Spray-Net
Initial Investment Range
$191,015 to $345,415
Franchise Fee
$105,740 to $208,540
offers and provides proprietary and other spray painting and other coating services designed for the exterior and interior of homes and other residential buildings we permit, including doors, windows, masonry and sidings, as a unique alternative renovation solution to various 'traditional' renovation and remodeling methods such as construction, masonry and/or vinyl siding, as well as other services and products we authorize.
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Spray-Net April 21, 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, Spray-Net Inc. (Spray-Net), explicitly warns of its financial condition as a "Special Risk". The audited financial statements confirm this, showing a significant stockholder's deficit of ($777,723) and a net loss of ($800,545) for 2024. This raises serious questions about their ability to provide ongoing support, invest in the brand, and fulfill their obligations, a fact noted by multiple state regulators who require fee deferrals.
Potential Mitigations
- Having your accountant perform a deep analysis of the financial statements, footnotes, and cash flow is critical to assess solvency risk.
- Your attorney should review the protections offered by any state-mandated fee deferrals or financial assurances.
- A business advisor can help you create contingency plans for potential disruptions in franchisor support or services.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals a very high rate of franchisee turnover. In 2023, 10 of the 26 franchises existing at the start of the year were terminated, representing a 38.5% termination rate. In 2024, an additional five units (out of 27) either terminated or ceased operations. This level of churn is a significant red flag that may indicate systemic problems with profitability, support, or the business model itself.
Potential Mitigations
- It is imperative to contact a significant number of former franchisees listed in Exhibit H to understand their reasons for leaving.
- Your business advisor should help you analyze the potential root causes of this high turnover rate.
- Discussing these turnover numbers directly with the franchisor and evaluating the credibility of their explanations is a key due diligence step for which your attorney can provide guidance.
Rapid System Growth
Medium Risk
Explanation
The system has grown quickly, from 11 to 29 franchised outlets between the start of 2022 and the end of 2024. When combined with the franchisor's disclosed financial weakness and high franchisee turnover, this rapid expansion raises concerns. Spray-Net's resources may be stretched thin, potentially compromising its ability to provide adequate training, site support, and other assistance to all franchisees in the growing network.
Potential Mitigations
- Questioning the franchisor about their plans to scale support infrastructure is a critical step your business advisor can help with.
- Inquiring with newer franchisees about the quality and timeliness of the support they are currently receiving is essential.
- An accountant's review of the financial statements can help assess if the company has the cash flow to support this growth.
New/Unproven Franchise System
High Risk
Explanation
While an affiliate has operated in Canada since 2013, the U.S. franchisor, Spray-Net, only began actively franchising in the U.S. in late 2019. This relatively short U.S. track record, combined with the disclosed financial instability and high franchisee turnover rates, indicates you would be joining a system that is still proving its long-term viability and support structure in the American market.
Potential Mitigations
- Engaging a business advisor to perform deep due diligence on the U.S. market performance is critical.
- Speaking with the earliest U.S. franchisees from the list in Exhibit G can provide insight into the system's evolution and challenges.
- An accountant should help you assess whether the franchisor's financial model is sustainable based on its U.S. operations.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. The business of exterior and interior home painting and coating is a well-established service industry, not a temporary fad. The long-term success of your business will likely depend more on factors like marketing, service quality, and local economic conditions rather than on a fleeting trend.
Potential Mitigations
- A business advisor can help you research the long-term demand for home renovation and painting services in your specific market.
- Developing a strong local marketing plan with a marketing professional is key to building a sustainable customer base.
- Your accountant can assist in building financial projections based on stable, long-term market assumptions.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. The key executives listed in Item 2 appear to have substantial and long-term experience with the Spray-Net brand and its affiliated companies, some dating back to 2010. This suggests the leadership team has significant operational knowledge of the business system.
Potential Mitigations
- During your due diligence calls, it's wise to ask current franchisees about their direct experiences with the management team's competence and support.
- A business advisor can help you evaluate the management team's strategic vision during discussions with the franchisor.
- Consulting with your attorney about the stability of the management team can provide additional perspective.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD. Item 1 indicates the company is operated by its principals, not a private equity firm. This means strategic decisions may be more focused on the long-term health of the brand rather than meeting short-term return targets for external financial investors.
Potential Mitigations
- When speaking with the franchisor, it's a good practice to ask about their long-term vision and any plans for future sale of the company.
- Your attorney can review the "Assignment" clause in the Franchise Agreement to understand what happens if the company is sold.
- A business advisor can help you research the company's ownership structure for any signs of external investor influence.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. Item 1 of the FDD clearly discloses the parent company, Groupe Spray-Net, Inc., and other affiliated entities. While financial statements for the parent are not provided, the franchisor's corporate structure appears to be transparently disclosed.
Potential Mitigations
- Your accountant should review the provided financial statements for the U.S. franchisor entity very carefully.
- An attorney can help clarify the legal and financial relationships between the U.S. franchisor and its Canadian parent/affiliates.
- During due diligence calls, ask franchisees about the role the Canadian parent company plays in supporting the U.S. system.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified. Item 1 does not disclose any "predecessors" for Spray-Net. The franchise system appears to have been developed within the current corporate family of affiliated entities, rather than being acquired from a prior, unrelated company with its own history.
Potential Mitigations
- Your attorney can confirm the corporate history outlined in Item 1 during the due diligence process.
- In discussions with long-term Canadian franchisees, you could inquire about the brand's history to ensure there are no unmentioned predecessors.
- A business advisor can help you research the brand's public history to verify the information presented in the FDD.
Pattern of Litigation
Medium Risk
Explanation
Item 3 discloses an arbitration proceeding from a former franchisee alleging the Franchise Disclosure Document was materially deficient. While this is a single disclosed case involving the Canadian affiliate, the nature of the claim is significant. It points to potential franchisee dissatisfaction with representations and, when viewed alongside the high turnover rates in Item 20, suggests franchisee disputes may be a concern.
Potential Mitigations
- Your attorney should analyze the specific allegations in the disclosed litigation and assess their potential relevance to you.
- It is critical to contact former franchisees from the list in Exhibit H to inquire about their experiences and potential disputes.
- Asking the franchisor for more context on this proceeding is a key due diligence step.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
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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
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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