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Structural Elements Micro-Franchise

Structural Elements Franchising, LLC
https://www.structuralelements.com
1-301-766-9293
13214 Fountainhead Plaza, Hagerstown, Maryland 21742

Initial Investment Range

$11,116 to $23,250

Franchise Fee

$2,916 to $7,500

The franchise offered is for a micro-franchise business (“Micro-Franchise Business”).

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Structural Elements Micro-Franchise April 18, 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
3
1
6

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor's audited financial statements reveal significant financial distress. For fiscal year 2024, Structural Elements Franchising, LLC (SEF) had a net loss of over $207,000, negative operating cash flow, and stockholder's equity of only $1,450. The notes disclose a loan covenant violation and state that the ability to continue as a "going concern" depends on future financing. This financial weakness, also flagged as a Special Risk, may impair SEF's ability to support you.

Potential Mitigations

  • Having an accountant perform a thorough analysis of the financial statements and footnotes is critical to understanding the depth of these financial issues.
  • You should discuss the "going concern" language and loan covenant violation with your attorney to assess the risk to your investment.
  • A business advisor can help you evaluate if the franchisor's reliance on new franchise sales and financing is a sustainable model.
Citations: Item 21, Exhibit E (Balance Sheets, Statements of Income, Statements of Cash Flows, Notes 4 and 9), "Special Risks to Consider About This Franchise" section

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals a high rate of franchisee exits. In 2023, 3 of 14 outlets (21%) were terminated. In 2024, 3 of 11 outlets (27%) exited through termination or non-renewal. This significant turnover, especially for a small system, may indicate systemic problems, franchisee dissatisfaction, or lack of profitability, posing a substantial risk to your potential success.

Potential Mitigations

  • It is imperative to contact the former franchisees listed in Exhibit D to understand their reasons for leaving the system.
  • Your attorney can help you formulate specific questions for the franchisor regarding the high number of terminations and non-renewals.
  • An accountant should help you model the potential financial impact if the underlying causes of this turnover affect your business.
Citations: Item 20 (Table 1 and Table 3), Item 19

Rapid System Growth

Low Risk

Explanation

This risk was not identified, as Item 20 data shows the system has been shrinking or stagnant, not growing rapidly. A stable or slowly growing system can be positive, but in this case, the lack of growth combined with high turnover and financial weakness suggests other significant challenges.

Potential Mitigations

  • A business advisor can help assess whether the lack of growth is a strategic choice or a sign of systemic problems.
  • Discussing the system's growth plans and challenges with current franchisees can provide valuable insight.
  • Your accountant should analyze whether the franchisor's financial model is sustainable without robust system growth.
Citations: Not applicable

New/Unproven Franchise System

High Risk

Explanation

SEF began offering Micro-Franchises in 2019. While not a brand-new startup, the system remains small with only 11 active franchisees as of year-end 2024. Combined with the high turnover rates disclosed in Item 20 and the franchisor's precarious financial condition in Item 21, the long-term viability and success of the business model appear unproven. This increases your investment risk.

Potential Mitigations

  • Extensive due diligence is required; speak with a wide range of current and former franchisees about their experiences.
  • Your business advisor should help you evaluate the sustainability of this niche business model in your specific market.
  • An accountant should carefully assess the franchisor's financials to determine if they have the resources to support the system.
Citations: Item 1, Item 20, Item 21

Possible Fad Business

Low Risk

Explanation

This specific risk does not appear to be significant. The business operates in the broad and established wellness and healthcare services industry, offering recognized treatments like physical therapy and acupuncture. While the "micro-franchise" model is unique, the underlying services do not seem to be a short-term fad, suggesting a basis for sustained consumer demand.

Potential Mitigations

  • A business advisor can help you research the long-term demand for the specific mix of wellness services in your local market.
  • Investigate the competitive landscape, including independent practitioners offering similar services.
  • Discuss the stability and acceptance of the "micro-franchise" model with current franchisees.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk was not identified. Item 2 indicates that the management team has relevant experience. The Founder and other key personnel have direct experience in the wellness and medical fields. Critically, the Vice President of Operations is a Certified Franchise Executive (CFE) with prior experience in franchise consulting, which suggests knowledge of franchise system management.

Potential Mitigations

  • When speaking with current franchisees, you can inquire about their perception of management's competence and support.
  • A business advisor can help you review the backgrounds of the key executives listed in Item 2.
  • Consider researching the Certified Franchise Executive (CFE) designation to understand its significance.
Citations: Not applicable

Private Equity Ownership

Low Risk

Explanation

This risk was not identified. According to Item 1 and the financial statement footnotes, the franchisor is owned by a holding company, which in turn is owned by a group of individuals and entities. There is no indication that the franchisor is owned or controlled by a private equity firm.

Potential Mitigations

  • You can ask the franchisor for more details about the ownership structure of the holding company.
  • A franchise attorney can help you understand the implications of the current ownership structure.
  • Discussing any ownership-related impacts with current franchisees can provide valuable context.
Citations: Not applicable

Non-Disclosure of Parent Company

Medium Risk

Explanation

The FDD discloses the existence of a parent company, Structural Elements Holdings, LLC. However, it does not provide the parent company's financial statements. Given the franchisor's significant financial weakness, high debt, and "going concern" risks as detailed in Item 21, the financial health of the parent is material to assessing the overall stability of the system. Its absence creates a significant information gap.

Potential Mitigations

  • You should request the financial statements of the parent company, SE Holdings, LLC, to better assess the overall financial stability of the enterprise.
  • Your attorney should advise on whether the parent's financials are legally required to be disclosed under these circumstances.
  • An accountant can help you assess the increased risk resulting from the franchisor's weak standalone financials without a strong parent guarantee.
Citations: Item 1, Item 21 (Exhibit E, Note 1)

Predecessor History Issues

Low Risk

Explanation

This risk is not applicable as the franchisor explicitly states in Item 1 that it has no predecessors. Therefore, there is no risk of inherited issues from a prior company operating the franchise system.

Potential Mitigations

  • Your attorney can confirm the corporate history if there are any concerns about undisclosed predecessors.
  • Speaking with the earliest franchisees might provide historical context on the system's origins.
  • A business advisor can help you assess the risks associated with the franchisor's own operating history, as disclosed in other Items.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

This risk was not identified, as Item 3 of the FDD states that there is no litigation that requires disclosure. This suggests the franchisor has not been involved in significant legal disputes with franchisees or regarding its business practices recently.

Potential Mitigations

  • An attorney can conduct independent searches of court records to verify the absence of litigation.
  • When speaking with current and former franchisees, you can inquire about any past or pending disputes they are aware of.
  • Be aware that settlements with confidentiality clauses could prevent some disputes from becoming public or being disclosed in Item 3.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
6
3
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

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3

Financial & Fee Risks

Total: 10
1
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

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4

Legal & Contract Risks

Total: 16
9
3
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.

5

Territory & Competition Risks

Total: 5
1
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.

6

Regulatory & Compliance Risks

Total: 10
5
1
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
3
1
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
5
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

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
8
3
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.

10

Miscellaneous Risks

Total: 2
1
1
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.