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How much does Renovation Sells cost?
Initial Investment Range
$79,005 to $171,484
Franchise Fee
$55,500 to $130,500
The franchisee will operate a residential real estate renovation and remodeling business to help individuals sell their home under the “Renovation Sells” trademarks.
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Renovation Sells April 30, 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 audited financial statements for Renovation Sells Franchising, LLC (Renovation Sells) show significant and worsening financial weakness. The company has sustained large operating losses for three consecutive years and has a substantial negative net worth (members' deficit) of over $2.7 million as of year-end 2023. Total liabilities heavily outweigh assets. This financial condition, which has led to state-mandated fee deferrals, suggests a heavy reliance on new franchise sales and debt to fund operations, indicating significant instability.
Potential Mitigations
- A franchise accountant should thoroughly analyze the franchisor's financial statements, including the notes, to assess its viability and dependency on franchise fees versus royalties.
- Discuss the implications of the negative net worth and operating losses with your financial advisor to understand the risk to the support system.
- Your attorney should explain the protections, if any, offered by state-mandated fee deferrals due to the franchisor's financial condition.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals a concerning rate of franchisee terminations. In 2023, four franchisees terminated, representing nearly 13% of the outlets that started the year. In 2022, two franchisees terminated. While the system is growing, this level of turnover in a young system is a significant red flag, potentially indicating issues with the business model, franchisee profitability, or franchisor support. This trend suggests a higher-than-average risk of business failure or dissatisfaction within the system.
Potential Mitigations
- It is crucial to contact a significant number of current and former franchisees from the lists in Item 20 to understand their experiences and reasons for leaving.
- Your accountant can help you analyze the turnover rates over the past three years to evaluate the stability and health of the franchise system.
- Discussing the specific circumstances behind the terminations directly with the franchisor may provide additional context, which your attorney can help you evaluate.
Rapid System Growth
High Risk
Explanation
Item 20 data indicates the system is growing very quickly, expanding from 8 to 42 franchised outlets in two years. While growth can be positive, such rapid expansion in a franchisor that is also financially unstable (as shown in Item 21) presents a significant risk. The franchisor's resources may be stretched thin, potentially compromising its ability to provide the necessary training, site selection assistance, and ongoing operational support to all franchisees as the system scales.
Potential Mitigations
- Engaging a business advisor to assess the franchisor's infrastructure and capacity to support this rapid growth is highly recommended.
- In your discussions with current franchisees, specifically ask about the quality and responsiveness of the support they are currently receiving.
- Your accountant should review the franchisor's financials to determine if they are investing adequately in support systems to match their growth.
New/Unproven Franchise System
High Risk
Explanation
Renovation Sells is a very new franchise system, having only begun franchising in mid-2020. The brand has limited history and minimal national brand recognition. Furthermore, the financial statements in Item 21 show a company that is not yet profitable and is carrying significant debt. Investing in such an unproven system carries a higher risk of business model flaws, underdeveloped support systems, and potential for franchisor failure compared to more established brands with a long track record of success.
Potential Mitigations
- A business advisor can help you conduct extensive due diligence on the backgrounds of the founders and their specific experience in both the renovation industry and in managing a franchise system.
- It is essential to speak with the earliest franchisees in the system to learn about their experiences and the evolution of franchisor support.
- Having an accountant carefully vet the franchisor's capitalization and business plan is critical to assessing its long-term viability.
Possible Fad Business
Medium Risk
Explanation
The business model centers on pre-sale home renovations, which is closely tied to the health of the real estate market. This market is subject to fluctuations from interest rates and economic cycles, which could impact demand for your services. While home renovation is an established industry, a business focused narrowly on the pre-sale niche could face challenges during a real estate downturn. Your long-term success may depend on the business model's adaptability beyond this specific trend.
Potential Mitigations
- A business advisor can help you assess the long-term sustainability of the pre-sale renovation niche and its sensitivity to economic cycles.
- Inquire with the franchisor about their strategies and support for adapting the business model or expanding service offerings during real estate market downturns.
- It would be prudent to develop a business plan with your financial advisor that includes contingencies for periods of lower real estate transaction volume.
Inexperienced Management
Medium Risk
Explanation
Item 2 shows that while the founders have experience in the construction and renovation business through their affiliate company, their experience specifically in managing and supporting a national franchise system is very recent, beginning only in 2020. Franchising requires a different skill set than running a local operation, including developing robust training, support, and marketing systems for a distributed network. This lack of extensive franchising history increases the risk of underdeveloped support infrastructure and strategic errors.
Potential Mitigations
- A business advisor can help you evaluate whether the management team has hired experienced franchise professionals to supplement their own knowledge.
- Speaking with a range of franchisees is critical to gauge the current quality and effectiveness of the franchisor's support and training systems.
- Your attorney should help you ask targeted questions to the franchisor about how they have scaled their support operations to meet franchisee needs.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD Package. Private equity ownership can be a risk if the firm prioritizes short-term profits and a quick exit over the long-term health of the franchise system. This can sometimes lead to reduced support, increased fees, or pressure on franchisees to cut costs in ways that harm the brand. Item 1 indicates Renovation Sells is owned by Renovation Sells Holding, LLC, not a private equity firm.
Potential Mitigations
- Your attorney can help you research the ownership structure of any franchisor to identify if a private equity firm is involved.
- When PE firms are involved, a business advisor can help investigate their track record with other franchise brands they have owned.
- It is always wise to ask existing franchisees about any changes in support or culture following a change in ownership.
Non-Disclosure of Parent Company
Medium Risk
Explanation
Item 1 discloses that the franchisor has a parent company, Renovation Sells Holdings, LLC, and other affiliates. However, the financial statements provided in Item 21 are for the franchisor entity only, not the parent company. While not necessarily a violation, the lack of parent company financials means you cannot fully assess the overall financial strength or weakness of the entire enterprise that stands behind your franchise, which is particularly relevant given the franchisor's own financial instability.
Potential Mitigations
- An accountant should review the financial statements provided and advise on whether the absence of parent financials presents a material gap in your due diligence.
- Your attorney can help you inquire about the relationship between the parent and the franchisor and ask if a parental guarantee of performance is available.
- A business advisor can assist in researching the history and standing of the parent company and its principals.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 1 states that Renovation Sells has no predecessor company. This type of risk occurs when a franchisor acquires a system from a previous owner (a predecessor) but fails to disclose the full history, which might include past issues like high failure rates or litigation. This can obscure the true track record of the brand you are buying into.
Potential Mitigations
- Your attorney should always review Item 1 to check for any disclosed predecessors.
- If a predecessor is identified, a business advisor can help you conduct independent research on that company's history and reputation.
- Talking to long-term franchisees who operated under the predecessor is a key due diligence step your attorney can guide you through.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." A pattern of litigation, especially lawsuits initiated by franchisees alleging fraud, misrepresentation, or breach of contract, can be a major red flag indicating systemic problems with a franchisor's business practices. Similarly, a high volume of litigation initiated by the franchisor against its franchisees can suggest an overly aggressive or difficult relationship.
Potential Mitigations
- It is crucial for your attorney to carefully review any litigation disclosed in Item 3 to understand the nature of the disputes.
- Even if no litigation is disclosed, a business advisor can help you conduct online searches for news articles or franchisee complaints.
- Asking current and former franchisees about their experiences with disputes can provide valuable insight your attorney can help you evaluate.
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