Up Closets
Initial Investment Range
$71,350 to $218,000
Franchise Fee
$46,500 to $124,500
We offer franchises for a closet business that designs, sells, and installs custom closet systems and organizational units for homes, home offices, garages, and other residential and commercial spaces, and related services and products under the “Up Closets” trademarks.
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Up Closets February 18, 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 parent company and guarantor, Home Run Holdings LLC, shows negative members' equity in its 2024 audited financial statements. Liabilities exceed assets, indicating a weak financial position. This financial instability could impair the franchisor's ability to provide support, invest in the brand, or meet its long-term obligations to you, creating significant risk for your investment.
Potential Mitigations
- An experienced franchise accountant must thoroughly analyze the franchisor's financial statements, including all footnotes and cash flow statements.
- Discuss the negative equity position and the company's plan for achieving profitability with the franchisor directly, with guidance from your business advisor.
- Your attorney should confirm if any financial assurance, like a bond or escrow, is required by your state due to this financial weakness.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals an extremely high rate of franchisee cessation in 2024. Eight out of 16 franchises that started the year were terminated or ceased operations. This very high turnover is a major red flag, suggesting potential systemic problems with the business model, profitability, or franchisor support that could significantly jeopardize your chance of success.
Potential Mitigations
- It is critical to contact a significant number of former franchisees listed in Item 20 to understand why they left the system.
- A detailed analysis of the turnover data with your franchise attorney and accountant is necessary to grasp the full extent of this risk.
- Present these concerning turnover figures to the franchisor and request a detailed explanation for each departure, with help from your business advisor.
Rapid System Growth
High Risk
Explanation
The franchise system is expanding at an extremely rapid pace, growing from 2 to 44 outlets in just two years. When combined with the franchisor's disclosed financial weakness and high franchisee turnover, this rapid growth suggests that the franchisor's support infrastructure may be severely strained or underdeveloped. This could result in inadequate training, operational assistance, and quality control for you.
Potential Mitigations
- Engage your business advisor to question the franchisor about their specific plans and resources for scaling franchisee support systems.
- A thorough review of the franchisor's financial statements with your accountant can help determine if they have the capital to support this growth.
- In discussions with current franchisees, specifically ask about the quality and timeliness of support they are currently receiving.
New/Unproven Franchise System
High Risk
Explanation
The franchisor is a new entity with a very short operating history, having started franchising in late 2022. The FDD explicitly highlights this as a "Special Risk." This lack of a proven track record, combined with disclosed financial weakness and high franchisee turnover, means the business model is not yet established and the risk of system-wide problems or failure is significantly elevated.
Potential Mitigations
- Given the high risk, your attorney may be able to negotiate more franchisee-favorable terms, such as lower fees or stronger protections.
- Conducting extensive due diligence on the backgrounds and franchising experience of the management team is critical with your business advisor.
- An accountant's review of the business model's viability and the franchisor's capitalization is essential for such a new system.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. The business of providing custom closet systems and home organization services is part of an established home improvement industry and does not appear to be a short-term fad. However, it is always important to assess long-term market trends and the specific competitive advantages offered by the franchisor's system.
Potential Mitigations
- To assess long-term viability, you could research local market demand for home organization services with a business advisor.
- Consider discussing industry trends and the franchisor's competitive position with your financial advisor.
- Engaging with current franchisees about customer demand and repeat business can provide valuable market insights.
Inexperienced Management
Medium Risk
Explanation
While the key executives listed in Item 2 have prior franchising experience, much of it is with other very new brands under the same parent company structure. The franchisor entity itself, Up Closets Franchising LLC, has a very limited history. This structure could mean management's attention is divided among multiple fledgling systems, potentially affecting the quality of support and strategic focus for your specific brand.
Potential Mitigations
- A business advisor can help you investigate the track record and reputation of the executives and their other franchise concepts.
- Asking current franchisees about the level of direct engagement and support they receive from the senior management team is important.
- Your attorney should review the litigation history in Item 3, as it relates directly to the conduct of the management team.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD. The franchisor appears to be owned by its founders through a holding company structure, not by an outside private equity firm. Generally, private equity ownership can introduce risks related to short-term profit motives over the long-term health of the brand, so its absence can be a positive factor.
Potential Mitigations
- Your attorney can help confirm the ownership structure and identify any undisclosed controlling parties.
- It is still valuable to understand the franchisor's long-term goals for the company with your business advisor.
- Reviewing the franchisor's assignment rights in the Franchise Agreement with your attorney is always a prudent step.
Non-Disclosure of Parent Company Financials
Low Risk
Explanation
This risk was not identified. The franchisor clearly discloses its parent company, Home Run Holdings LLC, in Item 1. Furthermore, the parent company provides a Guarantee of Performance and its audited financial statements are included in the FDD, which offers a degree of transparency into the overall financial structure backing the franchise.
Potential Mitigations
- Your accountant should review the parent company's financials and the terms of the Guarantee of Performance carefully.
- The strength and enforceability of the parent's guarantee should be assessed by your attorney.
- Understanding the relationship and flow of funds between the franchisor and its parent is a key area for your accountant to examine.
Predecessor History Issues
Low Risk
Explanation
This specific risk was not identified, as Item 1 states the franchisor has no predecessor. This means there is no prior corporate entity's history to analyze for issues like bankruptcy or litigation. However, the risk of this being a new and unproven system is captured under a separate risk analysis.
Potential Mitigations
- Even without a predecessor, it is important to research the business history of the key individuals listed in Item 2 with a business advisor.
- Your attorney can help verify the franchisor's corporate history to ensure no predecessor information has been omitted.
- In discussions with the franchisor, you can ask about the origins of the business concept and operating system.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses two pending arbitration claims from former franchisees. The allegations are serious, including fraudulent inducement to enter the franchise agreement. For a very new system, having multiple franchisees bring such claims represents a significant pattern and a major red flag regarding the franchisor's sales practices, franchisee relationships, and the viability of the business model itself.
Potential Mitigations
- Your attorney must review the specific allegations in these lawsuits and advise you on the potential implications.
- This pattern of litigation should be a key topic of discussion during your calls with other current and former franchisees.
- Engage your business advisor to ask the franchisor to explain the circumstances surrounding these serious claims.
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
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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