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Smash Zone

Smash Zone, LLC
https://smashzonewi.com/
1-262-370-9839
10111 W. Capitol Drive, Unit 10, Wauwatosa, Wisconsin 53222

How much does Smash Zone cost?

Initial Investment Range

$60,105.00 to $73,150.00

Franchise Fee

$31,000.00

Smash Zone is an entertainment center that allows customers to smash common household items using instruments such as bats, crowbars, and sledgehammers from a safe and fun environment.

Enjoy our partial free risk analysis below

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Smash Zone August 16, 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
4
2
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The financial statements for Smash Zone, LLC (Smash Zone) provided in Exhibit D are a compilation based on tax records, not audited, and the accountant provides no assurance. They also omit most standard disclosures. The balance sheet for year-end 2023 shows very low total equity of approximately $13,379. This thin capitalization suggests a potential inability to fund ongoing support, invest in the brand, or withstand financial setbacks, posing a significant risk to your investment.

Potential Mitigations

  • A franchise accountant must thoroughly review the provided financial statements, including the accompanying compilation letter, to assess the franchisor's viability.
  • Inquire with your attorney about whether state law requires the franchisor to post a bond or establish an escrow due to its financial condition.
  • Discuss the franchisor’s capitalization and ability to support the system with your financial advisor before making any investment.
Citations: Item 21, FDD Exhibit D

High Franchisee Turnover

Medium Risk

Explanation

As Smash Zone is a new franchisor that only began offering franchises in 2024, there is no history of franchisee turnover to analyze in Item 20. While this means no negative data exists, it also signifies a lack of a track record. High turnover is a major red flag in established systems, indicating potential issues with profitability, support, or the business model itself. The absence of data here is an inherent risk of joining an unproven system.

Potential Mitigations

  • Speaking with the owner of the single company-owned unit about their operational experience can provide some insight.
  • Your business advisor should help you assess the risks of joining a system with no franchisee performance history.
  • An accountant can help you create financial models that account for the higher risks associated with a new, unproven franchise.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support to all franchisees. For a new franchisor, monitoring the pace of growth against the expansion of their support infrastructure is critical to ensure quality does not suffer as the system scales.

Potential Mitigations

  • It is advisable to periodically discuss the franchisor's growth plans and corresponding support staff expansion with your business advisor.
  • Your attorney can help you understand the support obligations detailed in the franchise agreement.
  • Speaking with other franchisees as the system grows can provide real-world feedback on the quality of support.
Citations: Item 20

New/Unproven Franchise System

High Risk

Explanation

Smash Zone is a new and unproven franchise system, having only started offering franchises in August 2024 with only one company-owned location in operation. The system lacks a track record of successful franchisees, has minimal brand recognition, and its financial statements are unaudited and show very thin capitalization. This significantly increases the risk of operational challenges, inadequate support, and potential system failure. Exhibit C also notes there is no comprehensive operations manual.

Potential Mitigations

  • Given the high risk, your attorney should attempt to negotiate more favorable terms, such as lower fees or enhanced protections.
  • A thorough vetting of the founders' business acumen and the viability of the single corporate unit is essential, with help from your business advisor.
  • Your accountant must help you develop very conservative financial projections that account for the uncertainty of a new system.
Citations: Items 1, 2, 20, 21

Possible Fad Business

Medium Risk

Explanation

The 'rage room' concept, while currently popular, may be a business tied to a fleeting trend rather than sustained consumer demand. The long-term viability of this entertainment niche is unproven. If consumer interest wanes over the 10-year contract term, your business could face declining revenue and potential failure, while your contractual obligations to the franchisor would remain. The business model's durability beyond the current trend presents a notable risk.

Potential Mitigations

  • Conducting independent market research with a business advisor to assess the long-term demand for this type of entertainment is crucial.
  • Question the franchisor on their long-term vision and plans for innovation to keep the concept fresh and relevant.
  • Your financial advisor can help you model a faster return on investment to account for the risk of the concept being a short-term fad.
Citations: Item 1

Inexperienced Management

High Risk

Explanation

The business experience described in Item 2 for the franchisor's principals, Glenda and Scott Hovey, does not include any prior experience in managing or developing a franchise system. While they have experience in advertising and general management respectively, the lack of specific franchising expertise is a significant risk. This can lead to underdeveloped support systems, a lack of understanding of franchisee needs, and strategic errors in growing the brand, directly impacting your potential for success.

Potential Mitigations

  • It is important to ask the franchisor directly if they have engaged any experienced franchise consultants or attorneys to guide their system development.
  • A business advisor can help you assess whether the management team's skills are transferable to the complexities of running a franchise network.
  • Your attorney should scrutinize the franchisor's contractual support obligations, as their ability to fulfill them may be limited by inexperience.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD package. When a franchisor is owned by a private equity firm, there can be a risk that decisions are driven by short-term profit motives, such as cutting support or raising fees, to prepare the company for a future sale. This can sometimes conflict with the long-term health of the franchisees and the brand.

Potential Mitigations

  • A business advisor can help you research the ownership structure of any franchise system you consider.
  • If a system is PE-owned, it's wise to ask existing franchisees about any changes in culture or support since the acquisition.
  • Your attorney can review the franchise agreement for terms related to the sale or assignment of the franchise system.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package, as Item 1 states there is no parent company. It is a risk when a franchisor is a subsidiary of a larger parent, as the parent's financial health and strategic decisions can directly impact the franchise system. Proper disclosure rules require the parent's financial statements to be included if they guarantee the franchisor's obligations or are otherwise fundamental to the franchisee's success.

Potential Mitigations

  • Your attorney can help verify the franchisor's corporate structure to confirm the absence of a controlling parent entity.
  • For any franchise, an accountant should review the provided financial statements to ensure they represent the complete and correct franchising entity.
  • Always be clear on whose financial strength you are relying upon when making an investment decision with your financial advisor.
Citations: Item 1, Item 21

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD package, as Item 1 states Smash Zone has no predecessors. In cases where a franchisor acquires a business or its assets from a predecessor, it's important to understand the predecessor's history. A history of litigation, bankruptcy, or high franchisee turnover under a predecessor could signal underlying problems with the business model that may have been inherited by the new franchisor.

Potential Mitigations

  • Your attorney should always carefully review Item 1 for any mention of predecessors.
  • If a predecessor is identified, a business advisor can help you conduct independent research on their historical performance and reputation.
  • Asking long-tenured franchisees about their experience under any previous ownership is a key due diligence step.
Citations: Item 1

Pattern of Litigation or Bankruptcy

High Risk

Explanation

Item 4 discloses that both of the franchisor's principals, Glenda Hovey and Scott Hovey, have filed for personal Chapter 7 bankruptcy within the last 10 years (2020 and 2016, respectively). This history, combined with the company's weak financial position, presents a very high risk regarding their financial management capabilities and their ability to successfully operate and grow a franchise system. This history may also impact their ability to secure necessary funding for the franchisor entity.

Potential Mitigations

  • A frank discussion with the franchisor about the circumstances of these bankruptcies and the financial controls now in place is warranted.
  • Your accountant and financial advisor must consider this history as a critical factor when evaluating the overall risk of the investment.
  • This history significantly elevates the importance of having your attorney scrutinize the franchisor's financial stability and contractual obligations.
Citations: Item 4
2

Disclosure & Representation Risks

Total: 15
4
0
11

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
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.

4

Legal & Contract Risks

Total: 16
4
6
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.

5

Territory & Competition Risks

Total: 5
2
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.

6

Regulatory & Compliance Risks

Total: 10
4
2
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
3
1
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
2
7
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.

9

Term & Exit Risks

Total: 18
7
6
5

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: 1
1
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.