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How much does Red Barn Homebuyers cost?
Initial Investment Range
$59,465 to $257,820
Franchise Fee
$38,260 to $40,520
Red Barn Homebuyers, LLC offers franchises for the operation of a real estate investment business consisting of (a) purchasing, renovating and selling real properties (traditional “house flipping”) and/or (b) wholesaling real properties.
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Red Barn Homebuyers April 21, 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
Although the 2024 financial statements show profitability, state regulators in Illinois and Maryland have mandated the deferral of your initial fees due to the franchisor's "financial condition." This is a significant warning sign that may indicate underlying financial weakness or insufficient capitalization not immediately apparent from the provided statements. The franchisor also explicitly discloses its financial condition as a special risk to consider, calling its ability to provide support into question.
Potential Mitigations
- Your accountant must scrutinize the audited financial statements, including all footnotes, and question the franchisor about the specific reasons for the state-mandated fee deferrals.
- A thorough discussion with your attorney is crucial to understand the protections offered by any state-required financial assurances, like fee deferrals.
- Engaging a business advisor to assess if the franchisor has adequate capital to support its rapid growth and fulfill its obligations is highly recommended.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals a high rate of franchisee exits. In 2023, 4 of 13 starting franchisees ceased operations, a churn rate of nearly 31%. In 2024, 6 of 54 starting franchisees exited through termination or other cessations, an 11% churn rate. Such high turnover in a young system may indicate significant issues with the business model's viability, franchisee profitability, or the quality of franchisor support, presenting a major risk to your investment.
Potential Mitigations
- You must contact a significant number of former franchisees listed in Item 20 to understand why they left the system.
- It is critical that your accountant helps you analyze the turnover rates and compare them against any available industry benchmarks for house-flipping businesses.
- A frank discussion with your attorney about the potential implications of this high turnover on your own likelihood of success is warranted.
Rapid System Growth
High Risk
Explanation
The system is expanding extremely quickly, growing from 0 to 86 franchised outlets in three years. While the franchisor's revenues have increased, such rapid growth can strain its ability to provide adequate and timely training, site selection assistance, and ongoing operational support to all franchisees. The quality of support may be diluted as resources are spread thin across a rapidly expanding network, potentially impacting your business's ramp-up and performance.
Potential Mitigations
- You should question the franchisor about their specific plans and infrastructure for scaling support systems to match this rapid growth.
- Engaging a business advisor can help you assess whether the franchisor’s management team and support staff have the capacity to handle this number of new units.
- It is important to ask both new and established franchisees about the current quality and responsiveness of the support they receive.
New/Unproven Franchise System
High Risk
Explanation
Red Barn Homebuyers, LLC (Red Barn) is a new franchisor, organized in August 2021 and beginning franchise sales in April 2022. The FDD discloses that the franchisor itself has never directly owned and operated a similar business. Investing in a new system carries higher risks, including an unproven support infrastructure, underdeveloped operational systems, and minimal brand recognition, which could affect your potential for success.
Potential Mitigations
- A business advisor can help you conduct extensive due diligence on the founders' specific experience in both real estate investment and managing a franchise system.
- Speaking with the earliest franchisees from the Item 20 list is critical to understand their experiences with the developing system.
- Your attorney may be able to negotiate more favorable terms, such as enhanced support commitments, to help offset the risks of joining an unproven system.
Possible Fad Business
Medium Risk
Explanation
The franchised business is in the real estate investment sector, specifically house flipping and wholesaling. This industry is highly cyclical and sensitive to interest rate fluctuations, property value changes, and overall economic health. A market downturn could significantly impact your ability to source profitable deals and sell properties, which may affect the long-term viability of the business model.
Potential Mitigations
- A business advisor should help you research the long-term sustainability of the house-flipping model and its historical performance during economic downturns.
- Assessing the franchisor's strategies for adapting to changing market conditions is crucial for long-term planning.
- Creating financial models with your accountant that account for potential market fluctuations is a prudent step.
Inexperienced Management
Medium Risk
Explanation
While founder Ken Corsini has industry experience, the franchisor entity is very new (2021) and only began franchising in 2022. Item 2 shows that some key executives have limited experience specifically in managing a franchise system. Inexperience in franchising can lead to challenges in providing effective franchisee support, training, and strategic guidance, even with strong industry knowledge. This could impact your operational efficiency and growth.
Potential Mitigations
- It is wise to thoroughly vet the backgrounds of all key executives with your business advisor, focusing on their direct franchising management experience.
- Speaking with current franchisees about the quality of management's guidance and system support is essential.
- You should ask the franchisor what steps they have taken to compensate for any lack of franchise management experience, such as hiring expert consultants.
Private Equity Ownership
Low Risk
Explanation
This risk, where a franchise system is owned by a private equity firm that might prioritize short-term returns over long-term system health, was not identified in the FDD. Item 1 indicates the franchisor is a standard limited liability company and does not disclose ownership by a private equity fund. It is still a useful concept to understand in franchising.
Potential Mitigations
- When evaluating any franchise, your attorney should help you verify the ownership structure disclosed in Item 1 through public records.
- It is good practice to ask a franchisor about their long-term vision for the brand, which can provide insight into their operational philosophy.
- A business advisor can help you understand the potential impacts of different ownership structures on a franchise system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. The FDD does not mention a parent company. Red Barn Homebuyers, LLC is presented as the primary entity, and its financials are provided. In some franchise systems, a thinly capitalized subsidiary relies on an undisclosed parent, which can hide financial instability. This does not appear to be the case here, but understanding this structure is important for franchise evaluation.
Potential Mitigations
- Your attorney should always confirm the corporate structure disclosed in Item 1 to ensure there are no undisclosed parent companies with significant control.
- If a parent company were involved, especially as a guarantor or key supplier, an accountant should review its financial statements for stability.
- Understanding the full corporate structure helps a business advisor assess the true backing and resources of the franchise system.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD. Item 1 does not disclose any predecessors for Red Barn Homebuyers, LLC. In some cases, a franchisor may acquire a system from a predecessor and not fully disclose negative history such as past litigation or franchisee failures. A clean history in this regard is positive, but it's always important for a prospective franchisee to understand the full lineage of a brand.
Potential Mitigations
- When evaluating any franchise, your attorney should carefully review Item 1 for any mention of predecessors.
- If a predecessor exists, a business advisor can assist you in researching its historical performance and reputation.
- Speaking with long-term franchisees can often reveal valuable information about their experiences under any previous ownership.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified. Item 3 of the FDD states that no litigation is required to be disclosed. This is a positive factor, as a pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about a franchisor's practices and the health of the system. The absence of such litigation suggests a less contentious relationship between the franchisor and its franchisees.
Potential Mitigations
- Your attorney can conduct an independent public records search to confirm the absence of litigation beyond what is disclosed in Item 3.
- It is always a valuable exercise to ask current franchisees about their relationship with the franchisor and whether they are aware of any disputes.
- A business advisor can help you interpret the significance of any litigation history when evaluating a franchise opportunity.
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