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How much does Svn cost?
Initial Investment Range
$37,235 to $124,150
Franchise Fee
$31,800
We offer a franchise to operate a business under the SVN® mark and logo that provides commercial real estate brokerage services to the public and other ancillary services that we may approve.
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Svn April 2, 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
The franchisor's audited financial statements reveal a significant risk. As of year-end 2024, SVN International PBC (SVNIPBC) had a negative net worth of approximately $21.9 million. This resulted from taking on substantial new debt to finance a related-party asset purchase and a complex ownership restructuring involving an Employee Stock Ownership Plan. This level of indebtedness and negative equity could impact the franchisor's ability to support you and the system long-term.
Potential Mitigations
- A thorough review of the franchisor's financial statements, including all footnotes detailing the recent restructuring, is critical and should be performed by your accountant.
- It is advisable to discuss the implications of the high debt load and negative equity on the franchisor's operational capabilities with your financial advisor.
- Your attorney should analyze any state-mandated financial assurances, such as bonds or fee deferrals, that may be required due to this financial condition.
High Franchisee Turnover
High Risk
Explanation
Item 20 data indicates a potentially concerning rate of franchisee turnover. In 2024, a total of 16 franchised outlets left the system through termination or non-renewal, representing over 11% of the outlets that were operating at the start of the year. This rate of attrition could suggest underlying issues within the franchise system, such as challenges with profitability or support, and warrants further investigation before you invest.
Potential Mitigations
- Analyzing the turnover data for trends over the past three years with your accountant will provide a clearer picture of system stability.
- Engaging a business advisor to help you contact a significant number of former franchisees from the list in Item 20 is essential to understand their reasons for leaving.
- Your attorney should help you formulate specific questions to ask the franchisor regarding the circumstances of these terminations and non-renewals.
Rapid System Growth
Low Risk
Explanation
This specific risk was not identified in the FDD. While the system is growing, it does not appear to be expanding at a rate that would suggest its support infrastructure is over-strained. However, rapid growth in any system can stretch a franchisor's resources, potentially leading to a decline in the quality and availability of training, operational support, and marketing assistance for franchisees. You should still assess their capacity to support all franchisees adequately.
Potential Mitigations
- Asking the franchisor directly about their plans for scaling support infrastructure to match unit growth is a prudent step your business advisor can help you with.
- A discussion with a broad range of existing franchisees about the current quality and responsiveness of franchisor support is recommended.
- An accountant's review of the franchisor's financials in Item 21 can help assess if they have the resources to support continued growth.
New/Unproven Franchise System
Medium Risk
Explanation
The FDD indicates that SVNIPBC has been offering franchises since March 2002. It is not a new or unproven system in the traditional sense. However, the company underwent a significant financial and ownership restructuring in late 2024 and early 2025, becoming an employee-owned entity with substantial new debt. This transformation introduces risks similar to those of a new system, as its long-term stability under this new structure is not yet proven.
Potential Mitigations
- A thorough vetting of the management team's experience in navigating such corporate restructurings should be conducted with your business advisor.
- Speaking with existing franchisees about changes in support or company direction since the ESOP transaction is critical.
- An accountant's analysis of the new capital structure's viability is essential to understanding the company's financial footing going forward.
Possible Fad Business
Low Risk
Explanation
The franchised business, commercial real estate brokerage, is a mature and established industry, not a fad. However, the industry is subject to economic cycles and significant disruption from technology. The long-term success of your business may depend on SVNIPBC's ability to adapt its systems and brand to stay relevant and competitive in a changing market. Item 11 details their current technology and support systems.
Potential Mitigations
- Assess the long-term market demand and cyclical nature of the commercial real estate industry in your specific geographic area with your business advisor.
- It is prudent to evaluate the franchisor's plans for innovation and technology, as disclosed in Item 11, to gauge their adaptability.
- Working with your financial advisor can help you model the potential impact of economic downturns on this type of business.
Inexperienced Management
Low Risk
Explanation
Item 2 indicates that the key executives have extensive experience in the real estate and franchising industries. For example, the CEO and EVP of Operations have held senior roles in the company and other relevant businesses for several years. Therefore, the risk of an inexperienced management team appears to be low. However, management's experience in navigating the company's recent, complex financial restructuring into an ESOP remains to be demonstrated over time.
Potential Mitigations
- It is still wise to discuss the management team’s specific experience with the new employee-owned corporate structure with your business advisor.
- Asking existing franchisees about the quality of management's strategic direction and support remains a key due diligence step.
- Legal counsel can help you understand the implications of the new corporate structure and management's obligations within it.
Private Equity Ownership
Medium Risk
Explanation
This risk is present. As disclosed in the financial statements, the company recently transitioned to an Employee Stock Ownership Plan (ESOP) structure. While not a traditional private equity model, an ESOP introduces its own set of financial pressures, such as the need to service the large debt incurred to finance the employee buyout. This could create pressure to focus on cash flow and debt repayment, potentially impacting long-term investment in franchisee support.
Potential Mitigations
- A business advisor can help you research the typical performance and priorities of ESOP-owned companies.
- Talking to franchisees about any changes in support or fees since the ESOP transaction is an important step.
- Consulting an attorney who specializes in ESOPs could provide deeper insight into the unique risks and governance of this ownership model.
Non-Disclosure of Parent Company
Low Risk
Explanation
The franchisor, SVNIPBC, is wholly owned by the SVN International Corp. Employee Stock Ownership Trust (SVN ESOT). The FDD provides financial statements for SVNIPBC itself, which appears appropriate as it is the contracting entity. However, the complex relationship and financial transactions between the company, the ESOT, and other related parties (like Real Impact Corporation) are critical to understanding the full financial picture. The notes to the financial statements in Item 21 provide significant details.
Potential Mitigations
- Having your accountant thoroughly review the consolidated financials and all footnotes is crucial to understanding the complete corporate structure.
- It is advisable to ask your attorney to verify that all necessary parent and affiliate disclosures have been properly made.
- Understanding the financial health and obligations of the entire web of related entities is key, a task for your financial advisor.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD. Item 1 states SVNIPBC has no predecessors who offer franchises or provide products to franchisees. While the company name has changed and it has undergone significant restructuring, the core entity appears consistent. Therefore, the risk of undisclosed negative history from a predecessor entity is not applicable based on the documents provided.
Potential Mitigations
- Your attorney can help you confirm the corporate history through public record searches to ensure no predecessor entities have been omitted.
- Asking long-term franchisees about the history of the company and any previous ownership structures can provide useful context.
- A business advisor can assist in researching the brand's history and reputation in the marketplace over time.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses one significant concluded lawsuit initiated by a franchisee against the franchisor and related parties, alleging breach of contract and tortious interference regarding geographic exclusivity, with damages sought in excess of $100 million. The case was settled with a total payment of $300,000 to the plaintiff. While this is only one case, its serious allegations and material settlement could indicate potential for disputes with the franchisor, particularly concerning territorial rights.
Potential Mitigations
- Having your attorney carefully review the details of the litigation disclosed in Item 3 is essential.
- You should consider this litigation in the context of the FDD's statement that you will not receive an exclusive territory.
- It may be beneficial for a business advisor to help you contact former franchisees to discuss their experiences with dispute resolution.
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
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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
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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
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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
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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
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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
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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