Steel Coated Floors
Initial Investment Range
$122,785 to $174,285
Franchise Fee
$101,285 to $121,285
We franchise the right to operate a "mobile-services" business focused on providing a designated line of epoxy flooring products and services, primarily for residential garages as well as industrial and commercial garages.
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Steel Coated Floors 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
Steel Coated Floors International, LLC (SCF) financials are extremely weak. As a new entity, its 2024 balance sheet shows only $198 in cash, minimal equity of $8,067, and heavy reliance on related-party debt. The FDD's "Special Risks" section explicitly warns that its financial condition calls into question its ability to provide support. This indicates a significant risk of instability and inability to fulfill its obligations to you.
Potential Mitigations
- Your accountant must conduct a deep analysis of the audited financial statements, including all footnotes and the auditor's report.
- Discuss the franchisor's capitalization and ability to operate without relying on new franchise fees with your financial advisor.
- An attorney should confirm if any financial assurances like a bond or escrow are required by your state due to these weak financials.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals an exceptionally high franchisee turnover rate. In 2023, the system began with 16 franchised outlets and ended with only 8. During that year, 2 were terminated and 8 "ceased operation for other reasons." This represents a 62.5% annual churn rate, which is a critical red flag suggesting potential systemic problems, franchisee unprofitability, or significant dissatisfaction with the brand.
Potential Mitigations
- It is imperative to contact a substantial number of former franchisees listed in Exhibit F to understand their reasons for leaving the system.
- Your accountant should analyze the turnover data across all categories (terminations, cessations, transfers) to assess the system's stability.
- Ask your attorney to help you frame questions for the franchisor regarding the specific circumstances behind this high rate of departures.
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD package. The data in Item 20 shows the franchise system has been shrinking significantly, not growing rapidly. Rapid growth can strain a franchisor's ability to provide adequate support, so its absence here is notable, though the shrinkage presents its own separate and more severe risks.
Potential Mitigations
- Engage a business advisor to evaluate whether a franchisor's support infrastructure is scalable to handle its projected growth.
- When analyzing any franchise, your accountant should review financials to see if capital is being reinvested to support expansion.
- In discussions with any franchisor, it is wise to ask about their specific plans for hiring and training support staff as the system grows.
New/Unproven Franchise System
High Risk
Explanation
The franchisor entity, SCF, is a startup formed in April 2024 with no operating history. While it has a predecessor, the newness of the legal entity, combined with its extremely weak financial position as shown in Item 21 and the high turnover rate of the system it acquired, presents a significant risk. You would be investing in an unproven franchising company managing a system with a troubled history.
Potential Mitigations
- A thorough due diligence investigation into the business and franchising experience of the management team is essential; a business advisor can help.
- Given the startup nature of the franchisor, your accountant should critically assess its capitalization and financial viability.
- Your attorney should help you understand the risks of contracting with a new entity that has inherited a system with high turnover.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. The business of installing epoxy floor coatings is an established service in the home improvement and commercial construction industries. While market demand can fluctuate, the core service is not based on a recent, fleeting trend, reducing the risk that the entire business concept is a short-lived fad.
Potential Mitigations
- For any franchise concept, engaging a business advisor to research the long-term market demand and competitive landscape is a prudent step.
- It is wise to evaluate a franchisor's plans for innovation and adaptation to stay relevant in a changing market.
- Always consider a business model's resilience to economic shifts and its sustainability beyond current trends with your financial advisor.
Inexperienced Management
Medium Risk
Explanation
While the management team from the parent company, Phoenix Franchise Brands, has experience listed in Item 2 across multiple franchise systems, this experience is a double-edged sword. Item 3 discloses a troubling history of litigation and regulatory actions involving these affiliated brands and their shared management. This suggests that while management is not new to franchising, their track record includes significant franchisee disputes and compliance issues, which is a notable risk.
Potential Mitigations
- Your attorney should carefully review the litigation history of all affiliated brands to understand the nature of the claims against the management team.
- A business advisor can help you assess the reputational risk associated with this specific management group.
- Asking current franchisees about their direct experiences with the management team's competence and support is crucial.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 indicates the franchisor is owned by Phoenix Franchise Brands, LLC. While this is a holding company for multiple franchise brands, it is not explicitly identified as a traditional private equity fund with a defined, short-term investment horizon. Therefore, the specific risks typically associated with a PE ownership model do not appear to be directly applicable here.
Potential Mitigations
- When evaluating any franchise, it is useful to research the ownership structure with your business advisor to understand their long-term strategy.
- Interviewing existing franchisees about any changes in system philosophy or support levels following an ownership change is a key due diligence step.
- Your attorney can help assess any contractual clauses that permit the franchisor to be sold and the potential implications for you.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor's parent company, Phoenix Franchise Brands, LLC, is disclosed in Item 1. Although the parent's financial statements are not provided, the parent does not appear to be guaranteeing the franchisor's performance, which is the primary trigger for requiring their disclosure. The risk of the franchisor's own financial weakness is captured in the 'Disclosure of Franchisor's Financial Instability' risk.
Potential Mitigations
- If a franchisor is a thinly capitalized subsidiary, it is critical for your attorney and accountant to assess if a parent guarantee is offered or required.
- Always verify the corporate structure of a franchisor to understand the full context of its financial backing and stability.
- An accountant should confirm whether the provided financial statements are sufficient and appropriate under franchise disclosure rules.
Predecessor History Issues
Medium Risk
Explanation
The FDD discloses a predecessor, Steel Coated Floors Franchising, LLC. The alarming franchisee turnover data in Item 20 for 2022 and 2023 reflects the performance of the system under that predecessor. This indicates significant historical problems within the system that the new franchisor entity, SCF, has inherited. The FDD does not clearly separate past issues from the current situation, creating risk and uncertainty.
Potential Mitigations
- A business advisor can help you research the history and reputation of the predecessor entity.
- It is important to ask current franchisees about their experiences under both the predecessor and the new franchisor.
- Your attorney should help you question the franchisor about what specific changes have been made to address the historical issues revealed in Item 20.
Pattern of Litigation
High Risk
Explanation
While SCF itself is new and has no litigation, Item 3 discloses a significant and concerning pattern of litigation against its affiliated brands, which operate under the same parent company and management. These lawsuits include franchisee claims of fraud, financial misrepresentation, and conversion of funds. This pattern across the management group's other companies is a major red flag regarding their business practices and potential for disputes.
Potential Mitigations
- Your attorney must conduct a detailed review of all litigation disclosed in Item 3, including the specific allegations and current status.
- Engaging a business advisor to assess the reputational risk of associating with a management group facing such serious claims is recommended.
- Treating this pattern of litigation as a significant warning sign about the franchisor's corporate culture is a necessary precaution.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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