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Zoom Room
How much does Zoom Room cost?
Initial Investment Range
$318,500 to $627,550
Franchise Fee
$62,900 to $193,400
Zoom Room Franchising, LLC grants franchises for the operation of businesses that provide obedience and agility training, solution-oriented pet retail products, social events for dogs and their owners, and other related services.
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Zoom Room December 16, 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor’s audited financial statements reveal significant risks. For the fiscal year ending August 31, 2024, Zoom Room Franchising, LLC (Zoom Room LLC) reported a net loss of $325,258 and a total members' deficit (negative net worth) of $1,313,195. The auditor's report also includes a major restatement of prior financials due to incorrect revenue recognition. These factors may suggest financial instability and could impact the company's ability to support you.
Potential Mitigations
- A franchise accountant should meticulously review the audited financial statements, including all footnotes and the auditor's report on the restatement.
- Discuss the franchisor's plan to achieve profitability and address its negative net worth with your business advisor.
- It is wise to have your attorney investigate if any financial assurances, like a bond or escrow, are required by your state due to the franchisor's financial condition.
High Franchisee Turnover
High Risk
Explanation
Item 20 data indicates a recent increase in franchisee turnover. In fiscal year 2024, there were 6 franchise terminations, compared to zero in the previous two years. While the system is growing, this sudden appearance of multiple terminations could indicate potential issues within the system, such as franchisee dissatisfaction or operational challenges. A high turnover rate can be a significant warning sign about the health and viability of the franchise system.
Potential Mitigations
- Your business advisor should help you calculate the annual franchisee turnover rate and compare it to industry averages.
- It is critical to contact a significant number of former franchisees listed in Exhibit E to understand their reasons for leaving the system.
- In discussions with the franchisor, your attorney can help you ask specific questions about the circumstances surrounding the recent terminations.
Rapid System Growth
High Risk
Explanation
The franchise system has experienced very rapid growth, expanding from 11 franchised outlets at the start of 2022 to 64 by the end of 2024. While growth can be positive, such a rapid expansion rate, when combined with the franchisor's stated financial instability, may strain its resources. This could potentially compromise the quality and availability of essential support, training, and operational guidance for new and existing franchisees.
Potential Mitigations
- A business advisor can assist you in questioning the franchisor about their specific plans to scale support systems to match this rapid unit growth.
- Speaking with both new and established franchisees from the list in Exhibit E is essential to gauge the current quality and responsiveness of franchisor support.
- An accountant's review of the franchisor's financials can help assess if they have the capital to adequately support this expansion.
New/Unproven Franchise System
High Risk
Explanation
While the business concept has existed since 2009 through a predecessor, the current franchising entity, Zoom Room LLC, was formed in 2017. The system's rapid growth has occurred recently. This, combined with its ongoing financial losses and significant negative net worth as shown in Item 21, presents the risks associated with a system that may still be stabilizing its franchise support infrastructure and proving its long-term financial model at a larger scale.
Potential Mitigations
- Your business advisor should help you conduct extensive due diligence on the management team’s specific experience in scaling a franchise system.
- A detailed review of the franchisor's capitalization and business plan with your accountant is critical to assess its long-term viability.
- Contacting some of the earliest franchisees in the system can provide valuable insight into its evolution and the franchisor's learning curve.
Possible Fad Business
Low Risk
Explanation
The business focuses on dog training, social events, and pet retail. While pet services are a strong industry, the specific combination of services and social-centric offerings could be subject to shifting consumer trends. A prospective franchisee should consider the long-term sustainability and demand for this specific business model beyond current popularity, as your contractual obligations will continue even if market interest wanes.
Potential Mitigations
- With a business advisor, independently research the long-term market trends for boutique, social-focused pet service businesses.
- You should evaluate the franchisor's stated plans for innovation and adaptation to stay relevant in a competitive market.
- Consider the business model's resilience during potential economic downturns with your financial advisor.
Inexperienced Management
Low Risk
Explanation
The business experience of the management team appears adequate, with key executives having several years of experience within the company or in other franchise systems. This risk was not identified as a major concern in the FDD. However, it is always important for a franchisee to be comfortable with the leadership team's background and vision for the brand, as they will be relying on their expertise and strategic direction.
Potential Mitigations
- It is always prudent to research the professional backgrounds of the key executives listed in Item 2 using online resources.
- Asking current franchisees about their confidence in the management team's leadership and strategic direction can provide useful insights.
- A business advisor can help you formulate questions for the franchisor about their long-term vision and strategy.
Private Equity Ownership
Medium Risk
Explanation
The franchisor does not appear to be owned by a traditional private equity firm. However, the Chief Financial Officer is also the owner of a multi-unit franchisee entity. This creates a similar dynamic, where decisions could potentially be influenced by the interests of a large franchisee operator. This presents a potential conflict of interest between the needs of the overall system and the specific financial interests of the CFO's own franchised units.
Potential Mitigations
- Your attorney should help you understand the implications of a key executive also being a major franchisee.
- Talking to other franchisees about their perception of fairness in system-wide decisions is a critical step.
- A business advisor can help assess how this potential conflict of interest might affect system policies, support, or costs.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The FDD discloses a parent company, Zoom Room, Inc., and other affiliates. The franchisor is a subsidiary of the parent. The financials for the parent company are not provided, and there is no parent guarantee. Given that the franchisor entity itself has a significant negative net worth, the financial health of the parent could be a material factor in assessing the overall stability of the system, but this information is not available for review.
Potential Mitigations
- Your accountant should evaluate the stand-alone financial statements of the franchisor entity very carefully.
- It may be beneficial to ask your attorney to inquire why a parent guarantee is not offered, given the subsidiary's financial state.
- You and your business advisor should assess the risk of relying on a thinly capitalized subsidiary without financial backing from a parent.
Predecessor History Issues
Low Risk
Explanation
The FDD discloses that the current franchisor, Zoom Room LLC, acquired the franchise assets from a predecessor, Zoom Room, Inc., in 2017. While the FDD does not indicate any negative history associated with the predecessor in Items 3 or 4, this change in corporate structure is a material fact. You should ensure you understand the reasons for this change and be aware that the operational history of the brand pre-dates the current franchising entity.
Potential Mitigations
- A discussion with your attorney can help clarify the legal implications of the asset transfer from the predecessor.
- You might ask the franchisor to explain the reasons for the change in corporate structure in 2017.
- When speaking with long-term franchisees, asking about their experience under both the predecessor and current franchisor could be insightful.
Pattern of Litigation
Low Risk
Explanation
This specific risk was not identified in the FDD. Item 3 states that no litigation is required to be disclosed. This is a positive indicator, suggesting the franchisor has not been involved in significant legal disputes with franchisees, suppliers, or regulators. However, you should remain aware that litigation can arise at any time, and a clean history is not a guarantee of future harmony.
Potential Mitigations
- Your attorney can conduct independent searches for litigation involving the franchisor that may not have met the threshold for disclosure in Item 3.
- It is always a good practice to ask current franchisees about any formal or informal disputes they are aware of within the system.
- Maintaining open communication with the franchisor can help resolve issues before they escalate to legal action.
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
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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