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Xtension Envy
How much does Xtension Envy cost?
Initial Investment Range
$322,750 to $583,750
Franchise Fee
$115,250 to $130,250
You will operate a high quality, hair extension salon which will perform hair extension sales, installations, and ongoing maintenance to include coloring, washing, blow outs, straightening and cuts under the trademark “Xtension Envy”.
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Xtension Envy April 29, 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 audited financial statements in Item 21 reveal a net loss and a negative net worth for 2024. This indicates significant financial weakness and may suggest an inability to fund operations or provide promised support without relying on new franchise fees or infusions from its parent company. This poses a substantial risk to your investment.
Potential Mitigations
- Having an experienced franchise accountant perform a detailed review of the franchisor's financials, including footnotes and cash flow statements, is critical.
- It is vital to ask the franchisor about their plans to address these losses and achieve profitability, with guidance from your business advisor.
- Your attorney should inquire if any states have required the franchisor to post a bond or escrow fees due to its financial condition.
High Franchisee Turnover
Low Risk
Explanation
This risk was not identified as the franchisor is new and Item 20 shows no history of franchised outlets operating, closing, or transferring. Generally, high turnover can signal systemic problems, franchisee dissatisfaction, or lack of profitability. The absence of this data here is due to the system's young age, which presents a different kind of risk (unproven system).
Potential Mitigations
- Since no franchisee history exists, performing enhanced due diligence on the business model's viability with your business advisor is essential.
- Your accountant should create detailed financial projections, as there is no franchisee performance data to rely upon.
- Your attorney should review the termination and renewal clauses in the agreement very carefully, as these will govern future exits.
Rapid System Growth
Low Risk
Explanation
This risk was not identified. Item 20 indicates the franchise system has not yet begun to add outlets, so there is no evidence of rapid growth straining support resources. In other franchises, rapid expansion can sometimes outpace the franchisor's ability to provide adequate training and support, which is a key area to monitor as a system matures.
Potential Mitigations
- A business advisor can help you assess the franchisor's plans and capacity for providing support as the system begins to grow.
- It is wise to ask the franchisor directly about their staffing plans for franchise support and training.
- Your accountant should review the franchisor's financial statements to gauge their ability to invest in support infrastructure as they expand.
New/Unproven Franchise System
High Risk
Explanation
The company was formed in 2021 and, according to Item 20, has zero operating franchisees. You would be one of the first. This presents a significant risk, as the business model, brand recognition, and franchisor's support systems are unproven in a franchise context. The lack of a franchisee track record makes assessing potential success or challenges difficult.
Potential Mitigations
- Conducting extensive due diligence on the viability of the single affiliate-owned salon and the founders' direct operational experience is crucial with a business advisor.
- Because of the higher risk, your attorney may be able to negotiate more franchisee-favorable terms, such as lower fees or better protections.
- Your accountant should scrutinize financial projections given the lack of historical data from other franchisees.
Possible Fad Business
Medium Risk
Explanation
The business focuses specifically on hair extensions. While popular, a narrow focus like this could potentially be a trend with less long-term stability than a full-service salon. You should consider whether the demand for this specialized service is sustainable for the entire 10-year term of your agreement, especially if consumer preferences shift.
Potential Mitigations
- Engaging a business advisor to independently research the long-term market trends for hair extension services is recommended.
- You should ask the franchisor about their plans for service innovation and adaptation to stay relevant if market trends change.
- Carefully consider the business's resilience to economic downturns with your financial advisor, as specialized luxury services can be vulnerable.
Inexperienced Management
Medium Risk
Explanation
The founding management team has limited experience operating this concept as a franchisor, having only started in 2021. While a new co-owner, Peter Taunton, has extensive franchise experience, he is very new to the company, and Item 3 discloses he is currently involved in multiple lawsuits from a prior franchise concept alleging fraud and misrepresentation.
Potential Mitigations
- A thorough vetting of the entire management team's background, including the context of the litigation disclosed in Item 3, should be discussed with your attorney.
- It is important to ask the franchisor about the specific roles and long-term commitment of the new, experienced co-owner.
- A business advisor can help you evaluate whether the management team's collective experience is sufficient to support a new franchise system.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified, as Item 1 does not indicate the franchisor is owned by a private equity firm. When PE firms own a franchise, there can sometimes be a focus on short-term investor returns over the long-term health of the system. This does not appear to be a factor here.
Potential Mitigations
- Your attorney can help you understand the ownership structure detailed in Item 1 and its potential implications.
- It is good practice to ask about the long-term vision for the company with a business advisor.
- When evaluating any franchise, your accountant should assess whether the franchisor's financial decisions appear to prioritize franchisee success.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk of non-disclosure is not present, as Item 1 identifies a parent company, XE Holdings, LLC. However, the franchisor's financials in Item 21 indicate a dependency on this parent for funding. Generally, if a parent company guarantees the franchisor's obligations, their financial statements may also be required for a complete risk assessment.
Potential Mitigations
- Your accountant should analyze the note on related party transactions in the franchisor's financial statements (Item 21) to understand the level of dependency.
- You should inquire with the franchisor about the financial health of the parent company, XE Holdings, LLC.
- Your attorney can advise on whether a formal guarantee from the parent company should be requested.
Predecessor History Issues
Low Risk
Explanation
This risk is not present, as Item 1 explicitly states the franchisor has no predecessors. In other situations, a franchisor might acquire a system from a previous owner (a predecessor), and it would be important to examine the predecessor's history for issues like litigation or high franchisee failure rates, which could be inherited by the new franchisor.
Potential Mitigations
- Your attorney can confirm the corporate history outlined in Item 1 to ensure there are no undisclosed predecessor entities.
- A business advisor can help you research the industry and operational history of the founders, even without a formal predecessor.
- When evaluating any franchise, speaking with long-term franchisees can reveal insights about any prior ownership structures.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses that a key principal, Peter Taunton, is currently being sued in three separate cases by former franchisees of another system he previously ran. The allegations include fraud, misrepresentation, and violations of franchise law. A pattern of such serious allegations against a key decision-maker, even from a prior venture, presents a significant risk regarding the franchisor's sales practices and integrity.
Potential Mitigations
- A thorough review of these specific lawsuits with your franchise attorney is absolutely essential to understand the nature and severity of the allegations.
- You must question the franchisor directly about this litigation history and the role this principal will play in your franchise relationship.
- Treating this litigation history as a major red flag and proceeding with extreme caution is advisable; your attorney can provide guidance.
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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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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