Shrunk 3D Logo

Shrunk 3D

Shrunk 3D, Inc.
https://www.shrunk3d.com
1-843-212-9336
2019 Cherry Hill Ln. A., North Charleston, SC 29405

Initial Investment Range

$187,485 to $387,235

Franchise Fee

$174,900 to $294,900

Shrunk 3D, Inc. (‘Shrunk 3D”) offers franchises to qualified individuals to operate a franchised mobile store selling 3D printed products and other 3D scanning and printing services operating under the Shrunk 3D name.

Enjoy our complimentary free risk analysis below

Unlock the full risk analysis to access 9 more categories covering 100+ risks.

Shrunk 3D April 30, 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.

1

Franchisor Stability Risks

Start Here
Total: 10
3
3
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The financial statements for Shrunk 3D, Inc. (Shrunk 3D) show it was unprofitable in 2022 and 2023, with a significant net loss in 2023, before turning a profit in 2024. A large portion of 2024 revenue (56.1%) came from required purchases by new franchisees, not ongoing royalties. This reliance on franchise sales for revenue, rather than operational support fees, may suggest a risk to the franchisor's long-term stability and ability to support you if expansion slows.

Potential Mitigations

  • Your accountant should carefully analyze the franchisor's financial statements, focusing on cash flow, debt, and the balance between one-time fees and recurring revenue streams.
  • A discussion with your financial advisor about the franchisor's business model sustainability is crucial.
  • Legal counsel can help you understand any financial assurance mechanisms like bonds or escrow if required by your state.
Citations: Item 21, Exhibit F

High Franchisee Turnover

Medium Risk

Explanation

Item 20 data reveals a pattern of franchisee outlets ceasing operations, including three in 2023 and two in 2024, alongside one reacquisition by the franchisor. While the system is growing, these departures represent a notable percentage of the system size in those years. This turnover could indicate potential challenges with the business model, profitability, or franchisor support that may not be immediately apparent from the growth figures. Understanding the reasons for these exits is important.

Potential Mitigations

  • It is essential to contact former franchisees listed in Exhibit E to discuss their experiences and reasons for leaving the system.
  • Your accountant can help you analyze the turnover rates in Item 20 relative to system growth to assess the level of churn.
  • Discussing franchisee satisfaction and the causes of past departures with your business advisor can provide valuable context.
Citations: Item 20, Exhibit E

Rapid System Growth

High Risk

Explanation

The franchise system has expanded very quickly, growing from one to 51 outlets in three years as shown in Item 20. This rapid expansion, particularly when the franchisor's revenue is heavily dependent on initial franchisee fees and equipment sales, may strain its ability to provide adequate training, site support, and operational guidance to all franchisees. A support system that is outpaced by growth can negatively impact your business operations and success.

Potential Mitigations

  • You should ask the franchisor direct questions about their plans for scaling their support staff and infrastructure to match the rapid unit growth.
  • Speaking with both new and established franchisees can provide insight into the current quality and responsiveness of franchisor support.
  • A business advisor can help you evaluate whether the franchisor's support capabilities appear adequate for the system's size.
Citations: Item 20, Item 21

New/Unproven Franchise System

High Risk

Explanation

Shrunk 3D began franchising in May 2021 and is a relatively young system. An unproven franchisor may have underdeveloped operational systems, limited brand recognition, and evolving support structures. This presents a higher level of risk compared to a more mature and established franchise system, as the business model's long-term viability and the franchisor's ability to effectively manage growth and support franchisees have a limited track record.

Potential Mitigations

  • A thorough investigation of the founders' and key executives' industry and management experience should be conducted with your business advisor.
  • Contacting the earliest franchisees in the system is critical to understanding the evolution of the brand and support.
  • Your attorney may be able to negotiate more franchisee-favorable terms to help offset the risks associated with an emerging brand.
Citations: Item 1, Item 2, Item 20, Item 21

Possible Fad Business

Medium Risk

Explanation

The business model, which focuses on creating 3D printed figurines at events, competes with other novelty entertainment services like photo booths. This type of service could be susceptible to changing trends and consumer tastes. There is a risk that the business could be a fad with limited long-term demand, potentially impacting your investment's viability after the initial novelty wears off, while your long-term contractual obligations would remain.

Potential Mitigations

  • It is wise to conduct independent market research with a business advisor to assess the long-term consumer demand for this type of personalized memorabilia.
  • Question the franchisor on their plans for innovation and development of new products or services to maintain relevance.
  • Your financial advisor can help you analyze the business model's resilience to economic shifts and changing entertainment trends.
Citations: Item 1, Item 11

Inexperienced Management

Medium Risk

Explanation

While the Brand President has prior franchise experience, the company's co-founders do not appear to have a background in franchising before starting Shrunk 3D in 2019. Management's inexperience in managing a franchise network can pose risks, as it may lead to challenges in providing effective franchisee support, developing robust systems, and making strategic decisions that benefit the entire system. Their direct experience is limited to this specific, young concept.

Potential Mitigations

  • You should thoroughly vet the backgrounds of all key management personnel with the help of a business advisor.
  • In your discussions with current franchisees, specifically inquire about the management team's effectiveness and responsiveness.
  • Assessing the strength and experience of the entire support team, not just the top executives, is an important step.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD Package. Private equity ownership can sometimes lead to a focus on short-term profitability over the long-term health of the franchise system, potentially affecting franchisee support and costs. It can also increase the likelihood of the franchise system being sold, which introduces uncertainty for franchisees.

Potential Mitigations

  • An attorney can help investigate a franchisor's ownership structure for any signs of private equity involvement.
  • It is always prudent to ask current franchisees about any recent changes in ownership and the impact it has had on operations.
  • A business advisor can help research a private equity firm's reputation and track record with other franchise concepts.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD Package. If a franchisor is a subsidiary of a parent company, the parent's financial health can be critical. Failure to provide a parent company's financial statements, when required, may obscure the true financial stability and backing of the franchise system, hiding potential risks from the parent's own financial or operational issues.

Potential Mitigations

  • Your accountant should review Item 1 and Item 21 to determine if a parent company exists and if its financial statements are provided or required.
  • Legal counsel can advise on whether a parent company guarantee is necessary if the franchisor entity appears thinly capitalized.
  • In cases with a parent company, a business advisor can help investigate the parent's overall health and commitment to the franchise brand.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD Package. Franchisors must disclose information about predecessors from which they acquired the business. A failure to disclose, or an incomplete disclosure of, a predecessor's history could conceal important information about past litigation, bankruptcies, or high franchisee turnover rates, preventing you from seeing a full picture of the system's historical challenges.

Potential Mitigations

  • An attorney should carefully review Item 1 for any mention of predecessors and any related information in Items 3 and 4.
  • If a predecessor is identified, a business advisor can assist in researching its history and reputation.
  • When speaking with long-term franchisees, asking about their experience under any previous ownership is a valuable due diligence step.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

This risk was not identified in the FDD Package. A pattern of litigation against the franchisor by franchisees, especially concerning claims of fraud or misrepresentation, is a significant red flag. It can indicate systemic problems within the franchise relationship, poor franchisor performance, or questionable sales practices. A high number of lawsuits initiated by the franchisor against franchisees can also signal an overly aggressive or litigious culture.

Potential Mitigations

  • A thorough review of Item 3 with your attorney is crucial to understand the nature and frequency of any disclosed litigation.
  • For any significant litigation, your attorney can help you find and review the actual court filings for more detail.
  • Discussing the litigation history with current and former franchisees can provide important context beyond the FDD's summary.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
6
3
6

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.

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
9
4
3

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
3
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.

6

Regulatory & Compliance Risks

Total: 10
3
3
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.

7

Franchisor Support Risks

Total: 4
2
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.

8

Operational Control Risks

Total: 12
7
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.

9

Term & Exit Risks

Total: 18
10
5
3

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
2
0
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.