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Sky Zone

Sky Zone Franchise Group, LLC
https://www.skyzone.com
1-385-482-1020
86 N. University Avenue, Suite 350, Provo, Utah 84601
FDD Version:

How much does Sky Zone cost?

Initial Investment Range

$166,750 to $5,175,460

Franchise Fee

$29,000 to $1,609,960

The franchisee will operate a Sky Zone Indoor Trampoline Park featuring trampoline attractions to be used for sports and recreational activities, and other active entertainment attractions.

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Sky Zone July 11, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: August 19, 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

Medium Risk

Explanation

The financial statements for Sky Zone Franchise Group, LLC (SZFG) show profitability but also contain potential risks. The balance sheet reveals a very large related-party receivable from the parent company and a significant non-cash transaction in 2024 that converted $40 million of this debt to equity. This complex financial structure, coupled with a low cash balance, could suggest potential cash flow and dependency risks that may impact SZFG's ability to support franchisees effectively.

Potential Mitigations

  • A franchise accountant should thoroughly analyze the audited financial statements, paying close attention to the footnotes regarding related-party transactions and the non-cash equity conversion.
  • It is important to discuss the company's financial health and capitalization strategy with your financial advisor to assess its long-term stability.
  • Engaging your attorney to inquire about the reliance on the parent company for operational funding could provide additional clarity.
Citations: Item 21, FDD Exhibit F

High Franchisee Turnover

High Risk

Explanation

The data in Item 20 tables reveals a very high rate of franchised parks leaving the system. In 2024 alone, 17 parks were reacquired by the franchisor and one did not renew, representing a turnover of over 14% of the franchised units from the start of the year. Such a high rate of turnover, particularly through franchisor buy-backs, is a significant red flag that may indicate systemic issues, franchisee unprofitability, or widespread dissatisfaction within the system.

Potential Mitigations

  • Engaging a business advisor to analyze the Item 20 data and calculate the true annual turnover rate is a critical step.
  • It is imperative to contact a significant number of former franchisees listed in Exhibit E to understand the specific reasons for their departure.
  • Your franchise attorney should help you formulate questions for the franchisor regarding the high number of re-acquisitions.
Citations: Item 20, FDD Exhibit E

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD Package. While the system is growing through company-owned acquisitions, the franchised unit count has decreased. Rapid franchise growth can strain a franchisor's ability to provide adequate support. If a system expands too quickly, new franchisees may find that training, site selection assistance, and operational guidance are spread too thin, potentially compromising their launch and ongoing business health.

Potential Mitigations

  • A business advisor can help you analyze system growth rates in Item 20 against the franchisor's disclosed support infrastructure in Item 11.
  • Speaking with franchisees who opened at different times can provide insight into whether support levels have changed over time.
  • An accountant's review of the franchisor's financials can help assess if they are reinvesting sufficiently to support growth.
Citations: Item 20

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified in the FDD Package. Sky Zone began franchising in 2009 and has a long operational history with over 100 franchised units. Investing in a new or unproven franchise system carries heightened risk because the business model, brand recognition, and support systems have not yet withstood the test of time. These systems may have a higher failure rate and less predictable performance.

Potential Mitigations

  • A thorough review of the franchisor's history in Item 1 with your business advisor is important to understand their experience.
  • Your attorney can help you scrutinize the business experience of the management team as detailed in Item 2.
  • Contacting the earliest-listed franchisees can provide your business advisor with valuable long-term perspective on the system's evolution.
Citations: Not applicable

Possible Fad Business

Medium Risk

Explanation

The business model, centered on trampoline parks, operates in the competitive and trend-sensitive active entertainment industry. While established, the concept's long-term demand could be subject to shifting consumer tastes and the emergence of new recreational activities. A decline in the popularity of trampoline parks could negatively impact your investment, even if you are contractually obligated to continue operating for the full term of the agreement.

Potential Mitigations

  • Engaging a business advisor to research the long-term trends and competitive landscape of the family entertainment center industry is crucial.
  • Evaluating the franchisor's commitment to innovation and developing new attractions as described in Item 11 is important for future-proofing the business.
  • Your financial advisor can help you assess the business model's resilience to economic shifts and changing recreational trends.
Citations: Item 1, Item 11

Inexperienced Management

Low Risk

Explanation

This risk was not identified in the FDD Package. The executive team detailed in Item 2 appears to have significant experience in the franchise, restaurant, and entertainment industries. Inexperienced management can be a major risk, as it may lead to poor strategic decisions, underdeveloped operational systems, and inadequate franchisee support. This can jeopardize the entire franchise system's viability and your investment.

Potential Mitigations

  • Your business advisor should always help you vet the backgrounds of the key executives listed in Item 2.
  • Discussing the management team's accessibility and quality of support with current franchisees is a key due diligence step.
  • An attorney can help investigate the prior business history of the executive team for any red flags.
Citations: Item 2

Private Equity Ownership

High Risk

Explanation

SZFG is ultimately owned by a private equity firm, Palladium Equity Partners IV LP, as disclosed in Item 1. This ownership structure may create risks where decisions prioritize short-term investor returns over the long-term health of franchisees. This could manifest as increased fees, reduced support, pressure to use specific vendors, or a sale of the entire system, potentially to a less favorable operator. The high rate of franchisee reacquisitions in Item 20 could be indicative of a PE-driven strategy.

Potential Mitigations

  • It is critical to discuss the implications of private equity ownership with your franchise attorney and business advisor.
  • Inquiring with current franchisees about any changes in franchisor behavior, fees, or support since the PE acquisition is an important step.
  • A business advisor can help research the private equity firm's reputation and track record with other franchise brands.
Citations: Item 1

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 1 discloses the parent company structure, and the financials for the franchisor entity, Sky Zone Franchise Group, LLC, are provided in Item 21. Failing to disclose a parent company or provide its financial statements when required can hide significant risks. A franchisee might be investing in a thinly capitalized subsidiary, unaware that the parent company is financially unstable or unwilling to provide support.

Potential Mitigations

  • Your attorney should always verify the corporate structure disclosed in Item 1 to ensure all relevant parent companies are listed.
  • If a parent company guarantees the franchisor's obligations, it is wise to have your accountant review the parent's financial statements.
  • A business advisor can help assess the operational relationship between the franchisor and its parent.
Citations: Item 1, Item 21

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 1 states SZFG has no predecessors. A franchisor's predecessor is a company from which it acquired the business concept. A failure to disclose a predecessor, or downplaying a predecessor's negative history (like litigation or bankruptcy), can obscure inherited problems with the franchise system, giving you an incomplete picture of the brand's past performance and challenges.

Potential Mitigations

  • Having your attorney review Item 1 for any mention of predecessors or business acquisitions is a crucial first step.
  • If a predecessor is listed, your attorney should pay close attention to any associated litigation or bankruptcy history in Items 3 and 4.
  • A business advisor can help you research the history of the brand to uncover any unmentioned prior ownership structures.
Citations: Item 1, Item 3, Item 4

Pattern of Litigation

High Risk

Explanation

Item 3 discloses a concerning pattern of legal and regulatory issues. This includes a lawsuit by a franchisee alleging unfair competition from an affiliate brand, which SZFG settled by acquiring the park. Another suit from a founder alleged breach of fiduciary duty and was settled for over $800,000. Furthermore, an affiliate, House of Trix, entered a Consent Order for selling unregistered franchises and making untrue statements to a state regulator. This history indicates significant internal and external conflicts.

Potential Mitigations

  • A thorough review of every litigation and regulatory action in Item 3 with your franchise attorney is essential.
  • It would be prudent to ask the franchisor to explain the circumstances and resolutions of these significant legal matters.
  • Discussing these past issues with current and former franchisees can provide valuable context beyond the FDD's disclosures.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
6
2
7

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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3

Financial & Fee Risks

Total: 10
4
5
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.

4

Legal & Contract Risks

Total: 16
8
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.

5

Territory & Competition Risks

Total: 5
3
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.

6

Regulatory & Compliance Risks

Total: 10
4
3
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.

7

Franchisor Support Risks

Total: 4
1
2
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
5
6
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.

9

Term & Exit Risks

Total: 18
10
6
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.

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.