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Take the Quiz & Get MatchedJPAR - Real Estate
How much does JPAR - Real Estate cost?
Initial Investment Range
$17,940 to $235,400
Franchise Fee
$6,250 to $27,500
As a JPAR - Real Estate franchisee, you will serve as a real estate broker for residential home buyers and sellers, commercial real estate buyers and sellers and lessors and lessees.
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JPAR - Real Estate April 17, 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 financial statements reveal significant instability. The company has a negative net worth of ($301,304), a net loss of ($805,520), and current liabilities that far exceed current assets. A note from the auditor indicates the company is dependent on its parent for funding to continue as a “going concern.” This raises serious questions about its ability to support you and remain in business, a fact compounded by the post-year-end termination of its largest franchisee.
Potential Mitigations
- Your accountant must conduct a thorough analysis of the franchisor's financial statements, including the 'going concern' note and dependency on its parent company.
- It is critical to discuss with your franchise attorney the potential consequences of the franchisor's financial weakness and potential insolvency on your investment.
- Ask your business advisor to help you assess whether the franchisor's parent has the willingness and ability to continue funding these significant losses.
High Franchisee Turnover
High Risk
Explanation
Item 20 data indicates a concerning rate of franchisee turnover. In 2023, the system experienced an approximate 23% churn rate based on the number of exits relative to the starting number of outlets. Additionally, five franchises were terminated in the first quarter of 2025 alone. Such high turnover rates, particularly terminations, could suggest systemic issues, such as franchisee unprofitability, dissatisfaction with the system, or overly aggressive enforcement by the franchisor.
Potential Mitigations
- You should contact a significant number of former franchisees listed in Exhibit E to understand their reasons for leaving the system.
- A thorough analysis of the turnover tables with your accountant is essential to calculate the precise churn rates and identify trends over the past three years.
- In discussions with your franchise attorney, explore the potential underlying causes for the high number of terminations and other exits from the system.
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD Package. Rapid growth can strain a franchisor's ability to provide adequate support. If a franchisor's expansion outpaces its support infrastructure, new franchisees may experience delays in training, a lack of operational guidance, and diluted brand standards, which can negatively impact their launch and long-term success.
Potential Mitigations
- Your accountant can review the franchisor's financial statements to assess if they are investing in infrastructure to support growth.
- Questioning current franchisees about their experience with the quality and timeliness of support is a crucial step your business advisor can help with.
- It is wise to ask your attorney to seek contractual commitments regarding specific support levels and response times.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified in the FDD Package. Investing in a new or unproven franchise system carries inherent risks, as the business model may not have a long-term track record of success. These systems might lack established brand recognition, refined operational procedures, and the experienced management necessary to provide robust franchisee support, potentially increasing the risk of business failure.
Potential Mitigations
- With a new system, it's vital that your business advisor helps you conduct extensive due diligence on the founders' industry and franchising experience.
- Your accountant should carefully analyze the franchisor's capitalization to ensure it has sufficient funds to support its initial growth phase.
- Your franchise attorney may be able to negotiate more favorable terms to compensate for the higher risk associated with an unproven concept.
Possible Fad Business
Medium Risk
Explanation
The franchised business operates in the highly competitive and cyclical real estate brokerage industry. While not a temporary fad, the industry is subject to significant fluctuations based on economic conditions, interest rates, and housing inventory. Your success depends on navigating these market cycles, which are outside the franchisor's control. The business model's long-term viability is tied to these external economic factors.
Potential Mitigations
- Developing a business plan with your advisor that accounts for market cyclicality is crucial for long-term stability.
- Your financial advisor can help you create financial projections that model different economic scenarios, including downturns in the real estate market.
- It is prudent to discuss with current franchisees how the business performs during both strong and weak real estate markets.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 2 indicates the executive team has prior experience in the real estate and franchising industries. When a franchisor's management lacks experience in franchising or the specific industry, it can lead to poorly developed systems, inadequate franchisee support, and ineffective marketing strategies. This deficiency can jeopardize the success of individual franchisees who rely on the franchisor's expertise and guidance.
Potential Mitigations
- A business advisor can help you thoroughly vet the backgrounds of the franchisor's key executives.
- It is wise to ask current franchisees about their perception of the management team's competence and the quality of support they receive.
- If management is new to franchising, your attorney can help you inquire if they have engaged experienced franchise consultants.
Private Equity Ownership
Medium Risk
Explanation
The franchisor, JPAR Franchising, LLC (JPAR LLC), was acquired by Cairn JPAR Holdings, LLC in 2021, and its ultimate parent is Cairn Real Estate Holdings, LLC. Such ownership structures can sometimes resemble private equity, which may prioritize short-term returns. This could potentially lead to decisions like increasing fees, reducing support to cut costs, or selling the system, which may not align with your long-term interests as a franchisee.
Potential Mitigations
- Speaking with franchisees who have been in the system since before the 2021 acquisition could provide insight into any changes in culture or support.
- Your business advisor can help you research the parent company's track record with other businesses it may own.
- Consulting your attorney about the terms of the franchisor's right to assign the Franchise Agreement is advisable to understand the implications of a future sale.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchisor's parent company is disclosed, and its financials are not required as it does not guarantee the franchisor's obligations. When a franchisor is a subsidiary, the financial health of its parent can be critical. If the parent's financial statements are not disclosed when required, you may lack a complete picture of the overall financial stability and resources backing your franchise system.
Potential Mitigations
- An accountant can help determine if a parent company's financial statements should have been included based on FTC rules.
- Your attorney should verify if the parent company guarantees any of the franchisor's obligations.
- It is prudent to ask your business advisor to research the parent company's reputation and financial health through public sources.
Predecessor History Issues
Medium Risk
Explanation
The FDD states that JPAR LLC has no predecessors. However, it acquired its rights to the marks from an affiliate, JP Piccinini Real Estate Services, LLC, which has operated since 2011 and is involved in significant litigation. While not a legal predecessor, this affiliate's history is material to the brand. A lack of clarity around predecessor or key affiliate history could obscure past issues that might affect your business.
Potential Mitigations
- Your attorney should carefully review the history of the franchisor and its key affiliates as disclosed in Items 1 and 3.
- It is wise to ask long-term franchisees about the history of the system and their experience with any affiliated entities.
- A business advisor can assist in researching the public history and reputation of key affiliates mentioned in the FDD.
Pattern of Litigation
High Risk
Explanation
A significant pattern of litigation exists for a key affiliate. Item 3 discloses that JP Piccinini Real Estate Services, LLC, the owner of the JPAR® marks, is a co-defendant in three major antitrust class-action lawsuits concerning real estate commission rules. Although a settlement is pending, this industry-wide litigation is material and could pose reputational and operational risks to the entire brand, potentially impacting your business.
Potential Mitigations
- Your franchise attorney must carefully review the disclosures in Item 3 and explain the potential implications of this affiliate litigation.
- It is advisable to discuss with your business advisor how this type of industry litigation might affect your local operations and market perception.
- You should ask the franchisor how it is addressing the potential brand impact from this litigation.
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
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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
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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
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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
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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
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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
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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