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Your CBD Stores

Your CBD Stores Franchising, LLC
https://www.getsunmed.com
1-727-235-0720
600 8th Avenue W., Suite 500, Palmetto, Florida 34221

Initial Investment Range

$85,800 to $176,050

Franchise Fee

$31,450 to $71,550

As a Your CBD Stores Franchising, LLC franchisee you will operate a retail CBD-type and non-hemp wellness products store under the trademarks "Sunmed™" and "YOUR CBD STORE®" featuring herbal, dietary, and nutritional supplements containing lawful CBD and/or "Cannabinoids" from industrial hemp and non-hemp derived herbal, dietary, and nutritional supplements.

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Your CBD Stores September 17, 2024 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.

1

Franchisor Stability Risks

Start Here
Total: 10
4
3
3

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor’s audited financials reveal a significant reliance on its affiliate, Sunflora, Inc. As noted in the auditor's report, Sunflora provides management services at no charge and advances working capital. This suggests Your CBD Stores Franchising, LLC (YCBDSF) may not be financially self-sufficient. Such dependence on an affiliate, whose own financial health is not fully detailed with the same rigor, presents a considerable risk to the stability and support you may receive.

Potential Mitigations

  • Your accountant must carefully analyze the financial statements, including all notes regarding related-party transactions, to assess the franchisor's standalone viability.
  • It is prudent to discuss with a franchise attorney the legal implications of this financial dependency and any associated guarantees, or lack thereof.
  • A business advisor can help you evaluate the risk that a change in the affiliate relationship could pose to your franchise's operational support and supply chain.
Citations: Item 21, FDD Exhibit H

High Franchisee Turnover

High Risk

Explanation

The FDD discloses an extremely high franchisee turnover rate, which it flags as a “Special Risk.” In 2023, the system experienced 58 terminations and 4 franchisor reacquisitions, representing an exit rate of over 20% of the stores open at the start of the year. The total number of franchised outlets also declined from 298 to 277. Such a high rate of churn and system shrinkage is a critical warning sign of potential systemic problems, franchisee dissatisfaction, or unprofitability.

Potential Mitigations

  • Speaking with a significant number of former franchisees from the list in Exhibit G is essential to understand why they left the system.
  • Your business advisor should help you investigate the potential root causes of such high turnover before you make any investment.
  • A franchise attorney should be consulted to discuss the implications of joining a system with this level of disclosed franchisee failure.
Citations: Item 20, Special Risks

Rapid System Growth

Medium Risk

Explanation

The franchise system experienced extremely rapid growth in 2021, adding over 100 units, but has since reversed course and is now shrinking, with a net loss of 21 franchised units in 2023. While past rapid growth can strain a franchisor's ability to provide support, the current trend of contraction and high turnover may suggest more fundamental issues with the business model's viability or franchisee profitability, representing a significant risk to your potential for success.

Potential Mitigations

  • Engaging a business advisor to analyze the system's growth and subsequent contraction is crucial for understanding its market trajectory.
  • Discuss the reasons for this shift from rapid growth to shrinkage with both the franchisor and several current franchisees.
  • Your accountant can help model the financial implications of being in a potentially contracting market.
Citations: Item 20

New/Unproven Franchise System

High Risk

Explanation

YCBDSF began franchising in February 2020, making it a relatively new and unproven franchise system. This lack of a long-term track record, combined with the high franchisee turnover rates disclosed in Item 20, increases the risk associated with the investment. An unproven system may have underdeveloped support structures, operational inefficiencies, and a business model that has not yet demonstrated long-term sustainability and profitability for its franchisees across various market conditions.

Potential Mitigations

  • Thorough due diligence is critical; you should speak with a wide range of current and former franchisees about their experiences.
  • A business advisor can help you assess whether the franchisor's systems and support are sufficiently developed for a new franchisee's needs.
  • Your attorney should review the franchise agreement for any terms that might be unusually harsh for an unproven system.
Citations: Item 1, Item 20

Possible Fad Business

Medium Risk

Explanation

The business operates in the CBD industry, which is relatively new and exists in a state of legal and regulatory flux, as disclosed in the FDD's "Special Risks" section. Consumer demand and product legality can be influenced by rapidly changing state and federal laws. Investing in a business model that is heavily tied to such a new and potentially volatile product category carries the risk that the business could be a short-term fad rather than a sustainable long-term enterprise.

Potential Mitigations

  • You should conduct independent market research with a business advisor to assess the long-term consumer demand for CBD products.
  • Discuss the franchisor's strategy for product innovation and adaptation to potential market or regulatory shifts.
  • Consulting a local attorney is vital to understand the specific legal landscape for selling these products in your state.
Citations: Item 1, Special Risks

Inexperienced Management

Medium Risk

Explanation

The management team's experience in franchising began in 2020 when YCBDSF was established. While the executives have experience in the CBD industry through the affiliate Sunflora, their direct experience in managing and supporting a franchise system is limited to a few years. This could impact the quality of training, support, and strategic guidance provided to you, especially when navigating the challenges of a new business in a complex regulatory environment.

Potential Mitigations

  • A thorough interview with the management team, assisted by your business advisor, can help gauge their understanding of franchisee support needs.
  • It is important to ask current franchisees about the quality and effectiveness of the support and guidance they receive from the management team.
  • Your attorney can help assess if the franchise agreement contains adequate and enforceable support obligations.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk, where a franchisor is owned by a private equity firm that might prioritize short-term returns over long-term system health, was not identified. Item 1 indicates the franchisor is a privately held limited liability company, and there is no disclosure of ownership by a private equity fund. Nevertheless, understanding the ownership structure is always important as it can influence the franchisor's motivations and strategic direction.

Potential Mitigations

  • A franchise attorney can help you confirm the ownership structure and identify any potential influence from outside investment firms.
  • It's always wise to ask the franchisor about their long-term strategic plans for the company, including any potential future sale.
  • A discussion with a business advisor can help you understand the different risks associated with various franchisor ownership structures.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD clearly discloses the franchisor's key affiliate, Sunflora, Inc., and describes its critical role in financially backing the franchisor and acting as the primary product supplier. While this dependency creates its own risks, the franchisor appears to have complied with the disclosure requirements regarding its parent and affiliate entities, so there is no failure to disclose.

Potential Mitigations

  • Have your attorney review Item 1 and Item 21 to ensure all required parent and affiliate disclosures, including financial statements if necessary, are present.
  • An accountant should analyze the financial relationship between the franchisor and its affiliates to understand the system's true financial structure.
  • Asking the franchisor to explain the complete corporate structure can provide additional clarity.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the provided FDD package. Item 1 of the document does not disclose any predecessor entities from which YCBDSF acquired its assets or that previously operated the franchise system. A predecessor is an entity that previously offered franchises for the same system, and their history, including any litigation or bankruptcy, must be disclosed. The absence of such a disclosure suggests the system was developed internally by the current franchisor.

Potential Mitigations

  • Your attorney should always confirm the absence of predecessors and review Item 1 for any entities that might meet the definition.
  • A business advisor can help you research the history of the brand and its founders to uncover any prior business activities.
  • Asking the franchisor directly about the origins of the business concept can sometimes reveal relevant historical context.
Citations: Not applicable

Pattern of Litigation

High Risk

Explanation

Item 3 reveals a concerning history of litigation. While the franchisor has successfully pursued enforcement actions against franchisees, there is a significant, ongoing arbitration initiated by a franchisee alleging breach of contract and fraud, seeking $10 million in damages. The franchisor's attempt to have this claim dismissed was denied. This pattern suggests potential disputes over contractual promises and territorial rights, posing a substantial legal and financial risk for a new franchisee.

Potential Mitigations

  • A thorough review of all litigation disclosed in Item 3 with your franchise attorney is essential to understand the nature of the disputes.
  • It may be beneficial for your attorney to research the court records of these cases for more detailed information.
  • Discussing these litigation matters with current and former franchisees can provide valuable firsthand perspective on their dealings with the franchisor.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
2
10

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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3

Financial & Fee Risks

Total: 10
4
6
0

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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4

Legal & Contract Risks

Total: 16
7
6
3

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.

5

Territory & Competition Risks

Total: 5
3
1
1

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.

6

Regulatory & Compliance Risks

Total: 10
5
2
3

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.

7

Franchisor Support Risks

Total: 4
2
2
0

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.

8

Operational Control Risks

Total: 12
4
6
2

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.

9

Term & Exit Risks

Total: 18
10
6
2

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.

10

Miscellaneous Risks

Total: 2
1
1
0

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.