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How much does Purvelo cost?
Initial Investment Range
$355,920 to $587,320
Franchise Fee
$50,000 to $120,000
The franchise offered is for the establishment and operation of businesses that provide a cycle studio model offering spin and other fitness class offerings (each, a “Studio”).
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Purvelo August 12, 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 2023 audited financial statements include a "Going Concern" warning from the auditor, noting substantial doubt about the company's ability to continue operating. The franchisor has a history of significant net losses, negative cash flow, and a negative net worth, relying on parent company contributions to function. This financial weakness could severely impair its ability to provide support, grow the brand, or even remain in business, posing a significant risk to your investment.
Potential Mitigations
- Your accountant must conduct a deep analysis of the financial statements, including the "Going Concern" note and the company's reliance on its parent for funding.
- A franchise attorney should review the parent company's guarantee of obligations, if any, to assess its strength and enforceability.
- Engaging a financial advisor to evaluate the long-term viability of a franchisor with such a precarious financial position is crucial before investing.
High Franchisee Turnover
Medium Risk
Explanation
Item 20 data reveals that the system is not growing, with total outlets remaining stagnant. The only two franchised units that exist are recent conversions from company-owned stores, as the franchisor sold half of its corporate locations in 2023. While not showing franchisee failures yet, this lack of organic franchise growth and the shedding of corporate assets in a very new system raises questions about the model's scalability and appeal.
Potential Mitigations
- It is critical to speak with the two current franchisees, who were former company store managers, to understand the transition and their current performance.
- Your business advisor should help you question the franchisor about their strategy for corporate stores and their plans for future organic franchise growth.
- An accountant should help you assess the potential risks of joining a system that is not demonstrating growth in its early stages.
Rapid System Growth
Low Risk
Explanation
This risk was not identified. The data in Item 20 indicates the franchise system is not experiencing rapid growth; in fact, the total number of outlets has remained stagnant. While avoiding the risks of overexpansion, this also means the brand has very limited market presence and recognition. Slow growth can present its own challenges, such as a lack of peer support and a slower-to-develop brand fund.
Potential Mitigations
- A business advisor can help you assess the pros and cons of joining a small, slow-growing system versus a larger, more established brand.
- Question the franchisor about their growth plans and the resources they have to support future expansion.
- Your accountant can help model the financial implications of slow brand growth, such as a smaller marketing fund and lower brand recognition.
New/Unproven Franchise System
High Risk
Explanation
Purvelo Franchising, LLC (Purvelo LLC) is a new franchisor, formed in 2022, with a very limited operating history and only two franchisees, who are recent conversions from company stores. The franchisor explicitly flags its "Short Operating History" as a special risk. Investing in an unproven system with minimal brand recognition and undeveloped support structures carries a significantly higher risk of business failure compared to joining an established brand.
Potential Mitigations
- A franchise attorney should be consulted to understand the heightened risks of joining an emerging system, potentially negotiating more franchisee-favorable terms.
- With your business advisor, conduct extensive due diligence on the viability of the business model itself, independent of the franchise structure.
- Your accountant should scrutinize the franchisor's capitalization and ability to survive the early stages of development.
Possible Fad Business
Medium Risk
Explanation
The business operates in the competitive boutique fitness sector, specifically focusing on cycle/spin classes. This market can be trend-sensitive. While not definitively a fad, there is a risk that consumer preferences could shift, or that the concept may struggle to differentiate itself in a crowded marketplace. You should evaluate the long-term sustainability and brand differentiation beyond current fitness trends.
Potential Mitigations
- Consult with a business advisor to research the long-term outlook for boutique cycle studios in your specific market.
- Question the franchisor on their plans for innovation and adaptation to evolving fitness trends to maintain relevance.
- Analyze the local competition to determine if the market is already saturated with similar concepts.
Inexperienced Management
Low Risk
Explanation
This specific risk was not identified. The FDD's Item 2 discloses that the executive team, particularly CEO Paul Flick, has extensive experience managing a large portfolio of other franchise systems. While the Purvelo brand is new, the leadership has a long history in the franchising industry. However, it is still important to verify that this broad experience translates into effective support for this specific fitness concept.
Potential Mitigations
- In discussions with current franchisees, it would be wise to ask about the quality and relevance of the support provided by the experienced management team.
- A business advisor can help assess whether the management's experience in other industries is applicable to the boutique fitness market.
- Your attorney can review the franchisor's obligations to ensure specific support commitments are clearly defined in the agreement.
Private Equity Ownership
Medium Risk
Explanation
The franchisor is part of a large portfolio of brands under a holding company structure characteristic of private equity or a similar investment-focused strategy. This could mean that management decisions prioritize overall portfolio returns or a future sale of the brand over the long-term health of individual franchisees. Your success may be secondary to the parent company's broader financial objectives, which could affect support levels and strategic direction.
Potential Mitigations
- A business advisor can help you research the track record of the parent company, AE Capital Group, and its other franchise brands.
- Question current franchisees about any changes in strategy, support, or fees that may reflect the parent company's influence.
- Your franchise attorney should carefully review the franchisor's right to sell or assign the franchise system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified, as the FDD discloses the parent company structure in Item 1. However, the provided financials are for the franchisor entity only, not the parent. Given the franchisor's precarious financial state, the lack of a formal parent company guarantee of its obligations means you may have no recourse to the more established parent if the franchisor fails.
Potential Mitigations
- Your accountant should analyze the financial relationship between the franchisor and its parent, as described in the financial statement notes.
- A franchise attorney should be asked to determine if a parent company guarantee of the franchisor's obligations is necessary and negotiable.
- Given the franchisor's "going concern" status, discussing the parent's commitment with a financial advisor is crucial.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified, as no predecessors for the Purvelo franchise system are listed in Item 1. The business was operated by an affiliate before the franchising entity was created, but there is no history of a prior entity offering Purvelo franchises. However, the negative history of affiliated companies under the same management, disclosed in Item 3, should be considered a related and significant concern.
Potential Mitigations
- Your attorney should review the history of affiliated companies under the same management for patterns of behavior, even if they are not legal predecessors.
- A business advisor can help you investigate the history and reputation of the brand's founders and parent company.
- Discussing the history of the company-owned locations with former employees or managers could provide valuable insight.
Pattern of Litigation
High Risk
Explanation
While Purvelo LLC itself has no litigation, Item 3 reveals a significant pattern of governmental enforcement actions against affiliated franchise systems and the CEO, Paul Flick. These actions by regulators in multiple states involve serious franchise law violations, including failure to make proper disclosures. This history raises substantial concerns about the management’s compliance culture and attitude toward its legal obligations to franchisees, which could directly impact you.
Potential Mitigations
- Your franchise attorney must conduct a thorough review of every disclosed litigation and governmental action to understand the pattern of conduct.
- Discussing these legal troubles with a business advisor is essential to assess the character and integrity of the franchisor's management.
- This history should be a major factor in your decision, and you should ask your attorney about the potential implications for your own franchise relationship.
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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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
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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
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
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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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.