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How much does SkyRun cost?
Initial Investment Range
$105,080 to $153,980
Franchise Fee
$55,000 to $75,000
The franchise offered is for the operation of a property management and rental business focused primarily on vacation homes and short-term and mid-term home rentals.
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SkyRun 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor’s audited financial statements reveal significant financial weakness. As of December 31, 2024, liabilities exceed assets, resulting in a member's deficit of over $1.1 million. The company has also posted substantial net losses for the last two fiscal years. The FDD's own notes and a state-specific risk factor highlight this liquidity issue. This financial state may affect the franchisor's ability to support you or grow the brand, posing a substantial risk to your investment.
Potential Mitigations
- A franchise accountant must conduct a thorough review of the franchisor's financial statements, including all footnotes and the auditor's report.
- It is critical to ask the franchisor for their detailed plan to address the recurring losses and negative equity, which you can then review with your financial advisor.
- Your attorney should investigate if any financial assurances, like a bond or escrow, are required by your state due to the franchisor's financial condition.
High Franchisee Turnover
High Risk
Explanation
Item 20 data indicates a high rate of franchisee turnover. In 2023, there were 6 terminations against a starting base of 23 franchised outlets, representing a termination rate of approximately 26% for that year. Such a high number of franchisees leaving the system in a single year can be an indicator of potential systemic problems, which may include franchisee unprofitability, dissatisfaction with the business model, or issues with franchisor support.
Potential Mitigations
- It is essential to contact a significant number of former franchisees from the list in Exhibit D to understand their reasons for leaving the system.
- Analyzing the turnover data with your accountant is important to calculate the churn rate over the past three years and assess system stability.
- Your attorney can help you formulate specific questions for the franchisor regarding the circumstances that led to these terminations.
Rapid System Growth
High Risk
Explanation
The franchise system has nearly doubled in size over the last three years, which constitutes rapid growth. This expansion, when viewed alongside the franchisor's significant financial weakness as disclosed in Item 21, presents a risk. The franchisor's resources may be strained, which could compromise its ability to provide the adequate training, marketing, and operational support necessary for its growing number of franchisees.
Potential Mitigations
- Questioning the franchisor about their specific plans for scaling support infrastructure to match unit growth is a key due diligence step to take with your business advisor.
- Interviewing a range of existing franchisees, both new and established, can provide insight into the current quality and responsiveness of franchisor support.
- An accountant should review the franchisor's financial statements in Item 21 to assess if they possess the capital to adequately support this expansion.
New/Unproven Franchise System
High Risk
Explanation
The franchisor, SkyRun Franchising Limited, was formed in June 2022 and has a very limited operating history. This is explicitly identified as a 'Special Risk' in the FDD. While its predecessor has experience, this new entity is unproven. Investing in a new franchise system carries higher risk, as the business model's long-term viability, brand recognition, and the effectiveness of its support systems are not yet fully established.
Potential Mitigations
- Engaging a business advisor to conduct extensive due diligence on the founders' and management's experience in both the industry and franchising is crucial.
- Speaking with the earliest franchisees from the Item 20 list will provide valuable firsthand accounts of their experiences with the new system.
- Your attorney could attempt to negotiate more favorable contract terms, such as enhanced support guarantees, to compensate for the higher risk.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. The vacation rental industry is well-established, not a temporary fad. However, a franchisee should always consider the long-term viability of any business model and its resilience to economic shifts or changes in consumer travel habits. A business tied to a fleeting trend can leave a franchisee with a worthless investment after the trend fades, while contractual obligations to the franchisor remain.
Potential Mitigations
- To assess long-term market demand, consider working with a business advisor to research industry trends and the sustainability of the business model.
- Evaluating the franchisor's plans for innovation, adaptation, and research and development as described in Item 11 can provide insight into its long-term vision.
- Your financial advisor can help you consider the business model's resilience to economic downturns and its performance beyond current travel trends.
Inexperienced Management
Medium Risk
Explanation
Key management personnel, including the President and the Director of Franchise Development, have a very short tenure with this specific franchising entity, having started in July 2024. While they have experience in other companies, their limited time with this new franchisor means their track record in managing this specific system and supporting its franchisees is not yet established. This could present a risk regarding the quality and consistency of leadership and strategic direction.
Potential Mitigations
- A thorough vetting of the management team's background and relevant experience in both the vacation rental industry and franchise management should be conducted with a business advisor.
- Speaking with existing franchisees about the quality of support and management's responsiveness since these individuals joined is advisable.
- Directly questioning the franchisor about the management team's long-term vision and strategy for the company is a prudent step.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package, as there is no disclosure of ownership by a private equity firm in Item 1. When a franchisor is owned by a private equity firm, there may be a focus on short-term investor returns. This could potentially lead to decisions that benefit the investors over the long-term health of the franchise system and its franchisees.
Potential Mitigations
- If a franchisor is PE-owned, it is wise to research the firm's track record with other franchise systems with the help of a business advisor.
- Talking to franchisees about changes in support or system direction since a PE acquisition can offer valuable insight.
- Your attorney should review the Franchise Agreement for clauses that might be affected by a sale of the franchise system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor clearly discloses its parent company in Item 1. In cases where a franchisor is a subsidiary of another company, it is important to understand the relationship and financial backing. If the parent's financials are essential for assessing the overall health of the system but are not provided, a franchisee could be making a decision without a complete financial picture.
Potential Mitigations
- When a parent company is involved, your attorney should confirm if the parent guarantees the franchisor's obligations.
- An accountant should assess if the franchisor is adequately capitalized on its own, or if its viability depends on the parent.
- If a parent guarantee is provided, your attorney should review the terms of that guarantee.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor properly discloses its predecessor in Item 1 and does not indicate any negative history such as litigation or bankruptcy in Items 3 and 4. A franchisee should always review predecessor information carefully, as it can reveal historical challenges, inherited issues, or provide a more complete picture of the brand's lineage and track record.
Potential Mitigations
- Careful review of Items 1, 3, 4, and 20 for any information related to a predecessor is a task for your attorney.
- If a system was acquired, researching the predecessor's public track record with a business advisor can provide additional context.
- Asking long-term franchisees about their experience under any previous ownership is a valuable part of due diligence.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package, as Item 3 discloses no relevant litigation. A pattern of litigation against a franchisor, especially lawsuits from franchisees alleging fraud or misrepresentation, can be a major red flag. It may indicate systemic problems with the franchisor's business practices, disclosure integrity, or overall relationship with its franchisees.
Potential Mitigations
- When litigation is disclosed in Item 3, your attorney must carefully review the nature, status, and outcomes of all cases.
- Independent research on disclosed litigation, such as reviewing court dockets, can provide more context than the FDD summary, a task for which you can retain legal counsel.
- A high volume of franchisor-initiated litigation against franchisees should be discussed with your attorney, as it may indicate an overly aggressive culture.
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