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Red Light Method

Red Light Method Franchising, LLC
https://www.redlightmethod.com
1-775-737-3322
9475 Double R Blvd., Suite 11, Reno, Nevada 89521

Initial Investment Range

$191,675 to $695,175

Franchise Fee

$51,925 to $121,925

Red Light Method Franchising, LLC offers for sale a franchise to establish and operate a hybrid spa-gym, boutique fitness business offering red light therapy spa treatments, using a medical-grade, pad-based red light therapy device, and group Power Plate classes, with the option to add Pilates.

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Red Light Method November 11, 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.

1

Franchisor Stability Risks

Start Here
Total: 10
3
2
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

Red Light Method Franchising, LLC (RLMF) is a new company, formed in July 2023. The audited financial statements for its initial period ending June 30, 2024, show a net loss of over $29,000 and revenue derived solely from initial franchise fees, not ongoing royalties. This financial weakness and reliance on franchise sales for income is explicitly noted as a “Short Operating History” risk, indicating potential instability and a risk to its ability to support you.

Potential Mitigations

  • A thorough review of the franchisor's financials, including footnotes and the net loss position, with your accountant is essential.
  • Engage your franchise attorney to discuss the implications of investing in a new, unprofitable system and the protections offered.
  • Developing conservative financial projections with your business advisor that account for the risk of limited franchisor support is critical.
Citations: Item 1, Item 21, FDD page 4

High Franchisee Turnover

Low Risk

Explanation

As a new franchisor that only began offering franchises in March 2024, there is no history of franchisee turnover to analyze in Item 20. The tables show zero franchised outlets have opened or closed. While this means no negative turnover is reported, it also signifies that the system's viability and franchisee success rates are completely unproven. The long-term stability and potential for future turnover are significant unknowns.

Potential Mitigations

  • Speaking with the very first franchisees who have signed agreements, listed in Exhibit G, is crucial for your due diligence.
  • Your business advisor should help you assess the risks inherent in an unproven system with no performance history.
  • Ask your attorney about including performance milestones or enhanced support commitments in your agreement to mitigate the risk of being an early franchisee.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 20 data does not suggest that the franchisor is expanding at a rate that would strain its support systems, primarily because the system is brand new with only two agreements signed and no outlets open as of the fiscal year end. However, monitoring projected growth against the franchisor's resources will be important going forward.

Potential Mitigations

  • Your business advisor can help you question the franchisor about their plans for scaling support infrastructure as the system grows.
  • An accountant should review the franchisor’s financial capacity to support its projected growth of eight new units in the next year.
  • Discussing the quality of support with the initial franchisees as they open will provide valuable, real-time insight.
Citations: Item 20

New/Unproven Franchise System

High Risk

Explanation

RLMF is a new franchisor, having been formed in July 2023 and beginning to offer franchises in March 2024. The system has no operating franchised units and relies on a single company-owned location for its business model and financial projections. The FDD explicitly discloses a “Short Operating History” as a special risk. Investing in a new, unproven system carries a higher risk of business model flaws, inadequate support, and potential failure.

Potential Mitigations

  • Conducting extensive due diligence on the management team's prior industry and franchising experience is essential; a business advisor can help.
  • A franchise attorney should be consulted to potentially negotiate more franchisee-favorable terms to compensate for the higher risk.
  • Your accountant must help you thoroughly vet the business model and its financial viability, given the lack of franchisee performance data.
Citations: Item 1, Item 2, Item 20, Item 21, FDD page 4

Possible Fad Business

Medium Risk

Explanation

The business combines red light therapy, Power Plate classes, and optional Pilates in a boutique spa-gym setting. While wellness is a large market, this specific hybrid model is described in Item 1 as “new to the marketplace and developing.” The potential exists that this specific combination of services could be a trend rather than a business with long-term, sustainable demand. Your investment's success is tied to the durability of this new concept.

Potential Mitigations

  • A business advisor can help you independently research the long-term market demand for this specific hybrid spa-gym model.
  • It is wise to evaluate the franchisor's plans for innovation and adaptation to stay relevant if current trends change.
  • Your accountant should assist you in creating financial models that stress-test profitability under various market demand scenarios.
Citations: Item 1, Item 19

Inexperienced Management

High Risk

Explanation

Item 2 discloses the business experience of the management team. While the CEO has experience as a business coach and instructor in the parent company's studio, neither she nor the CFO, a pilot, appear to have prior experience in managing or operating a franchise system. Building and supporting a successful franchise network requires a different skill set than running a single location, which could present a risk to the quality of support and strategic guidance you receive.

Potential Mitigations

  • Engaging a business advisor to help you question the management team about how they plan to support franchisees is recommended.
  • Speaking with the initial franchisees about the quality and responsiveness of management's support will be very important.
  • Your attorney should verify if the franchisor has engaged any experienced franchise consultants to guide their system development.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD Package. The franchisor, RLMF, is disclosed as a wholly-owned subsidiary of its parent, Red Lite Gym, LLC, which is owned by the same individuals who manage the franchisor. There is no indication of outside private equity ownership. Therefore, risks typically associated with PE firms, such as a focus on short-term returns over system health, do not appear to be present.

Potential Mitigations

  • Your attorney should confirm the ownership structure as disclosed in Item 1 of the FDD.
  • It's a good practice for your business advisor to help you understand the motivations and long-term goals of any franchise ownership group.
  • Having an accountant review the financial relationship between the parent and franchisor can provide insight into system stability.
Citations: Item 1

Non-Disclosure of Parent Company

Medium Risk

Explanation

This risk was not identified in the FDD Package. RLMF clearly discloses its parent company, Red Lite Gym, LLC. However, the parent company's financial statements are not included. While the franchisor's own financials are provided, the parent owns the trademark and the only operating studio. The parent's financial health is material to the overall stability of the system, but its financial statements have not been disclosed for your review.

Potential Mitigations

  • Your attorney should inquire why the parent company's financial statements were not included, as they own key assets.
  • An accountant should analyze the franchisor's financials with the understanding that key operational data resides with the parent.
  • A business advisor can help you assess the risk of the franchisor entity being a thinly capitalized subsidiary.
Citations: Item 1, Item 21

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 1 indicates that RLMF has no predecessors. The franchisor is a new entity created by the owners of the parent company, Red Lite Gym, LLC, to franchise the concept. Therefore, there is no predecessor history to analyze for past issues such as litigation, bankruptcy, or franchisee failures.

Potential Mitigations

  • Your attorney should confirm the corporate history as disclosed in Item 1.
  • A business advisor can help you evaluate the risks associated with a new entity without any predecessor history to analyze.
  • Focusing due diligence on the track record of the parent company and its principals is a crucial step.
Citations: Item 1

Pattern of Litigation

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 3 states that no litigation is required to be disclosed. For a new franchisor with no operating franchisees, this is expected. The absence of litigation is a positive factor, but it provides no insight into how the franchisor might handle disputes with franchisees in the future, as no track record exists.

Potential Mitigations

  • Your attorney should confirm the
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
2
10

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
5
3
2

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.

4

Legal & Contract Risks

Total: 16
5
7
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
0
3
2

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
4
2

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
2
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.

8

Operational Control Risks

Total: 12
3
7
2

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
9
8
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.

10

Miscellaneous Risks

Total: 2
0
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.