Sugar Llamas Logo

Sugar Llamas

Sugar Llamas Enterprises LLC
https://sugarllamas.com
1-918-282-9218
5700 W. Austin St., Broken Arrow, Oklahoma 74011

Initial Investment Range

$252,400 to $408,200

Franchise Fee

$30,000 to $70,000

The franchise offered is for a quick service restaurant offering mini donuts, coffee, ice cream, and specialty drinks under the name Sugar Llamas.

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Sugar Llamas May 1, 2024 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 financial statement for Sugar Llamas Enterprises LLC (Sugar Llamas) is an opening balance sheet showing only $5,000 in cash. As a newly formed entity, it has no operating history and is thinly capitalized. The accompanying CPA letter indicates a 'compilation,' which is not an audit, and omits standard disclosures. This presents a significant risk regarding the franchisor's ability to fund operations, provide support, or withstand financial challenges without relying solely on new franchise fee sales.

Potential Mitigations

  • Your accountant must evaluate the franchisor's capitalization and assess its ability to meet its support obligations without relying on future franchise sales.
  • Discuss the franchisor's funding and plans for supporting the system with your business advisor.
  • An attorney should review any state-mandated financial assurances, like bonds or escrow, that may be required due to the weak financial position.
Citations: Item 21, Exhibit A

High Franchisee Turnover

High Risk

Explanation

Item 20 shows no franchisee turnover because Sugar Llamas is a new franchisor. However, a significant risk is revealed in Item 1, which states an affiliate previously sold 30 'licenses' for the same concept, but only 13 of those units were operational as of March 2024. The high rate of non-operational licensed units (17 of 30) suggests potential issues with the business model or the support provided under the prior licensing structure, which could carry over into the franchise system.

Potential Mitigations

  • It is critical to question the franchisor about the reasons why a majority of the prior licensees have not opened for business.
  • With your attorney, formulate questions for the former licensees, if you can contact them, to understand their experience.
  • Your business advisor can help assess if the historical issues with licensees may signal future problems for franchisees.
Citations: Item 1, Item 20

Rapid System Growth

Medium Risk

Explanation

While Item 20 shows no historical franchisee growth, the franchisor's affiliate sold 30 licenses in under three years, suggesting an aggressive sales strategy. Given that Sugar Llamas is a new entity with minimal capital, as shown in Item 21, even modest growth could strain its ability to provide the promised training and support. A rapid expansion without adequate infrastructure is a significant risk to new franchisees who depend on that support.

Potential Mitigations

  • In discussions with the franchisor, inquire specifically about their plans and budget for scaling up support staff and infrastructure as the system grows.
  • Your accountant should review the franchisor's financial capacity to support system growth.
  • Questioning current and former licensees about their support experiences can provide valuable insight for you and your business advisor.
Citations: Item 1, Item 20, Item 21

New/Unproven Franchise System

High Risk

Explanation

The franchisor explicitly discloses this as a risk, stating on the State Cover Page that it has been in existence for a short time, since February 16, 2024. As a new franchising entity with no operating history and minimal initial capital, there is a heightened risk. The business model, support systems, and brand have not been proven within a franchise structure, which differs significantly from a licensing model. This increases your risk of business failure due to potential systemic problems.

Potential Mitigations

  • A business advisor can help you conduct extensive due diligence on the viability of the business model itself, given the lack of franchising history.
  • Your accountant must stress-test your financial projections to account for the higher risks associated with an unproven franchisor.
  • Negotiating more protective terms with your attorney may be warranted to offset the increased risk of joining an emerging system.
Citations: State Cover Page, Item 1, Item 21

Possible Fad Business

Medium Risk

Explanation

The business, centered on mini donuts, specialty coffee, and ice cream, relies on product categories that can be subject to rapidly changing consumer trends. While these items are currently popular, there is a potential risk that the concept could be a fad with limited long-term, sustainable demand. If consumer interest wanes, your investment could be jeopardized, as you remain bound by a long-term franchise agreement even if sales decline due to shifting tastes.

Potential Mitigations

  • You and your business advisor should conduct independent market research to assess the long-term consumer demand for this specific concept in your area.
  • Inquire with the franchisor about their long-term strategy for product innovation and brand evolution to stay relevant beyond current trends.
  • Your financial advisor can help you evaluate the business model's resilience to shifts in consumer preferences and economic conditions.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk was not identified in the FDD package. Item 2 indicates that the principals, Dallas and Robyn Jones, have prior franchise experience with another brand, CherryBerry, LLC, from 2009 to 2014, and have operated the Sugar Llamas concept since 2020. However, it is still crucial to evaluate if their past experience is relevant and sufficient to manage a new franchise system effectively, as building a support infrastructure is a different skill than operating units.

Potential Mitigations

  • You should discuss the management team's specific experience in supporting a franchise system with your business advisor.
  • It is prudent to ask the franchisor how their past experience has prepared them to provide robust franchisee support, training, and marketing.
  • An attorney can help you understand the importance of experienced management in fulfilling a franchisor's contractual obligations.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD package. FDD Item 1 does not indicate ownership by a private equity firm; the franchisor appears to be owned by its founders. This can be positive, suggesting a focus on long-term brand health over short-term investor returns. However, this also means the company's financial strength is dependent on the founders' resources and the business's performance.

Potential Mitigations

  • Your accountant should still carefully review the franchisor's financial statements in Item 21 to assess its stability and capitalization.
  • It is beneficial to understand the long-term vision of the founders by discussing their goals for the company with them directly.
  • A business advisor can help evaluate the strengths and weaknesses of a founder-led company versus one with institutional backing.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose a parent company. Sugar Llamas appears to be a standalone entity alongside its affiliates, which are also controlled by the same individuals. Therefore, the risks associated with a hidden or financially unstable parent company are not present here. Your evaluation should focus on the disclosed entity's own financial condition.

Potential Mitigations

  • Confirm the corporate structure with your attorney to ensure there are no undisclosed controlling entities.
  • Your accountant's review should focus solely on the financial health of Sugar Llamas and its disclosed affiliates.
  • A business advisor can help you understand the implications of dealing with a standalone franchisor versus a subsidiary.
Citations: Not applicable

Predecessor History Issues

High Risk

Explanation

The FDD states there is no predecessor, but this appears to be a risk based on a technicality. An affiliate, Sugar Llamas, LLC, previously sold 30 'licenses' for the same business concept before the franchisor entity was formed. This affiliate's history, including the fact that 17 of 30 licensees are not operational, is critical information. By not classifying the affiliate as a predecessor, the franchisor avoids certain historical disclosures in Items 3, 4, and 20, potentially obscuring important risks.

Potential Mitigations

  • Your attorney must analyze the legal distinction between the 'affiliate' and a 'predecessor' and its disclosure implications.
  • It is crucial to question the franchisor about the operating history and turnover of the prior licensing program.
  • A business advisor can help investigate the history of the system under its previous licensing model.
Citations: Item 1

Pattern of Litigation

Low Risk

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that is required to be disclosed. The absence of lawsuits against the franchisor, especially those alleging fraud or breach of contract, is a positive indicator. However, as a new franchising entity, it has had little time to accumulate a litigation history.

Potential Mitigations

  • Your attorney can conduct independent searches for litigation involving the franchisor's principals or their affiliated companies.
  • It is wise to ask current and former licensees about any disputes they may have had, even if they did not result in litigation.
  • A business advisor can help you assess other indicators of franchisor-franchisee relationship quality in the absence of litigation history.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
4
1
10

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
5
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
7
4
5

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
4
3
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.

7

Franchisor Support Risks

Total: 4
2
2
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
6
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
11
6
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.

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.