That 1 Painter
Initial Investment Range
$113,000 to $693,500
Franchise Fee
$80,500 to $214,000
The franchisee will operate a residential and commercial painting and cosmetic repair service business under the “That 1 Painter” trademarks.
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That 1 Painter May 6, 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 financial statements in Exhibit D reveal a heavy reliance on initial franchise fees for revenue ($7.69M of $10.42M total revenue in 2024), rather than on ongoing royalties. This may indicate an unsustainable business model focused on sales over long-term franchisee support and success. Several state regulators have imposed fee deferral requirements due to this financial condition, explicitly confirming the risk. This could impact the franchisor’s ability to support you.
Potential Mitigations
- A franchise accountant should analyze the franchisor's financial statements, particularly the revenue sources and cash flow, to assess its long-term stability.
- Your attorney should review the state-specific addenda to understand the implications of any financial assurance requirements like fee deferrals.
- Discuss the franchisor's plan for shifting its revenue dependency from franchise fees to royalties with your business advisor.
High Franchisee Turnover
High Risk
Explanation
Item 20 reveals a critically high number of 117 signed franchise agreements for which outlets have not yet opened. This figure is substantial compared to the 271 operating territories. This situation, flagged as a 'Special Risk' by the franchisor itself, may indicate that franchisees face significant delays or challenges in opening their businesses. A large number of unopened franchises could be a leading indicator of future franchisee failure and turnover within the system.
Potential Mitigations
- Your attorney should help you ask the franchisor for a detailed explanation of the high number of unopened franchises.
- Contacting franchisees on the 'signed but not open' list, if possible, could provide direct insight into opening challenges; your business advisor can help guide this research.
- An accountant can help you budget for potential opening delays that may exceed the estimates provided in Item 7.
Rapid System Growth
High Risk
Explanation
The franchisor is experiencing hyper-growth, expanding from zero to 265 franchised territories in just three years. While growth can be positive, such rapid expansion can strain a franchisor's resources, especially for a young company that is heavily reliant on franchise fees for its revenue. This may impact the quality and availability of training, support, and other resources essential for your success, as the support infrastructure may not keep pace with unit growth.
Potential Mitigations
- It is prudent to discuss the franchisor's plans for scaling its support staff and systems to match its rapid unit growth with your business advisor.
- Questioning a wide range of existing franchisees about their recent experiences with the quality and timeliness of franchisor support is crucial.
- Your accountant should review the franchisor's investment in support infrastructure as reflected in its financial statements.
New/Unproven Franchise System
High Risk
Explanation
The franchisor, That 1 Painter Franchising LLC (That 1 Painter), began franchising in May 2021 and explicitly discloses its 'Short Operating History' as a special risk. Investing in a young system carries inherent risks, including an unproven long-term business model, undeveloped support systems, and minimal brand recognition. The success of early franchisees may not be representative of future performance, and the franchisor's ability to navigate market changes or economic downturns is not yet established.
Potential Mitigations
- A business advisor can help you conduct extensive due diligence on the track record and industry experience of the founders and key management.
- Speaking with the earliest franchisees in the system is critical to understand the evolution of the business model and support.
- An accountant should help you develop conservative financial projections, acknowledging the higher risks associated with a new franchise system.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. A 'fad' business is one tied to a fleeting trend, which can pose a significant risk to a franchisee's long-term investment. If consumer interest wanes, your business could face declining sales and potential failure, even while your long-term contractual obligations to the franchisor remain. Evaluating the long-term, sustainable demand for a franchise's products or services is a crucial part of due diligence.
Potential Mitigations
- A business advisor can help you research the industry to assess the long-term consumer demand for the products or services offered.
- It is wise to evaluate the franchisor's commitment to research and development to ensure the business model can adapt to changing market trends.
- Your financial advisor can help you assess the business's potential resilience during various economic cycles.
Inexperienced Management
Medium Risk
Explanation
While the executives listed in Item 2 have been with the company since its inception, the franchise system itself is very young (since 2021). The management team's experience is primarily within their own recently created ecosystem of affiliated franchise brands (ResiBrands). This lack of a long-term track record in managing a large, mature franchise system through various economic cycles could pose a risk regarding the quality of strategic guidance and long-term support you may receive.
Potential Mitigations
- A business advisor should help you vet the management team's specific experience in managing a franchise system of this scale and complexity.
- Inquiring with existing franchisees about their perception of management's competence and strategic direction is a valuable step.
- Your attorney can help you understand the implications of the interconnected affiliate structure on management focus and resources.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Franchisors owned by private equity firms can sometimes prioritize short-term returns for investors over the long-term health of franchisees. This can lead to increased fees, reduced support, or a quick sale of the franchise system to another owner, creating uncertainty for your investment. It is important to research the track record of any private equity firm involved with a franchise you are considering.
Potential Mitigations
- Should you encounter a franchise owned by a private equity firm, your business advisor can help you research the firm's history with other franchise brands.
- It is advisable to ask current franchisees about any changes in the system since the private equity acquisition.
- Your attorney can review the franchise agreement for terms related to the sale or assignment of the franchise system.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The FDD discloses that That 1 Painter is a subsidiary of ResiBrands LLC. While the franchisor's financials are provided, the parent company's financials are not included. Given the franchisor's youth, its significant financial dependence on its parent or affiliates could be masked. Without the parent's financial statements, it is difficult to fully assess the overall financial strength and stability backing your franchise investment, a risk acknowledged by state regulators who have imposed financial assurance requirements.
Potential Mitigations
- Your accountant should carefully analyze the franchisor's balance sheet, particularly the large related-party receivables, to assess its standalone health.
- It is wise to ask the franchisor about the financial relationship and support provided by the parent company, ResiBrands LLC.
- A discussion with your attorney is important to understand the legal separation between the parent and franchisor and how it affects your risk.
Predecessor History Issues
Low Risk
Explanation
The franchisor does not disclose any predecessors, as it is a relatively new company. Generally, if a franchisor has predecessors, it is important to review their history for any signs of trouble, such as litigation, bankruptcy, or high franchisee turnover. A negative history with a predecessor could indicate underlying problems with the business model or management that may have been carried over to the new franchisor entity.
Potential Mitigations
- When evaluating a franchise, your attorney should always carefully review Item 1 for any mention of predecessor companies.
- If predecessors are listed, it's beneficial to conduct independent research on their business history with the help of a business advisor.
- Asking long-term franchisees about their experiences under any previous ownership can provide valuable context.
Pattern of Litigation
Low Risk
Explanation
This FDD does not disclose any litigation. This is a positive sign, particularly for a young, rapidly growing company. However, the absence of litigation is not a guarantee of a problem-free system. You should still conduct thorough due diligence, as disputes may exist that have not yet resulted in formal legal action. A pattern of litigation, especially franchisee-initiated lawsuits alleging fraud or misrepresentation, would be a significant red flag.
Potential Mitigations
- It's good practice to ask current and former franchisees about their satisfaction levels and any disputes they may have had, even if not in litigation.
- Your attorney can perform independent searches for litigation that may not have been required to be disclosed in the FDD.
- Continuing to monitor public records for litigation against the franchisor can be a prudent step, which your legal counsel can assist with.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
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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
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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