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SugaringLA

SugaringLA Franchise, LLC
https://www.sugaringla.com
1-760-573-8447
106 E. Liberty St., Suite 310, Ann Arbor, MI 48104

How much does SugaringLA cost?

Initial Investment Range

$313,250 to $506,500

Franchise Fee

$72,900 to $149,300

You will operate a studio that specializes in full body hair removal using the sugaring method with chemical-free, mostly plant-based products that are nutrient-rich and have benefits such as antioxidants, anti-inflammatory and antiseptic qualities.

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SugaringLA 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
2
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor explicitly warns that its financial condition calls its ability to provide support into question. Audited financials confirm this, showing a members' deficit of over $1.3 million and a net loss of over $1.2 million in 2024. The company's ability to continue as a going concern appears dependent on financial support pledged by an affiliate, Franworth, LLC. This indicates a significant risk to the franchisor's stability and its capacity to support you.

Potential Mitigations

  • Your accountant must conduct a thorough review of the franchisor's financial statements, including all footnotes and the affiliate support agreement.
  • It is crucial to have your attorney analyze the legal enforceability and terms of the affiliate's financial support pledge.
  • Discuss the franchisor's path to profitability and its reliance on affiliate support with current franchisees and a business advisor.
Citations: Item 21, Exhibit F (Audited Financial Statements, Note 6), "Special Risks to Consider About This Franchise" section

High Franchisee Turnover

Low Risk

Explanation

This specific risk was not identified in the FDD package, as the franchise system only began operating in 2024 and has no history of franchisee turnover. However, a high rate of terminations, non-renewals, or closures in an established system can be a critical warning sign of systemic problems, such as low profitability or poor franchisor support. The closure of a company-owned store in 2024 is noted under the "Questionable Outlet Data" risk.

Potential Mitigations

  • An accountant can help you calculate franchisee turnover rates from Item 20 data in any FDD you review.
  • It is beneficial to ask a business advisor about typical turnover rates for the specific industry.
  • Your attorney can help you formulate questions to ask current and former franchisees about why others may have left the system.
Citations: Not applicable

Rapid System Growth

High Risk

Explanation

The franchisor is new, with only four franchised outlets open at the end of 2024, yet it projects opening 15 new outlets in the next fiscal year. This represents nearly 400% growth. Such rapid expansion, especially for a new company with significant financial losses as shown in Item 21, creates a high risk that its support infrastructure (training, operations, marketing) will be unable to keep pace, potentially leading to inadequate assistance for all franchisees.

Potential Mitigations

  • A business advisor can help you assess whether the franchisor's staffing and infrastructure plans are realistic for its growth targets.
  • In discussions with your attorney, ask the franchisor for specific details on how they plan to scale support services.
  • Inquire with the first few franchisees about the current quality and responsiveness of the support they receive.
Citations: Item 20 (Tables 1 and 5), Item 21, Exhibit F

New/Unproven Franchise System

High Risk

Explanation

The franchisor explicitly discloses that it is at an early stage of development with a limited operating history, making it a riskier investment. FDD Item 1 shows the franchisor entity was formed in late 2022 and began offering franchises in 2023, with the first units opening in 2024. This newness means the business model, brand recognition, and support systems are largely unproven in the franchise market, increasing your risk of business failure.

Potential Mitigations

  • A thorough investigation of the management team's prior industry and franchising experience is essential, which a business advisor can assist with.
  • Engaging an accountant to scrutinize the capitalization and financial plans is critical for a new system.
  • Your attorney might be able to negotiate more favorable or protective terms in the franchise agreement to offset the higher risk.
Citations: "Special Risks to Consider About This Franchise" section, Items 1, 20, 21

Possible Fad Business

Medium Risk

Explanation

The business model is centered on sugaring, a specific method of hair removal. While the broader beauty and hair removal market is well-established, the popularity of specific trends can fluctuate. A risk exists that consumer demand for this particular service could decline over the life of your 10-year agreement. You should consider the long-term sustainability of a business focused on this specialized service, as you would still be bound by your franchise agreement even if trends change.

Potential Mitigations

  • A business advisor can help you research long-term consumer trends in the beauty and wellness industry to gauge sustainability.
  • Investigate with the franchisor their plans for service innovation and adaptation to evolving market tastes.
  • Consult with your financial advisor to model the business's resilience under different market demand scenarios.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk was not identified as a primary concern. The franchisor's management team, as described in Item 2, includes the founder with over a decade of industry experience in the core business, and a President with prior executive experience at other established franchise systems like Sky Zone. The franchisor also utilizes Franworth, a professional franchise development company. This combination of industry-specific and franchise-specific experience appears to mitigate this risk.

Potential Mitigations

  • It is always wise to have a business advisor help you research the backgrounds of the key executives listed in Item 2.
  • Asking current franchisees about their direct experiences with the management team can provide valuable insight.
  • Consult your attorney to understand the role and influence of any third-party management companies like Franworth.
Citations: Not applicable

Private Equity Ownership

Medium Risk

Explanation

The franchisor is partially owned and heavily reliant on an affiliated franchise development company, Franworth, LLC. The financial statements show that SugaringLA Franchise, LLC (the franchisor) pays significant management fees ($420,000 in 2024) to Franworth. This structure could create a conflict of interest, where decisions may prioritize generating fees for the affiliate over the long-term profitability of individual franchisees. Your success is tied to the stability and motivations of this influential third-party owner.

Potential Mitigations

  • A business advisor can help you research the reputation and track record of the affiliated development company, Franworth.
  • It's important to ask existing franchisees about their interactions with and the value provided by the affiliate.
  • Your attorney should clarify the legal relationship and obligations between the franchisor and its affiliate owner.
Citations: Items 1, 21 (Note 2)

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified. The FDD appears to properly disclose the franchisor's corporate structure in Item 1, including its predecessor and key affiliates like Franworth, LLC and Liberty Distribution, LLC. There is no indication of an undisclosed parent company that would be material to your investment decision. The reliance on the affiliate Franworth for financial support is also disclosed in the notes to the financial statements.

Potential Mitigations

  • An attorney can help you verify a franchisor's corporate structure through public records.
  • Always have an accountant review the financial statements in Item 21 for mentions of parent companies or guarantors.
  • If a franchisor is a new subsidiary, your attorney should confirm if parent company financials are required and have been provided.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD. Item 1 discloses a predecessor entity, but Items 3 and 4 indicate no history of litigation or bankruptcy for the franchisor, which would include the predecessor. Item 20 data shows no franchising activity occurred under the predecessor. The information suggests a corporate restructuring to launch the franchise program, rather than an attempt to escape a problematic history. Diligence on this front reveals no apparent negative issues.

Potential Mitigations

  • Your attorney should always carefully review the FDD for any information regarding predecessors in Items 1, 3, 4, and 20.
  • If a predecessor exists, it is prudent to ask current long-term franchisees about their experience under the prior entity.
  • A business advisor can assist in researching public information about any predecessor entities for potential red flags.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation or other dispute resolution is required to be disclosed in this Item." This indicates there is no current, pending, or past material litigation involving the franchisor, its predecessors, or management that would require disclosure under franchise law, such as claims of fraud or significant franchisee disputes. This lack of litigation history is typical for a very new franchise system.

Potential Mitigations

  • Your attorney should always carefully review Item 3 for any disclosed litigation.
  • It is wise to ask current franchisees about any disputes or disagreements they are aware of within the system.
  • A business advisor can help you conduct public record searches for litigation not disclosed in the FDD.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
4
2
9

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
6
3
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

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4

Legal & Contract Risks

Total: 16
8
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

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5

Territory & Competition Risks

Total: 5
4
0
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
4
5
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.

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
7
4
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
8
5
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.

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.