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Stratus Building Solutions of Hampton Roads

MX Thompson, Inc.
https://stratusclean.com
1-757-904-1668
5269 Greenwich Road, Suite 200, Virginia Beach, VA 23462

How much does Stratus Building Solutions of Hampton Roads cost?

Initial Investment Range

$4,725 to $79,750

Franchise Fee

$3,600 to $69,000

Stratus of Hampton Roads grants franchises to independent businesses, giving these businesses the right to provide commercial cleaning and maintenance services to interior and exterior environments of business and residential locations within a designated territory under the Stratus name and marks.

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Stratus Building Solutions of Hampton Roads March 26, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: August 22, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
2
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The national franchisor, SBS Franchising LLC, shows significant financial weakness. Its 2024 balance sheet indicates liabilities far exceed equity, a potential indicator of insolvency. Its prior year financials required restatement and included a going concern note. The regional franchisor, MX Thompson, Inc. d/b/a Stratus Building Solutions of Hampton Roads (Stratus of Hampton Roads), also reported net losses in 2023 and 2024. This financial instability at multiple levels may impact support and brand viability.

Potential Mitigations

  • Your accountant must conduct a thorough review of the financial statements for both the regional and national franchisor entities, including all notes.
  • A business advisor can help you assess if the franchisors have sufficient capital and cash flow to meet their support obligations to you.
  • Discuss the financial health of the system with your attorney to understand the full scope of risk to your investment.
Citations: Item 21, Exhibit F-1, Exhibit F-2

High Franchisee Turnover

High Risk

Explanation

The system-wide data for the national franchisor, SBS Franchising LLC, reveals a high franchisee turnover rate. In 2024, the combined number of terminations and cessations represented approximately 11.4% of the total franchises at the start of the year. This level of churn across the broader system is a significant red flag that may indicate underlying issues with the business model, franchisee profitability, or franchisor support, despite stable numbers at the local regional level.

Potential Mitigations

  • With your business advisor, you should contact a significant number of former franchisees from the system-wide list to understand their reasons for leaving.
  • Your accountant should analyze the multi-year turnover trends in Item 20 to assess if the high churn rate is a consistent problem.
  • It is critical to discuss the potential reasons for high system-wide turnover with your attorney before investing.
Citations: Item 20

Rapid System Growth

Medium Risk

Explanation

Item 20 data shows that the national Stratus system is undergoing very rapid growth, expanding from 2,318 to 3,759 units between the start of 2022 and the end of 2024. When combined with the financial weaknesses noted in the national franchisor's financial statements in Item 21, this rapid expansion raises concerns about whether the franchisor has the resources and infrastructure to provide adequate support to all of its new and existing franchisees.

Potential Mitigations

  • Engaging a business advisor to question the franchisor about their plans to scale support infrastructure to match franchise growth is advisable.
  • You should speak with a range of new and established franchisees from the lists in Item 20 to gauge the current quality and responsiveness of franchisor support.
  • Your accountant can help assess if the franchisor's financial statements reflect sufficient investment in support staff and systems.
Citations: Item 20, Item 21

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified in the FDD package. The Stratus franchise system, through its national franchisor and predecessors, has been in operation for many years. An unproven system can present higher risks because its business model, brand recognition, and support structures are not yet time-tested, potentially leading to a higher rate of failure for franchisees. This system, however, is established.

Potential Mitigations

  • When evaluating any franchise, it is prudent to have a business advisor help you research the franchisor's history and track record in the industry.
  • Your accountant should always review the financial statements for signs of stability and longevity.
  • Legal counsel can help you understand the full operational history by reviewing Item 1 of the FDD.
Citations: Not applicable

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. A franchise based on a potential fad product or service carries the risk that consumer interest may decline, leaving you with a long-term contract for a business with waning demand. Evaluating the long-term market need for a franchise's core offering is a crucial part of due diligence, as this helps assess the sustainability of the business beyond short-lived trends.

Potential Mitigations

  • Before investing, you should work with a business advisor to research the long-term market trends and sustainability of the industry.
  • Your financial advisor can help you assess the business model's resilience to economic shifts and changing consumer tastes.
  • Discussing the franchisor’s plans for innovation and adaptation with your attorney can provide insight into their long-term vision.
Citations: Not applicable

Inexperienced Management

Low Risk

Explanation

This risk was not identified in the FDD package. Item 2 shows that the executives at both the regional and national levels have prior experience in the cleaning, franchising, or related business management sectors. Inexperienced management can be a significant risk, as it may lead to inadequate support, unrefined systems, and poor strategic decisions that negatively affect franchisee success.

Potential Mitigations

  • A thorough review of the management team's background in Item 2 with your business advisor is a key step in evaluating any franchise.
  • It is always a good practice to speak with current franchisees about their direct experiences with the management team's competence and support.
  • Your attorney can help you understand the roles and responsibilities of the key personnel listed in the FDD.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

The FDD does not indicate that the franchisor is owned by a private equity firm. When a franchise is PE-owned, there is a potential risk that decisions may prioritize short-term investor returns over the long-term health of the system. This can sometimes manifest as reduced franchisee support, increased fees, or pressure to use affiliated vendors. Understanding the ownership structure in Item 1 is therefore important.

Potential Mitigations

  • When a franchisor is owned by a private equity firm, engaging a business advisor to research the firm's track record with other franchise concepts is recommended.
  • Your attorney should examine the franchise agreement for clauses that might be affected by a focus on short-term returns, such as those concerning fees or supplier requirements.
  • An accountant can help analyze financial trends to see if cost-cutting in support areas has occurred since an acquisition.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

The franchisor is a regional entity, MX Thompson, Inc., which is a franchisee of the national franchisor, SBS Franchising LLC. The FDD properly discloses this relationship and includes the financial statements for SBS Franchising LLC. The ultimate parent of the intellectual property is a publicly traded Canadian company, Diversified Royalty Corp. This complex structure is a key feature of the investment.

Potential Mitigations

  • Your attorney must review the relationship between the regional franchisor, the national franchisor, and any parent entities to clarify all obligations.
  • It is crucial that your accountant reviews the financial statements of all disclosed parent or affiliated entities that guarantee performance.
  • A business advisor can help you understand the potential impacts of a multi-layered franchise structure on your day-to-day operations.
Citations: Item 1, Item 21, Exhibit F-2

Predecessor History Issues

Medium Risk

Explanation

This risk is present. The FDD discloses that the current national franchisor, SBS Franchising LLC, acquired the system from a predecessor, Stratus Franchising, LLC. Item 3 discloses that this predecessor was subject to regulatory actions in both California and Virginia for making untrue statements or material misrepresentations in franchise filings. This history of compliance issues, even with a predecessor, could suggest historical problems with the brand's practices.

Potential Mitigations

  • A franchise attorney should be consulted to review the details of any predecessor information disclosed in Items 1, 3, and 4.
  • It is important to ask long-term franchisees about their experiences under any previous ownership to gauge if issues have persisted.
  • Your business advisor can assist in researching the public record and reputation of any predecessor entities.
Citations: Item 1, Item 3

Pattern of Litigation

High Risk

Explanation

A significant pattern of litigation exists for the national franchisor system. Item 3 discloses a pending PAGA action in California against SBS Franchising LLC alleging franchisee misclassification as employees. It also details past regulatory actions against the predecessor company for making untrue statements. This history of litigation and regulatory enforcement at the national brand level suggests potential systemic legal and operational risks that could impact the entire brand's reputation and stability.

Potential Mitigations

  • A thorough review of the allegations, status, and potential implications of all litigation disclosed in Item 3 with your attorney is critical.
  • You should discuss the misclassification lawsuit with your attorney to understand how it might affect your own business and legal status.
  • Given the history, it's wise to have a business advisor help you conduct deeper due diligence on the franchisor's reputation with current franchisees.
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
2
7
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.

4

Legal & Contract Risks

Total: 16
4
5
7

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
2
4
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
1
3
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
6
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.

9

Term & Exit Risks

Total: 18
6
4
8

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: 2
2
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.