current entity's short track record by speaking with the earliest franchisees.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD, as Item 3 discloses no litigation involving the franchisor. A pattern of litigation, especially cases initiated by franchisees alleging fraud or misrepresentation, can be a major red flag. It may indicate systemic problems with the franchisor's operations, support, or sales practices. The absence of disclosed litigation is a positive sign.
Potential Mitigations
- Your attorney can conduct an independent public records search to verify that no material litigation has been omitted.
- In discussions with current and former franchisees, it is still prudent to ask about any disputes they may have had with the franchisor.
- A business advisor can help you review other risk factors, as the absence of litigation alone does not guarantee a healthy system.
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
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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.
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