The Designery
Initial Investment Range
$185,439 to $611,439
Franchise Fee
$59,900 to $264,900
We offer qualified individuals and entities the right to operate a business which provides design and installation services for kitchen, bath and closet projects in new construction and renovation of both residential and commercial buildings.
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The Designery April 25, 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 2024 audited financial statements for A1 Kitchen & Bath Franchising, LLC (The Designery) show a net loss of over $3.2 million and a negative members' deficit of over $3.5 million. The auditor's report includes an "Emphasis of Matter" paragraph highlighting recurring net losses, which raises doubt about its ability to continue as a going concern. This financial weakness may impact The Designery's ability to provide support, a risk also flagged in the FDD's "Special Risks" section.
Potential Mitigations
- Your accountant must conduct a thorough review of the financial statements, including all footnotes and the auditor's opinion, to assess the franchisor's viability.
- In discussions with the franchisor, you should inquire about their plans to address the net losses and fund future operations.
- A financial advisor can help you evaluate the risk that this financial instability poses to your own investment and potential for success.
High Franchisee Turnover
Low Risk
Explanation
The FDD's Item 20 data does not indicate a high rate of franchisee turnover. In 2024, there was only one termination against a starting base of 21 franchised outlets, and a footnote explains this was for non-payment on an additional territory, not a failure of an operating unit. While low turnover is positive, it is important to understand why franchisees leave any system, as this can signal underlying issues with profitability, support, or the business model.
Potential Mitigations
- Speaking with a broad selection of current and former franchisees from the lists in Item 20 is essential to gather firsthand accounts of their experiences.
- Your business advisor can help you analyze the growth and turnover data in Item 20 to understand the overall health of the system.
- It is prudent to ask the franchisor about the circumstances surrounding any franchisee departures to assess potential systemic issues.
Rapid System Growth
High Risk
Explanation
The system has grown from 4 franchised outlets at the start of 2023 to 73 by the end of 2024. This explosive growth, combined with the franchisor's significant net loss and negative net worth as shown in Item 21, presents a risk. The Designery's support infrastructure could be strained by this rapid expansion, potentially leading to inadequate training, site selection assistance, and ongoing support for you and other franchisees as the system scales.
Potential Mitigations
- You should discuss with the franchisor how they are scaling their support staff and systems to manage this rapid growth.
- Contacting a number of recent and established franchisees can provide insight into the current quality and responsiveness of franchisor support.
- Your business advisor can help you assess whether the franchisor's operational and financial capacity can sustain such a high growth rate.
New/Unproven Franchise System
High Risk
Explanation
The Designery began offering franchises in May 2021 and is in an early stage of development, a fact highlighted in the "Special Risks" section. As a new system, its business model, operational support, and brand recognition are not as established as those of a mature franchise. This presents a higher level of risk regarding the long-term viability and the potential for the franchisor to provide consistent, effective support as it grows.
Potential Mitigations
- Extensive due diligence on the business model and the management team's experience in both the industry and in franchising is critical; your business advisor can assist.
- Engaging with the earliest franchisees from the list in Item 20 can provide valuable insights into the system's evolution and the franchisor's performance.
- Your attorney may be able to negotiate more favorable terms to help offset the higher risks associated with investing in a new system.
Possible Fad Business
Low Risk
Explanation
This specific risk was not identified in the FDD Package. However, investing in a business that is tied to a short-lived trend or fad is a significant risk in franchising. The long-term nature of a franchise agreement means you could be left with ongoing royalty and contract obligations long after public interest in the product or service has faded, potentially leading to business failure.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term consumer demand for the franchise's products and services.
- Careful evaluation of the franchisor's commitment to research and development is important to see how they plan to adapt to changing market trends.
- Your financial advisor can assist in analyzing the business's resilience to economic shifts and its potential for sustained profitability.
Inexperienced Management
Medium Risk
Explanation
Item 2 details the business experience of the management team. Several key executives joined The Designery and its parent, Homefront Brands, in 2022 or more recently. While they possess experience in franchising and related industries, the collective team has a relatively short history of working together to manage this specific franchise system. This could present risks related to team cohesion and the execution of the company's strategic vision.
Potential Mitigations
- Engaging a business advisor to help you thoroughly vet the professional backgrounds of each member of the management team is a prudent step.
- It is advisable to ask the franchisor about the management team's strategic plans and their prior experiences in scaling franchise systems.
- Speaking with current franchisees can provide valuable insight into their confidence in the leadership team's ability to successfully grow the brand.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD Package, as the franchisor does not appear to be owned by a private equity firm. However, when a franchisor is PE-owned, there can be a focus on short-term investor returns over the long-term health of franchisees. This might manifest as increased fees, reduced support, or a quick sale of the franchise system, which could introduce a new owner with a different philosophy.
Potential Mitigations
- If a franchisor is owned by a private equity firm, it's wise to research the firm's history with other franchise brands with the help of a business advisor.
- Your attorney should review the Franchise Agreement for any terms that allow the franchisor to be sold without your consent.
- Speaking with franchisees who have been through a sale of the system can provide valuable firsthand accounts.
Non-Disclosure of Parent Company
Medium Risk
Explanation
Item 1 discloses a complex structure of parent and affiliate companies, including HFB Franchisor Holdings, LLC and HFB Enterprise Holdings, LLC, which were recently formed. However, financial statements are not provided for these parent entities. Since the franchisor itself has a significant net loss and negative net worth, the financial strength of the parent companies is a material fact for assessing the overall stability and backing of the system. The absence of this information creates a potential risk.
Potential Mitigations
- Your accountant should review the disclosed financials and the corporate structure to assess the potential need for parent company financial data.
- It is advisable to ask the franchisor about the financial backing provided by the parent companies to support the franchise system's growth and obligations.
- An attorney can help you understand the legal relationship and obligations between the franchisor and its various parent and affiliate entities.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchisor, A1 Kitchen & Bath Franchising, LLC, states it does not have a predecessor. It converted from a Georgia LLC to a North Carolina LLC in 2022 but does not appear to have acquired its assets from a prior franchisor. Therefore, risks associated with an undisclosed or problematic history from a predecessor entity do not seem to apply here.
Potential Mitigations
- Your attorney should always confirm the details in Item 1 regarding predecessors and corporate history.
- In cases where a predecessor exists, researching their litigation and bankruptcy history can provide critical insights into potential inherited problems.
- A business advisor can help investigate the reputation and track record of any predecessor company mentioned in an FDD.
Pattern of Litigation
Low Risk
Explanation
Item 3 discloses one lawsuit initiated by the franchisor against a franchisee for breach of contract, including failure to pay fees and trademark infringement. While a single lawsuit does not constitute a pattern, particularly when initiated by the franchisor for non-payment, it is important to monitor litigation trends as a system matures. A future pattern of franchisee-initiated lawsuits alleging fraud or misrepresentation would be a significant red flag.
Potential Mitigations
- A review of the specific allegations in any disclosed litigation with your attorney is important to understand the context.
- It's beneficial to ask the franchisor for their perspective on any disclosed legal disputes.
- Contacting other franchisees to ask about their relationship with the franchisor can provide a broader view of potential issues.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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