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Steamatic

Steamatic, LLC
https://www.steamatic.com
1-817-332-1575
4320 Marsh Ridge Rd, Suite 190, Carrollton, TX 75010

Initial Investment Range

$202,400 to $444,690

Franchise Fee

$88,000 to $166,890

Steamatic franchisees operate mobile businesses that provide catastrophe restoration, cleaning, repair and other related services to commercial and residential customers using proprietary Steamatic technology.

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Steamatic April 17, 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.

1

Franchisor Stability Risks

Start Here
Total: 10
4
2
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor, Steamatic, LLC (Steamatic LLC), has a history of financial weakness. The audited financial statements in Exhibit B include an 'Emphasis of Matter - Liquidity' paragraph from the auditor, highlighting recurring operating losses and a net working capital deficiency. The balance sheet also shows significant debt to related parties. While profitable in 2024, this history indicates potential risk to the franchisor's ability to support you.

Potential Mitigations

  • A franchise accountant should meticulously analyze the audited financial statements, including the auditor's notes and cash flow statements, to assess the franchisor's long-term viability.
  • Discuss the franchisor's financial condition and the 'going concern' note with your business advisor to evaluate the potential impact on support and brand growth.
  • Your attorney should investigate if any financial assurances, like a bond or escrow, are required by state regulators due to these financial weaknesses.
Citations: Item 21, Exhibit B

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals potential instability in the franchise network. In 2024, four franchised outlets were terminated, representing nearly 10% of the system's size at the start of the year. While four new units opened, this rate of termination is a significant warning sign that may indicate franchisee distress, dissatisfaction, or systemic problems. This high turnover could suggest that the business model is challenging for franchisees to operate successfully.

Potential Mitigations

  • It is critical to contact a significant number of current and former franchisees listed in Item 20, especially those who were terminated, to understand the reasons for their departure.
  • Your accountant can help you analyze the turnover rates over the three-year period to identify any negative trends.
  • A business advisor can assist you in questioning the franchisor directly about the high termination rate and what steps are being taken to improve franchisee success.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD Package. The franchise system has not experienced rapid growth; outlet numbers have remained relatively static over the past three years. Uncontrolled, rapid expansion can strain a franchisor's ability to provide adequate support, training, and quality control, potentially harming the entire system. A steady, manageable growth rate is often a healthier sign for a franchise brand.

Potential Mitigations

  • Consult with your business advisor to analyze the growth patterns in Item 20 and compare them to the franchisor's operational capacity.
  • Your accountant should review the franchisor's financials in Item 21 to assess if they have the capital and staff to support their stated growth plans.
  • Discuss the franchisor's strategic growth plans with your attorney to understand how they might impact your specific territory in the future.
Citations: Item 20

New/Unproven Franchise System

Medium Risk

Explanation

Steamatic LLC acquired the assets of the system in 2019 and began franchising in late 2020. While the brand is old, the current franchisor is relatively new to managing it. This newness, combined with the financial weaknesses disclosed in Item 21 and the litigation history in Item 3, suggests a higher level of risk. An unproven management team may struggle to provide consistent support and strategic direction, impacting your potential for success.

Potential Mitigations

  • Your business advisor should help you conduct thorough due diligence on the current management team's specific experience in franchising and the restoration industry.
  • Speaking with franchisees who have joined since the 2019 acquisition is essential to gauge the quality of support under the new ownership.
  • An attorney can help you assess the risks associated with a newer franchisor and negotiate for more protective terms in the agreement.
Citations: Items 1, 3, 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD Package. The restoration and cleaning industry is a well-established and necessary service sector, not a business model based on a short-lived trend or fad. Investing in a franchise concept with sustained, long-term consumer demand rather than a fleeting craze is crucial for the long-term viability of your investment and your ability to build equity in the business over the full term of the franchise agreement.

Potential Mitigations

  • A business advisor can help you conduct independent market research to confirm the long-term demand for the franchise's services in your local area.
  • Review the franchisor's history in Item 1 with your attorney to understand the brand's longevity and adaptability.
  • Your accountant can assist in creating financial projections that account for normal economic cycles rather than short-term trends.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

While the management team described in Item 2 has extensive industry experience, some with the predecessor, the system's performance under their leadership presents risks. The significant litigation detailed in Item 3, the historical financial losses and liquidity issues noted in Item 21, and the high franchisee turnover in Item 20 all call into question the management's effectiveness in successfully operating this specific franchise system in the United States, creating a notable risk for new franchisees.

Potential Mitigations

  • A business advisor should help you formulate specific questions for the franchisor about how management has addressed the past litigation and financial challenges.
  • It is important to discuss management's performance and accessibility with a broad range of current franchisees.
  • Your attorney can help assess the level of risk associated with the management team's track record as presented in the FDD.
Citations: Items 2, 3, 21

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD Package. The franchisor is not disclosed as being owned by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of franchisees, potentially resulting in increased fees, reduced support, or a quick resale of the entire system. Understanding the ownership structure is important for assessing the franchisor's motivations and long-term commitment to the brand.

Potential Mitigations

  • Your attorney should always verify the ownership structure detailed in Item 1 of the FDD through public records.
  • A business advisor can help you research the track record of any parent company or controlling entity.
  • Discussing any ownership changes with long-term franchisees can provide valuable insight into shifts in company culture and support.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD Package. Item 1 discloses the parent company, Steamatic Holdings, LLC, and the provided financial statements in Exhibit B are consolidated, which includes the parent and subsidiaries. This provides a more complete picture of the overall financial health of the entities supporting the franchise system. Failure to disclose or provide financials for a critical parent entity can obscure significant financial or operational risks from a prospective franchisee.

Potential Mitigations

  • Your accountant should always confirm that financial statements are provided for the correct entities as required by disclosure laws.
  • An attorney can help determine if a parent company's financials are required to be disclosed based on its role and guarantees.
  • If a parent entity is mentioned but its financials are missing, a business advisor should help you question why they were omitted.
Citations: Not applicable

Predecessor History Issues

High Risk

Explanation

This risk is present and significant. Item 1 identifies Steamatic, Inc. as the predecessor from whom the current franchisor acquired the system. Item 3 details significant litigation between the current franchisor and this predecessor, involving allegations of misrepresentation about the state of the franchise network at the time of sale. This history suggests there may be inherited, systemic problems that could continue to affect the brand and its franchisees.

Potential Mitigations

  • Your attorney must carefully review the details of the litigation with the predecessor disclosed in Item 3.
  • Discussing the transition from the old ownership with long-term franchisees can provide critical insight into any lingering issues.
  • A business advisor can help you assess whether the current franchisor has adequately addressed the problems alleged in the litigation.
Citations: Items 1, 3

Pattern of Litigation

High Risk

Explanation

Item 3 discloses a material lawsuit between Steamatic LLC and the system's predecessor. The franchisor and the predecessor each asserted claims of breach of contract and fraud against the other regarding the asset purchase. The case was settled with Steamatic LLC paying $1,140,000. While not a pattern of litigation against franchisees, this single, significant case involving claims of fraud and misrepresentation regarding the system's health is a major red flag about the system's stability.

Potential Mitigations

  • A franchise attorney should analyze the disclosed litigation in detail to understand the nature of the allegations and the implications of the settlement.
  • Your business advisor can help you formulate questions for the franchisor regarding the issues raised in this lawsuit.
  • It is important to discuss this litigation with franchisees who were in the system during that period to gain their perspective.
Citations: Item 3
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
3
4
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

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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

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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
6
2
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.

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
2
9
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
9
7
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: 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.