Smoothie Factory & Smoothie Factory+Kitchen
Initial Investment Range
$78,500 to $589,000
Franchise Fee
$20,000 to $85,000
You will operate a retail store offering non-alcoholic, fruit-based “smoothie” beverages, frozen yogurt, yogurt-based beverages, fresh-squeezed fruit and vegetable juices, cafe items such as sandwiches, soups, salads, wraps, flatbreads, toasts and snack plates and other related products, and desserts.
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Smoothie Factory & Smoothie Factory+Kitchen April 3, 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 explicitly warns that its financial condition calls its ability to support you into question. Financial statements in Item 21 confirm this, showing a significant member's deficit (negative net worth) and operating losses for the past two fiscal years. The auditor's report includes a "Going Concern" note, indicating substantial doubt about the company's ability to continue operating without parent company funding. This may impact its capacity to provide promised services and support.
Potential Mitigations
- A thorough review of the audited financial statements, including all notes, with your accountant is essential to assess the franchisor's financial viability.
- Engage your franchise attorney to evaluate the strength and enforceability of any parent company guarantees or state-mandated financial assurances.
- Discuss the franchisor's plan to achieve profitability and financial stability with your business advisor and current franchisees.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals an extremely high rate of franchisee turnover and a significant decline in the number of operating stores. The number of franchised outlets has dropped from 21 to 7 in three years. In the most recent year, half of the existing franchises were terminated or did not renew. This could indicate widespread franchisee dissatisfaction, a lack of profitability in the system, or other significant systemic problems that pose a major risk to your investment.
Potential Mitigations
- It is critical to contact a significant number of former franchisees listed in Item 20 to understand exactly why they left the system.
- Discussing the high turnover rates directly with the franchisor, and evaluating the credibility of their explanations, should be done with your attorney.
- Your accountant should help you assess the potential financial impact if the issues causing this high turnover affect your proposed business.
Rapid System Growth
Low Risk
Explanation
This risk was not identified. Item 20 data shows the franchise system is shrinking, not growing rapidly. When evaluating a franchise, rapid growth can be a concern because a franchisor's support systems may not keep pace. However, in this case, the risk is related to system decline, which is addressed under the "High Franchisee Turnover" risk.
Potential Mitigations
- When analyzing any franchise, reviewing Item 20 with an accountant helps to assess whether the system's growth is stable and sustainable.
- A business advisor can help you evaluate if a rapidly growing franchisor has the infrastructure to provide adequate support.
- Your attorney can help you question the franchisor about their plans for managing growth and supporting new franchisees.
New/Unproven Franchise System
Low Risk
Explanation
This specific risk was not identified, as the franchisor and its predecessor have been operating for many years. You should note, however, that Item 1 discloses a recent rebranding to a "re-concepted" business model, which may have its own unproven elements. The primary risks identified relate to the system's current financial health and high franchisee turnover, not a lack of operating history.
Potential Mitigations
- When considering a new franchise system, your business advisor should help you scrutinize the franchisor's operating history and the experience of its management team.
- Engaging an attorney to review the FDD is critical for new systems, which may have less refined agreements.
- An accountant's review of the financials is especially important for new franchisors to assess their capitalization and viability.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. The core business of selling smoothies, juices, and healthy cafe items is part of a well-established market segment and does not appear to be a short-term fad. A fad business carries the risk that consumer interest will decline quickly, jeopardizing the long-term investment. This concept seems grounded in a more durable consumer trend.
Potential Mitigations
- To evaluate any business concept, working with a business advisor to research the long-term market demand for its products or services is recommended.
- An attorney can review the franchise agreement to see if you have flexibility to adapt to changing consumer tastes.
- Your accountant can help model the financial impact if a key product's popularity were to decline.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. Item 2 of the FDD describes a management team with extensive experience in the restaurant, retail, and franchise industries. An inexperienced management team can pose a risk through a lack of proven systems or inadequate franchisee support. However, the executive team listed appears to have relevant professional backgrounds.
Potential Mitigations
- It is always wise to have a business advisor help you research the backgrounds of the franchisor's key executives.
- Contacting current franchisees to inquire about their direct experiences with the management team's competence and support is a valuable step.
- Your attorney can help you frame questions for the franchisor regarding management's long-term vision and strategy for the brand.
Private Equity Ownership
Medium Risk
Explanation
The franchisor, Smoothie Holdings FC, LLC (SHFC), is part of a larger holding company, BRIX Holdings, LLC, which owns and operates multiple franchise brands. This structure can introduce risks associated with private equity ownership, such as a focus on short-term financial returns that may not align with your long-term interests as a franchisee. The Franchise Agreement in Section 12.1 also grants the franchisor broad rights to sell the system, potentially to a new owner with different priorities.
Potential Mitigations
- A business advisor can help you research the track record of the parent holding company, BRIX Holdings, across its other franchise brands.
- Speaking with franchisees from other BRIX-owned brands could provide insight into their management style and priorities.
- Your attorney should review the assignment clauses to understand your rights if the franchise system is sold.
Non-Disclosure of Parent Company
High Risk
Explanation
The franchisor's own financial statements state a dependency on its parent company for continued operation due to a "Going Concern" issue. However, the FDD does not include the parent company's financial statements. This omission prevents you from independently verifying the parent's financial capacity to provide the necessary support, creating a significant risk regarding the overall stability and backing of the franchise system.
Potential Mitigations
- It is crucial that your accountant requests the financial statements of the parent company, BRIX Holdings, LLC, to assess its ability to support the franchisor.
- Your attorney should question the franchisor about why the parent company financials were not included, given the stated reliance.
- Without the parent's financials, you and your financial advisor must assume a higher level of risk regarding the franchisor's viability.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified. The FDD discloses a predecessor in Item 1 from which assets were acquired in 2013. However, no negative history such as litigation or bankruptcy related to this predecessor is disclosed in Items 3 or 4. A full understanding of a predecessor's history is important as it can reveal inherited issues within the franchise system.
Potential Mitigations
- When a predecessor is involved, your attorney should carefully review all related disclosures in the FDD.
- A business advisor can assist in researching the predecessor's public track record for any signs of trouble.
- If possible, contacting franchisees who operated under the predecessor can provide valuable historical context.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses three recent lawsuits filed by the franchisor against franchisees for breach of contract, such as for unpaid royalties or failure to comply with post-termination rules. While no franchisees have sued the franchisor, this pattern of litigation, when viewed alongside the extremely high franchisee turnover rate in Item 20, suggests significant financial distress and default within the system. This may indicate an aggressive enforcement culture or that the business model is challenging for franchisees to operate profitably.
Potential Mitigations
- Your attorney should review the details of the litigation disclosed in Item 3 to understand the nature of the disputes.
- It is essential to contact former franchisees, including those who were sued, to hear their perspective on the franchise relationship and their reasons for default.
- Discuss this litigation pattern with a business advisor to assess the potential for a contentious relationship with the franchisor.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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