Tapville Social
Initial Investment Range
$147,750 to $2,216,000
Franchise Fee
$19,500 to $134,500
As a Tapville Social franchisee, you will operate an innovative self-pour beer taproom and self-service restaurant, kiosk, or mobile unit offering craft beer, wine, cider, and cocktails as well as other beverage and food offerings.
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Tapville Social March 29, 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor, Tapville Franchising Inc. (Tapville), explicitly warns of its financial condition. The audited financial statements in Exhibit C confirm this risk, showing significant net losses for the past three consecutive years (2021, 2022, and 2023) and a large accumulated deficit. This financial weakness could potentially impair Tapville's ability to provide ongoing support, invest in the brand, or meet its obligations to you, increasing your investment risk.
Potential Mitigations
- A franchise accountant should perform a thorough analysis of Tapville's financial statements, including footnotes and cash flow, to assess its long-term viability.
- It is wise to discuss with your business advisor the implications of a franchisor's financial instability on its ability to support its franchisees.
- Your attorney can help you understand any state-mandated financial assurances, like bonds or escrows, that may be in place.
High Franchisee Turnover
High Risk
Explanation
The data in Item 20 Tables 1 and 3 reveals a notable rate of franchisee turnover. In 2023, there were two terminations from a starting base of 11 franchised outlets, which suggests an 18% termination rate for that year. This level of turnover can be an indicator of potential issues within the system, such as franchisee unprofitability, dissatisfaction, or problems with the business model, which warrants further investigation.
Potential Mitigations
- Engaging a franchise accountant to calculate and analyze the annual turnover rates from Item 20 data is a crucial step.
- You should contact a significant number of former franchisees listed in Item 20 to understand their reasons for leaving the system.
- Discussing the specific circumstances behind the terminations with the franchisor, with guidance from your business advisor, is recommended.
Rapid System Growth
High Risk
Explanation
The franchise system is experiencing rapid growth, expanding from zero franchised outlets at the start of 2021 to 22 at the end of 2023 according to Item 20 data. While growth can be positive, such a rapid expansion rate may strain the franchisor's resources. This could potentially compromise the quality and availability of essential support services, including training, site selection assistance, and operational guidance for new franchisees like you.
Potential Mitigations
- A thorough review of the franchisor's support infrastructure with your business advisor can help assess its capacity to handle this growth.
- Inquiring with both new and established franchisees about the current quality and responsiveness of franchisor support is essential.
- Your accountant should analyze the financial statements in Item 21 to determine if Tapville has allocated sufficient capital to support its expansion.
New/Unproven Franchise System
Medium Risk
Explanation
Tapville began offering franchises in February 2019, making it a relatively new system. As shown in Item 20, the franchise network was still small just a few years ago. Investing in a newer system carries inherent risks, such as an unproven long-term business model, minimal brand recognition in many markets, and support systems that may not be fully developed. The franchisor's long-term stability and ability to support a large network are not yet fully established.
Potential Mitigations
- Speaking with the earliest franchisees listed in Item 20 about their experiences with the system's development is highly recommended.
- Your business advisor can help you conduct extensive due diligence on the long-term market viability of the self-pour taproom concept.
- An accountant's review of the franchisor's capitalization in Item 21 is critical to assess its ability to fund future growth and support.
Possible Fad Business
Medium Risk
Explanation
The business model centers on self-pour beverage technology, which is a modern and potentially trendy concept. While innovative, you should consider the long-term consumer demand and sustainability of this model. A risk exists if the concept proves to be a short-lived trend rather than a lasting market segment. The FDD does not provide significant information on how the business model might evolve if the primary self-pour attraction fades, leaving you with a long-term contract.
Potential Mitigations
- It would be prudent to conduct independent market research with your business advisor to gauge the long-term consumer demand for self-pour concepts.
- Evaluating the business's adaptability and potential revenue streams beyond the novelty of self-pour technology is a key discussion for your financial advisor.
- Inquire with the franchisor about their long-term vision and plans for innovation to maintain market relevance.
Inexperienced Management
Medium Risk
Explanation
Item 2 indicates that some members of the management team have experience from an affiliate, Red Arrow Tap Room, and other ventures. However, Tapville itself is a relatively new franchisor, having started in 2019. This suggests the management team, while having industry experience, may have limited history in managing a national franchise system of this specific type and scale. This could impact the quality of system-wide support, strategic direction, and franchisee relationship management as the system grows.
Potential Mitigations
- A business advisor can help you thoroughly vet the specific franchise management experience of each key executive listed in Item 2.
- It is critical to speak with a range of current franchisees about their direct experiences with management's competence and the quality of support provided.
- During discussions with the franchisor, you might inquire about how their past experiences have prepared them to manage a growing franchise network.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Private equity ownership can introduce a focus on short-term returns, which may not always align with the long-term health of the franchise system or individual franchisee profitability. This can sometimes lead to increased fees, reduced support, or pressure to use affiliated vendors as the PE firm works toward its own exit strategy.
Potential Mitigations
- When evaluating a franchise, it's wise to ask your business advisor to help you research the ownership structure disclosed in Item 1.
- If a private equity firm is involved, your attorney can help you investigate its reputation and track record with other franchise brands.
- Discussing any changes in support or culture since a PE acquisition with existing franchisees can provide valuable insight.
Non-Disclosure of Parent Company
Medium Risk
Explanation
Tapville discloses multiple affiliated entities in Item 1, such as Tapville Tech, LLC and Tapville Services, LLC, which provide key products and services to franchisees. However, the FDD does not include the financial statements for these parent or affiliate companies. While this may be compliant with disclosure rules if there's no parent guarantee, it means you cannot independently assess the financial health of these critical, intertwined entities upon which your business will depend for technology and support.
Potential Mitigations
- Your accountant should review the provided franchisor financials carefully to assess if it appears to be a thinly capitalized entity dependent on its affiliates.
- It is advisable to ask your attorney to inquire about the financial stability of the key affiliate suppliers, Tapville Tech and Tapville Services.
- A discussion with your business advisor about the risks associated with a franchise system that has a complex affiliate structure is recommended.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. Predecessor history, disclosed in Item 1, can reveal important information about the franchise system's origins. If a franchisor acquired the system from a previous entity, any undisclosed or downplayed negative history, such as litigation or high failure rates under the predecessor, could obscure inherited problems that might still affect the brand and its franchisees.
Potential Mitigations
- When reviewing an FDD, your attorney should pay close attention to Item 1 to see if any predecessors are disclosed.
- If a predecessor is listed, it's beneficial to ask your business advisor to help research that company's history and reputation.
- You should ask long-tenured franchisees about their experiences under any previous ownership.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses two significant, recent regulatory consent orders. One with California's DFPI found that Tapville used an improperly licensed auditor and failed to disclose that fact, resulting in a penalty. Another with Maryland's Securities Commissioner found that Tapville entered into an agreement to reserve franchise rights before it was registered to sell franchises in the state. This pattern of regulatory non-compliance raises questions about the franchisor's internal controls and adherence to franchise laws.
Potential Mitigations
- Your franchise attorney must carefully review the details and implications of all litigation and regulatory actions disclosed in Item 3.
- It is important to discuss with your attorney whether these past compliance issues could indicate a risk of future problems for franchisees.
- You should ask the franchisor what steps they have taken to improve their legal compliance procedures since these orders were issued.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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