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How much does Tipsy Scoop cost?
Initial Investment Range
$223,680 to $468,791
Franchise Fee
$66,564 to $84,564
The franchise that we offer is for Tipsy Scoop, a specialty ice cream shop featuring a menu of liquor-infused ice cream, frozen desserts, and other menu items.
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Tipsy Scoop March 27, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 22, 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, Tipsy Scoop Franchising LLC (Tipsy Scoop), explicitly discloses its weak financial condition as a "Special Risk," and the audited financial statements in Item 21 confirm this. For the year ending Dec. 31, 2023, the company had a net loss of ($67,690) and a negative net worth of ($47,690). While profitable in 2024, its net worth remains negative. This financial state may impact its ability to provide support or grow the brand effectively.
Potential Mitigations
- A franchise accountant should meticulously review the franchisor's financial statements, including footnotes, to assess its ongoing viability and cash flow.
- It is wise to ask the franchisor directly about its plans to address its negative net worth and fund future growth and support obligations.
- Discuss the potential impact of the franchisor's financial condition on your investment and the security of your fees with your financial advisor.
High Franchisee Turnover
Medium Risk
Explanation
This is a new franchise system with only two franchised outlets open at the end of 2024, so there is no history of franchisee turnover. However, Item 20, Table 4, shows that the franchisor closed one of its three company-owned outlets during 2024. The failure of a company-owned store in such a small system could be a negative indicator of the business model's viability or the challenges in certain markets.
Potential Mitigations
- In discussions with the franchisor, you should inquire about the specific reasons for the closure of the company-owned outlet.
- A business advisor can help you analyze the potential reasons for the closure and assess its relevance to your proposed location.
- It is important to ask current franchisees about their performance and challenges to gauge the support and viability of the system.
Rapid System Growth
Medium Risk
Explanation
According to Item 20, Table 5, the franchisor plans to open six new franchised outlets and two new company outlets in the next fiscal year. This represents a 400% increase in total system size (from four to twelve units). Such rapid expansion for a new franchisor with limited financial resources and staff, as seen in Item 21, may strain its ability to provide adequate site selection, training, and operational support to all new franchisees.
Potential Mitigations
- Questioning the franchisor about their specific plans to scale support staff and infrastructure to match this projected growth is a prudent step.
- A business advisor can help you assess whether the franchisor's operational and financial capacity can sustain such a rapid growth trajectory.
- Contacting the most recently opened franchisees to inquire about the quality and timeliness of the support they received is advisable.
New/Unproven Franchise System
High Risk
Explanation
Tipsy Scoop began offering franchises in February 2023 and had only two operating franchisees at the end of 2024. The FDD explicitly identifies "Short Operating History" as a "Special Risk." Investing in a new system carries higher risks, including an unproven franchisee support system, minimal brand recognition outside its home market, and potential for unforeseen operational challenges. The long-term viability and profitability for franchisees are not yet established.
Potential Mitigations
- A business advisor should help you conduct extensive due diligence on the concept's long-term viability and the management team's capabilities.
- Speaking with the first few franchisees is critical to understand their early experiences, challenges, and the quality of franchisor support.
- Your attorney might be able to negotiate more favorable terms, such as reduced fees or greater protections, to offset the higher risk of a new 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 risk long-term viability once consumer interest fades. A prospective franchisee should assess whether a concept has enduring market appeal or if it relies on novelty that may not last, as franchise agreements are long-term commitments that will outlast a short-term trend.
Potential Mitigations
- Your business advisor can help you research the industry to determine if the core product has long-term market demand or is a novelty.
- Evaluating the franchisor's plans for product innovation and adaptation to changing consumer tastes is a worthwhile exercise.
- Consider the business's resilience to economic shifts and its appeal beyond the initial trend with your financial advisor.
Inexperienced Management
Medium Risk
Explanation
The franchisor entity itself is very new, having been formed in late 2022. While the executive team has experience operating the Tipsy Scoop concept through affiliate companies since 2014, their experience in managing a franchise system and supporting franchisees is limited. A lack of specific franchising experience can lead to challenges in providing effective training, marketing support, and operational guidance to a growing network of independent owners, which is a different skill set from running corporate stores.
Potential Mitigations
- In your due diligence calls, specifically ask current franchisees about the quality of the franchise support systems, not just the business concept.
- Inquiring with the franchisor about whether they have engaged experienced franchise consultants or staff to guide their new venture would be prudent.
- A business advisor can help you assess if the management team's skills are transferable to the demands of managing a franchise network.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. When a franchise is owned by a private equity firm, there's a risk that management decisions will prioritize short-term investor returns over the long-term health of the brand and franchisee profitability. This can sometimes lead to increased fees, reduced support, or a quick sale of the company, creating uncertainty for franchisees.
Potential Mitigations
- If a franchisor is owned by a private equity firm, investigating the firm's history with other franchise brands is a crucial step for your business advisor.
- Your attorney should review the Franchise Agreement for terms related to the sale or assignment of the franchise system.
- Speaking with franchisees who have operated under the PE firm's ownership can provide valuable insight into changes in the system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. A franchisor should disclose parent companies in Item 1. If a franchisor is a thinly capitalized subsidiary, the financial statements of a parent company that guarantees its obligations may be required. The absence of such disclosures, when warranted, can hide the true financial backing of the system, preventing a full assessment of its stability.
Potential Mitigations
- Your accountant should review the franchisor's capital structure to assess if it appears to be a subsidiary of a larger, undisclosed entity.
- If a parent company is mentioned or provides a guarantee, your attorney should confirm that the parent's financial statements are included if legally required.
- Inquiring about the relationship between the franchisor and any affiliated companies is an important part of due diligence.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor states in Item 1 that it does not have any predecessors. This means the current franchising entity is the original and only one for this system. Therefore, there are no hidden historical issues from prior versions of the company to consider. However, the lack of a predecessor also reinforces that this is a very new company.
Potential Mitigations
- It is always a good practice to have your attorney review Item 1 carefully to confirm the franchisor's statements about its history.
- When no predecessor exists, the focus of your due diligence should be on the direct experience of the current management team.
- A business advisor can help you research the public history of the brand and its founders, even if no formal predecessor entity exists.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 of the FDD requires the disclosure of certain types of current and past litigation. A pattern of lawsuits filed by franchisees alleging fraud, misrepresentation, or breach of contract can be a significant red flag indicating systemic problems. Similarly, a high number of lawsuits filed by the franchisor against franchisees might suggest an overly aggressive or litigious culture.
Potential Mitigations
- A thorough review of Item 3 with your attorney is essential to understand the nature of any disclosed litigation.
- If litigation is disclosed, your attorney can help you research the public court records to get more details on the claims and outcomes.
- Discussing any disclosed litigation with current and former franchisees can provide valuable context.
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