Mister Sparky Logo

Mister Sparky

Mister Sparky Franchising SPE LLC
https://www.mistersparky.com/franchise
1-410-740-1900
7120 Samuel Morse Drive, Suite 300, Columbia, Maryland 21046

Initial Investment Range

$84,570 to $276,702

Franchise Fee

$5,000 to $33,000

The franchised business offers residential and light commercial electrical services, including maintenance, repair, and equipment replacement services.

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Mister Sparky April 4, 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.

1

Franchisor Stability Risks

Start Here
Total: 10
3
3
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The audited financial statements for the parent guarantor, AB Assetco LLC (AB Assetco), show a net loss of over $14.3 million in 2024, a significant reversal from its $8.1 million net income in 2023. This substantial loss and negative working capital could indicate financial weakness, potentially impairing the parent company's ability to provide robust support to the franchise system, fund future growth, or fulfill its guarantee obligations, which creates risk for you.

Potential Mitigations

  • Your accountant must conduct a thorough review of the consolidated financial statements in Exhibit I, including all footnotes, to assess the financial health of the parent entity.
  • Discuss the implications of the parent company's financial loss and its ability to support the system with your financial advisor.
  • A franchise attorney should review the terms of the parent's Guarantee of Performance to understand its scope and limitations.
Citations: Item 21, Exhibit I

High Franchisee Turnover

Medium Risk

Explanation

Item 20 and Exhibit G indicate a number of franchise exits in 2024, including one termination, multiple cessations of operation, and several transfers. While the system also experienced significant growth, the consistent departure of franchisees from the system warrants further investigation into the reasons for these exits. This turnover could suggest underlying issues with profitability, operations, or franchisee satisfaction that may impact your own potential for success.

Potential Mitigations

  • A thorough review of Item 20 data with your accountant is essential to calculate the precise turnover rate.
  • Contacting a significant number of former franchisees listed in Exhibit G is critical to understand their reasons for leaving the system.
  • Your business advisor can help you compare this turnover rate against industry averages for similar home service franchises.
Citations: Item 20 (Tables 1, 3), Exhibit G

Rapid System Growth

Medium Risk

Explanation

The franchise system is expanding rapidly, adding 45 net new territories in 2024 alone. This fast-paced growth, when viewed alongside the parent company's significant financial loss reported in Item 21, presents a risk. The franchisor's resources could be stretched thin, potentially compromising the quality and availability of training, marketing, and operational support for all franchisees, including you.

Potential Mitigations

  • It is important to ask the franchisor about their specific plans to scale support infrastructure to match this rapid growth.
  • In discussions with existing franchisees, inquire specifically about the current quality and responsiveness of franchisor support.
  • Your accountant should help you assess whether the franchisor's financial resources appear adequate to sustain this level of expansion.
Citations: Item 20 (Table 1), Item 21, Exhibit I

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified in the FDD package. The franchisor's predecessor began offering franchises in 2006, and the system is well-established with over 200 operating territories. An unproven system can be risky due to the lack of a track record, underdeveloped support systems, and minimal brand recognition, which can increase the chances of business failure.

Potential Mitigations

  • When evaluating any franchise, it is prudent to have your business advisor assess the system's age and maturity.
  • An attorney can help you understand the legal and business risks associated with investing in a newer, less established franchise system.
  • Always check Item 1 and Item 20 for the history of the franchise system and the number of operational units.
Citations: Not applicable

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. Mister Sparky offers electrical repair and maintenance services, which are established, essential home services with long-term consumer demand. A fad business, based on a temporary trend, can be a significant risk because your long-term contractual obligations continue even if public interest in the product or service fades, potentially leading to business failure.

Potential Mitigations

  • Your business advisor can help you research the long-term market demand and sustainability for any franchise concept you consider.
  • It is wise to assess a business's resilience to economic cycles and changing consumer trends with a financial advisor.
  • When analyzing a franchise opportunity, question how the business model plans to evolve and stay relevant over time.
Citations: Not applicable

Inexperienced Management

Low Risk

Explanation

This risk was not identified. Item 2 of the FDD shows that the franchisor's key executives have many years of experience in the home services industry and with this specific brand or its affiliates. Inexperienced management can be a major risk, as it may lead to poor strategic decisions, inadequate franchisee support, and a higher potential for system-wide problems, even if the business concept itself is sound.

Potential Mitigations

  • Always have your business advisor help you scrutinize the backgrounds of the key executives listed in Item 2.
  • Discussing the management team's reputation and competence with current franchisees is a vital due diligence step.
  • An attorney can help you understand the importance of experienced leadership in fulfilling the franchisor's contractual obligations.
Citations: Not applicable

Private Equity Ownership

High Risk

Explanation

Item 1 discloses that the franchisor's ultimate owner is Apax Partners, LLP, a private equity (PE) firm. This ownership structure may create pressure to prioritize short-term financial returns for investors over the long-term health of franchisees. This could manifest as increased fees, reduced support, or a quick sale of the entire system to another company, which is permitted without your consent under the Franchise Agreement.

Potential Mitigations

  • A business advisor can help you research the private equity firm's reputation and track record with other franchise systems.
  • You should discuss the impact of PE ownership with current franchisees, asking about any changes since the acquisition.
  • Your attorney should analyze the assignment clause in the Franchise Agreement to explain the implications of the system being sold.
Citations: Item 1, FA § 15.8

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified. The FDD provides extensive information regarding its parent companies, including AB Assetco LLC and Authority Brands, Inc., and includes audited financial statements for both in Exhibit I. Failing to disclose a parent company or its financials when required can obscure the true financial stability and backing of the franchisor, which is a significant risk for a prospective franchisee.

Potential Mitigations

  • Engage an attorney to verify the corporate structure if you suspect an undisclosed parent entity exists.
  • An accountant should confirm that the financial statements of any guaranteeing parent company are included and meet accounting standards.
  • Understanding the full corporate structure is a key piece of due diligence that your business advisor can assist with.
Citations: Not applicable

Predecessor History Issues

Medium Risk

Explanation

Item 1 discloses a predecessor entity, and Item 3 reveals this predecessor was involved in notable litigation. Specifically, the predecessor settled a case by paying a former franchisee $245,000. While the franchisor entity has changed, this history is part of the system's lineage and could indicate a past culture of conflict with franchisees. Understanding this history provides important context about potential risks that may carry over.

Potential Mitigations

  • Your attorney should carefully review the litigation history of any predecessor entity disclosed in Item 3.
  • Question the current management about how they have addressed the issues that may have led to past conflicts.
  • When speaking with long-term franchisees, ask about their experiences under both the current and predecessor management.
Citations: Item 1, Item 3

Pattern of Litigation

High Risk

Explanation

A review of Item 3 shows a history of contentious litigation. Notably, past lawsuits with a former franchisee resulted in settlements where the franchisor's predecessor made significant payments to the franchisee, including one for $245,000. A franchisor paying to settle claims could suggest the franchisee's allegations had merit. This pattern may be a red flag indicating potential systemic issues with the franchisor's business practices or franchisee relationships.

Potential Mitigations

  • Your attorney must carefully analyze the details and outcomes of all litigation disclosed in Item 3.
  • It is highly advisable to contact former franchisees, especially those involved in litigation if possible, to understand the context of the disputes.
  • Considering a pattern of franchisor-paid settlements as a significant warning sign is a prudent step your business advisor would recommend.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
4
3
8

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
4
5
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

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4

Legal & Contract Risks

Total: 16
6
6
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.

5

Territory & Competition Risks

Total: 5
3
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.

6

Regulatory & Compliance Risks

Total: 10
4
5
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.

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
3
4
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.

9

Term & Exit Risks

Total: 18
10
8
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.

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.