Motto Mortgage
Initial Investment Range
$55,700 to $239,750
Franchise Fee
$35,000
We offer franchises for businesses offering mortgage brokerage services using the Motto system.
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Motto Mortgage April 11, 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 audited financial statements reveal significant and recurring net losses for the past three years. The company’s positive equity position appears entirely dependent on large, ongoing capital contributions from its parent company, RE/MAX, LLC. This financial reliance on a parent indicates that on a standalone basis, the business may not be self-sustaining, posing a risk to its long-term ability to support franchisees if parent support diminishes.
Potential Mitigations
- Your accountant must conduct a thorough analysis of the audited financial statements, focusing on the trend of operating losses and dependence on parental capital infusions.
- A franchise attorney should review any financial guarantees provided by the parent company to understand their scope and duration.
- Discuss the franchisor's path to profitability and the parent company's long-term commitment with your business advisor.
High Franchisee Turnover
High Risk
Explanation
Item 20 data for 2024 shows a very high franchisee turnover rate of approximately 16.5%, with 41 total exits (terminations, non-renewals, and other cessations) from a starting base of 249 outlets. The total number of franchised outlets also declined from 249 to 228 during the year. This rate of attrition is a significant indicator of potential systemic problems, which could include franchisee unprofitability, dissatisfaction, or other operational challenges.
Potential Mitigations
- Contacting a significant number of former franchisees listed in Item 20 is critical to understand their reasons for leaving the system; a business advisor can help you prepare questions.
- A franchise attorney should help you scrutinize the definitions used for franchisee departures in Item 20 footnotes.
- Your accountant can help you model the potential financial impact if your business faces similar challenges leading to such high turnover.
Rapid System Growth
High Risk
Explanation
While the system grew in prior years, the data in Item 20 for 2024 shows a net decline of 21 franchised units. This, combined with the financial losses disclosed in Item 21, suggests that the previous growth may have strained the franchisor's resources. A shrinking system poses a risk to brand value and may indicate that the support infrastructure is not keeping pace with the needs of its franchisees.
Potential Mitigations
- In discussions with the franchisor, ask specific questions about their strategies for stabilizing the system and supporting existing franchisees.
- Your business advisor should help you evaluate if the brand's value proposition is weakening due to the recent contraction.
- Speaking with franchisees who joined during both growth and contraction phases can provide insight into the consistency of franchisor support.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified. A new or unproven franchise system can present significant risks because the business model, brand recognition, and support structures are not yet well-established. Prospective franchisees in such systems may face a higher likelihood of unforeseen challenges and a greater potential for system-wide failure. It is important to carefully evaluate the experience of the management team and the system's financial stability before investing in a new franchise.
Potential Mitigations
- A thorough review of the business experience of the franchisor's key executives in Item 2 with your business advisor is essential.
- Consulting an accountant to analyze the franchisor's financial statements in Item 21 for signs of under-capitalization is a crucial step.
- Your attorney can advise on negotiating more protective terms to offset the higher risks associated with a new system.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. A business concept tied to a temporary trend or fad can be risky, as long-term consumer demand may not be sustainable. This could leave you with a long-term contractual obligation even after public interest has faded, potentially leading to declining sales and business failure. Evaluating the long-term market relevance of the product or service is a critical piece of due diligence.
Potential Mitigations
- Independent market research, perhaps with the help of a business advisor, is necessary to assess the long-term consumer demand for the franchise's core offerings.
- Your financial advisor can help you evaluate the business model's resilience to changing market trends and economic cycles.
- Questioning the franchisor about their long-range plans for product and service innovation is an important due diligence step.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. The franchisor's management team, as detailed in Item 2, appears to have extensive experience in both the mortgage and franchising industries, largely stemming from their roles within the parent company, RE/MAX. Lack of relevant management experience is a risk because it can lead to poor strategic decisions, inadequate franchisee support, and underdeveloped operational systems, negatively impacting the entire franchise network.
Potential Mitigations
- A business advisor can help you analyze the backgrounds of the key executives listed in Item 2 to verify their experience is relevant.
- Discussing the management team's accessibility and responsiveness with current franchisees can provide valuable real-world insight.
- Your attorney can help you understand the roles and responsibilities of the management team as they relate to franchisee support.
Private Equity Ownership
Medium Risk
Explanation
The franchisor is part of a complex structure owned by a publicly traded company, RE/MAX Holdings, Inc. While this can provide financial stability, it also means decisions may prioritize shareholder value over franchisee profitability. The Franchise Agreement gives the franchisor the right to assign the contract without your consent, meaning the system could be sold to another entity with different priorities, posing a risk to the long-term support and direction of the franchise.
Potential Mitigations
- Research the parent company's history and reputation in managing franchise systems with your business advisor.
- Your attorney should review the assignment clause to understand the implications for your business if the franchise system is sold.
- Speaking with current franchisees about their experience under the current ownership structure can provide valuable perspective.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The franchisor discloses that it is a wholly owned subsidiary of RE/MAX, LLC, which in turn is part of a publicly traded company structure. The franchisor's financial statements are provided and show significant reliance on capital contributions from its parent. Failure to disclose a parent company or its financials when the franchisor is thinly capitalized can hide significant risks about the true financial stability of the system, but here the relationship and dependence are disclosed.
Potential Mitigations
- Your accountant should carefully analyze the provided financial statements, including the significant capital contributions from the parent company.
- A franchise attorney can help you understand the legal relationship between the franchisor and its parent, and what obligations, if any, the parent has to the franchise system.
- A business advisor can help investigate the parent company's overall financial health and its commitment to the Motto brand.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the document. The FDD discloses a predecessor, Full House Mortgage Connection, Inc., from which it acquired assets in 2016. A lack of clear information about a predecessor's history, including any financial, legal, or operational problems, can obscure risks that the current franchisor may have inherited. It is important for a prospective franchisee to understand the full history of the system they are joining.
Potential Mitigations
- Your attorney should review the disclosures in Items 1, 3, and 4 for any information related to the franchisor's predecessors.
- A business advisor can assist in conducting independent research into the history and reputation of any named predecessor entities.
- Asking long-term franchisees about their experiences under any previous ownership can provide valuable context.
Pattern of Litigation
Medium Risk
Explanation
The franchisor has not been sued by franchisees, but Item 3 discloses that Motto LLC initiated four lawsuits against its own franchisees in the last fiscal year, primarily to collect fees. This pattern suggests a willingness to use litigation to enforce its agreements, which could create a contentious relationship. If you face financial difficulties, there appears to be a risk that the franchisor may resort to legal action rather than working collaboratively towards a solution.
Potential Mitigations
- A franchise attorney should review the litigation history in Item 3 and discuss its implications for the franchisor-franchisee relationship.
- It is advisable to discuss the franchisor's approach to resolving disputes with current franchisees.
- Maintaining open communication with the franchisor and seeking assistance early if you encounter problems may help avoid legal conflicts; your business advisor can help mediate.
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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Purchase the complete risk review to see all 102 risks across all 10 categories.
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.
