1 Percent Lists
Real Estate
Founded 202039 locations1 Percent Lists Franchises, LLC sells franchises to real estate brokers. Franchisees operate individual 1 Percent Lists® Businesses, offering real estate brokerage services (residential and commercial sales and leasing) to clients of designated ages. Franchisees may operate from a home office or a commercial office, and must hire or contract with real estate brokers and agents (Real Estate Professionals) to conduct business. The franchisor provides a system (the "System"), trademarks ("Marks"), and training. Franchisees pay a one-time franchise fee and ongoing monthly royalty fees (calculated as a percentage of gross commissions per transaction). They also pay fees for training, website setup, and optional services. The franchisor retains the right to solicit clients and grant franchises elsewhere, and may develop corporate programs for franchisees to serve large clients.
Company Profile
Website:www.1percentlists.com
Year Founded:2020
1 Percent Lists Franchise Cost
| Franchise Fee: | $15,000Key Metric |
| Total Investment: | $22,000 - $60,000Key Metric |
| Liquid Capital: | $7,500 |
| Royalty Fee: | 5% of gross sales |
| Marketing Fee: | Not specified |
Quick ROI Calculator
Based on 1 Percent Lists's actual financial data
Outlet Counts by Year
Historical outlet data extracted from FDD documents
2023 (Latest):39
Start: 31
End: 39
Net: +8
2022:31
Start: 21
End: 31
Net: +10
2021:21
Start: 7
End: 21
Net: +14
* Data extracted from FDD documents using AI analysis
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AI-Powered Due Diligence Analysis
Our advanced AI analyzes Franchise Disclosure Documents (FDDs) to identify potential risks and opportunities across 10 critical categories.
13
High Risk
Critical items
35% of total
20
Medium Risk
Monitor closely
54% of total
4
Low Risk
Manageable items
11% of total
37
Total Items
Factors analyzed
10 categories
6.22
Overall Score
Low RiskHigh Risk
010
Franchisor Stability Risks
3 risks identified
2
1
Limited Operating History
High
Explanation:
- 1 Percent Lists was founded in 2020, giving it a limited operating history in the franchising space. This short track record makes it difficult to assess the long-term viability and stability of the franchise model, especially during economic downturns or changing market conditions.
- Item 20 shows a small number of existing franchises and projected new outlets, indicating a relatively nascent stage of development. This increases the risk of unforeseen challenges and potential instability as the system scales.
Potential Mitigations:
- Thoroughly research the franchisor's background, management team experience, and their plans for future growth and development.
- Speak with existing franchisees to understand their experiences and challenges, focusing on the support provided by the franchisor and the realism of the financial projections.
- Consult with a financial advisor and franchise attorney to assess the financial stability of the franchisor and the risks associated with a young franchise system.
FDD Citations:
- Item 20: Table 5 shows limited franchise numbers.
- Item 21: Financial statements cover a relatively short period.
Dependence on Approved Suppliers with Potential Conflicts of Interest
High
Explanation:
- The FDD states a requirement to purchase nearly all equipment and supplies from the franchisor, affiliates, or approved suppliers. This creates a dependence that could lead to inflated prices and reduced profitability for franchisees.
- The franchisor's officers have ownership interests in related companies, creating potential conflicts of interest. While not currently supplying directly to franchisees, the FDD indicates they may do so in the future, raising concerns about self-dealing and prioritizing the franchisor's profits over franchisee success.
Potential Mitigations:
- Carefully review the costs associated with required purchases and compare them to market prices. Negotiate with the franchisor for better pricing or alternative suppliers.
- Scrutinize the agreements with approved suppliers to ensure fair terms and conditions. Seek legal advice to understand the implications of these agreements and potential conflicts of interest.
- Request transparency regarding the ownership structure and financial relationships between the franchisor, its affiliates, and approved suppliers.
FDD Citations:
- Item 1 and Item 5: Detail requirements for purchasing from approved suppliers and the franchisor's potential role as a supplier.
- FDD p. 13: "Suppliers in Whom our officers Hold Interests" section discusses officer ownership in related companies.
Lack of Exclusive Territory
Medium
Explanation:
- The FDD explicitly states that franchisees will not receive an exclusive territory. This exposes franchisees to potential competition from other franchisees, company-owned outlets, and other distribution channels controlled by the franchisor. This can significantly impact market share and profitability.
Potential Mitigations:
- Discuss the franchisor's development plans and understand the potential for future competition in your desired area.
- Evaluate the market demographics and competitive landscape to assess the potential impact of non-exclusive territories.
- Negotiate for a defined area of primary responsibility, even without full exclusivity, to minimize direct competition from other franchisees within the system.
FDD Citations:
- FDD p. F-8: "You will not receive an exclusive territory."
Disclosure & Representation Risks
3 risks identified
1
2
Limited Operating History and Financial Performance
High
Explanation:
- 1 Percent Lists Franchises, LLC was founded in 2020, giving it a limited operating history in the competitive real estate industry. This short track record makes it difficult to predict future performance and assess the long-term viability of the franchise model.
- The financial statements show a net loss of $186,735 in 2022, though profitability was achieved in 2023. This recent shift to profitability needs further scrutiny to determine if it's sustainable.
- The company's reliance on franchise fees and royalties for revenue raises concerns about its ability to weather economic downturns or changes in the real estate market.
Potential Mitigations:
- Carefully analyze the reasons behind the 2022 loss and the 2023 profit. Request detailed information on revenue streams, expense management, and franchisee performance.
- Research the franchisor's market positioning and competitive advantages. Understand how they plan to navigate future market fluctuations and maintain profitability.
- Speak with existing franchisees to gauge their satisfaction and assess the realistic potential for return on investment.
FDD Citations:
- Exhibit A: Financial Statements (2022 and 2023) showing net loss and subsequent profit.
- Item 23: Receipts and other financial information.
- Note A: Summary of Significant Accounting Policies mentioning the company's formation in 2020.
Concentrated Revenue Streams
Medium
Explanation:
- The company's revenue is heavily reliant on franchise fees and royalties. This concentration poses a risk if franchise sales slow down or if franchisees struggle to generate revenue, impacting their ability to pay royalties.
- Lack of diversification in revenue streams makes the franchisor vulnerable to changes in the real estate market and economic downturns.
Potential Mitigations:
- Investigate the franchisor's plans for diversifying revenue streams. Inquire about potential new products, services, or revenue models.
- Analyze the franchise agreement to understand the terms and conditions related to royalty payments, including any provisions for adjustments during periods of economic hardship.
- Assess the strength of the franchisor's franchise sales and marketing efforts to gauge their ability to attract new franchisees.
FDD Citations:
- Exhibit A: Income Statements showing revenue breakdown primarily from franchise fees and royalties.
Limited Geographic Diversification
Medium
Explanation:
- As of December 31, 2023, the company had franchisees across nineteen states. While this shows some geographic reach, it could still represent a concentration in certain regions, making the franchisor vulnerable to regional economic downturns or localized market fluctuations.
Potential Mitigations:
- Research the franchisor's expansion plans and target markets. Understand their strategy for achieving broader geographic diversification.
- Analyze the competitive landscape in your target market to assess the potential impact of regional market conditions.
FDD Citations:
- Note A: Summary of Significant Accounting Policies mentioning the number of franchisees and states.
Financial & Fee Risks
6 risks identified
2
3
1
Deferred Initial Fees and Payments Dependency on Franchisor
High
Explanation:
- While deferring fees until the franchisor fulfills initial obligations appears beneficial, it creates a significant dependency on the franchisor's performance. Delays or failures by the franchisor could severely impact the franchisee's launch and operations.
- Lack of clarity on what constitutes "completion of initial obligations" introduces ambiguity and potential for disputes.
Potential Mitigations:
- Negotiate a clear and detailed definition of the franchisor's "initial obligations" and the timeline for their completion.
- Include specific performance metrics and penalties for franchisor delays in the Franchise Agreement.
- Secure a third-party escrow account to hold the deferred fees until obligations are met.
FDD Citations:
- Item 5 Amendment: "All initial fees and payments shall be deferred until such time as the franchisor completes its initial obligations under the Franchise Agreement, Independent Business Management Addendum and the Development Addendum."
No Financial Performance Representations
High
Explanation:
- The FDD explicitly states that no financial performance representations are made. This lack of information makes it difficult to assess the potential profitability of the franchise and increases the risk of financial underperformance.
- Relying solely on personal projections without any benchmark data is risky.
Potential Mitigations:
- Conduct thorough independent market research to assess the local demand for the services offered.
- Develop realistic financial projections based on conservative estimates and industry averages.
- Consult with experienced franchise consultants and accountants to evaluate the financial viability of the franchise.
- Network with existing franchisees (if possible) to gain insights into their financial performance (while acknowledging the FDD's restrictions on official representations).
FDD Citations:
- Item 19: "We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets."
Non-Refundable Initial Fees and Payments to Franchisor
Medium
Explanation:
- All payments to the franchisor or its affiliates are non-refundable. This poses a significant financial risk if the franchise relationship terminates prematurely or if the franchisee is dissatisfied with the franchisor's support.
Potential Mitigations:
- Carefully review the Franchise Agreement and understand the circumstances under which the agreement can be terminated.
- Negotiate with the franchisor to include specific conditions for potential refunds in the agreement.
- Seek legal counsel to review the agreement and advise on potential risks.
FDD Citations:
- Item 7: "All payments to us or our affiliates in this Item 7 are non-refundable."
No Franchisor Financing
Medium
Explanation:
- The franchisor does not offer any direct or indirect financing. This can limit access to capital for potential franchisees and increase the reliance on third-party financing, which may have less favorable terms.
Potential Mitigations:
- Explore various financing options from banks, credit unions, and other lenders.
- Prepare a strong business plan and financial projections to improve the chances of securing financing.
- Consider alternative funding sources such as personal savings, loans from family and friends, or Small Business Administration (SBA) loans.
FDD Citations:
- Item 7: "We do not offer financing directly or indirectly for any part of the initial investment."
Third-Party Financing Dependency
Medium
Explanation:
- The FDD highlights the reliance on third-party financing, which is subject to external factors like creditworthiness, collateral, and lending policies. This introduces uncertainty and potential challenges in securing necessary funds.
Potential Mitigations:
- Improve personal credit score and secure sufficient collateral to enhance loan eligibility.
- Research and compare loan terms from multiple lenders to find the most favorable options.
- Consult with a financial advisor to assess financing options and develop a sound financial plan.
FDD Citations:
- Item 7: "The availability and terms of financing for third parties will depend on factors such as the availability of financing generally, your creditworthiness, collateral you may have and lending policies of financial institutions from which you may request a loan."
California Maximum Interest Rate Restriction
Low
Explanation:
- The FDD mentions a 10% maximum annual interest rate in California. While this protects franchisees from excessive interest charges, it could also limit financing options or make it difficult to secure loans in a high-interest rate environment.
Potential Mitigations:
- Be aware of the interest rate limitations in California and factor them into financial planning.
- Explore financing options outside of California if necessary.
- Negotiate favorable interest rates with lenders within the California limit.
FDD Citations:
- Item 6: “The maximum interest rate in California is 10% annually as set forth in the Constitution of the State of California Article XV, §1.”
Legal & Contract Risks
3 risks identified
2
1
Enforceability of Termination Provisions
Medium
Explanation:
- The FDD states that certain termination provisions in the franchise agreement may not be enforceable if they don't constitute "reasonable cause" under the Virginia Retail Franchising Act. This creates uncertainty about the franchisor's ability to terminate the agreement and could expose the franchisee to legal challenges if termination is deemed unreasonable.
Potential Mitigations:
- Carefully review the termination provisions in the franchise agreement with legal counsel specializing in franchise law to assess their enforceability under Virginia law.
- Negotiate with the franchisor to clarify the definition of "reasonable cause" and include specific examples in the agreement.
FDD Citations:
- Item 17.h: "If any ground for default or termination stated in the franchise agreement does not constitute ‘reasonable cause,’… that provision may not be enforceable."
Conflict of Laws (Washington)
Medium
Explanation:
- The Washington Franchise Investment Protection Act may supersede the franchise agreement in areas like termination and renewal, creating potential conflicts and uncertainties.
Potential Mitigations:
- Consult with a Washington franchise law attorney to understand the implications of the Act and how it might affect the franchise relationship.
- Ensure the franchise agreement aligns with the Act's requirements regarding termination and renewal.
FDD Citations:
- Item 17.h Addendum: "In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act… prevails."
Waiver of Rights Limitations
Low
Explanation:
- The FDD specifies limitations on waiving rights under the Washington Act, except in specific circumstances. This restricts the franchisee's ability to negotiate certain terms and potentially limits their flexibility.
Potential Mitigations:
- Understand the specific limitations on waiving rights under the Act.
- Seek legal counsel before signing any waivers or releases related to the franchise agreement.
FDD Citations:
- Item 17.h Addendum: "A release or waiver of rights signed by you will not include rights under the Act except when signed pursuant to a negotiated settlement…"
Territory & Competition Risks
3 risks identified
2
1
No Exclusive Territory
High
Explanation:
- The FDD explicitly states no exclusive or protected territory is granted. This exposes franchisees to direct competition from other 1 Percent Lists franchisees, corporate-owned locations, and other distribution channels owned or controlled by the franchisor.
- This significantly increases the risk of market saturation and cannibalization, potentially impacting lead generation, sales, and profitability.
Potential Mitigations:
- Thoroughly research the existing and planned 1 Percent Lists locations in your desired area. Assess the competitive landscape and potential for market saturation.
- Discuss your concerns with existing franchisees about the impact of competition and the franchisor's approach to managing territorial conflicts.
- Negotiate with the franchisor for a clearly defined Target Marketing Area with reasonable population density and limited competition, even if exclusivity isn't possible.
FDD Citations:
- Item 12: "You will not receive an exclusive territory or a protected territory. You may face competition from other franchisees, from outlets we own, or from other channels of distribution or competitive brands that we may own or control."
Franchisor Competition
High
Explanation:
- The franchisor retains the right to establish company-owned 1 Percent Lists businesses anywhere, including within a franchisee's Target Marketing Area. This creates direct competition with the franchisee.
- The franchisor also retains the right to sell similar services and products through other channels, potentially undermining the franchisee's business.
Potential Mitigations:
- Clarify with the franchisor their current plans and future strategy for establishing corporate-owned locations and alternative distribution channels.
- Seek legal advice to understand the implications of the franchisor's competition clauses and potential remedies in case of unfair competition.
FDD Citations:
- Item 12: "We retain the right to operate and license or franchise other persons to operate 1 Percent Lists® Businesses at any location."
- Item 12: "We also retain the right to market and sell the same and similar services and products as those offered as part of the 1 Percent Lists® system at any location under trademarks [etc.]"
Target Marketing Area Definition and Changes
Medium
Explanation:
- The FDD describes a complex and potentially arbitrary process for defining the Target Marketing Area. It relies on factors like residential home counts, which can be subject to change and interpretation.
- The franchisor can change the data sources and methodology for determining the Target Marketing Area, creating uncertainty for franchisees.
- The franchisor is not obligated to provide a Target Marketing Area with a minimum population, potentially limiting market potential.
Potential Mitigations:
- Carefully review the criteria and process for defining the Target Marketing Area in the FDD and Franchise Agreement.
- Negotiate a clearly defined Target Marketing Area based on specific geographic boundaries or demographic data, rather than relying solely on residential home counts.
- Seek clarification on the franchisor's plans for future changes to the Target Marketing Area definition and data sources.
FDD Citations:
- Item 12: "The number of zip codes used varies based on population, density of commerce and residential buildings…"
- Item 12: "We may, at any time, change our sources for data used to determine site areas and Target Marketing Areas."
- Item 12: "We have no obligation whatsoever to provide you a targeted Marketing Area with a certain minimum number of people."
Regulatory & Compliance Risks
3 risks identified
1
2
Mandatory Purchasing Restrictions
High
Explanation:
- The franchisor mandates purchasing nearly all equipment and supplies from them, their affiliates, or approved suppliers. This significantly limits franchisee independence and potentially exposes them to inflated pricing and reduced negotiating power.
- The franchisor's officers have ownership interests in supplier companies, creating a potential conflict of interest and raising concerns about self-dealing.
- The franchisor reserves the right to mandate purchases of any items bearing their trademarks, further restricting franchisee flexibility.
Potential Mitigations:
- Carefully review Item 5 and all related sections to fully understand the scope of mandatory purchases and associated costs.
- Compare prices from approved suppliers with market rates to assess potential markups.
- Consult with a franchise attorney to evaluate the legality and fairness of the purchasing restrictions.
FDD Citations:
- First paragraph of provided FDD content: "We may require you to purchase from us...all equipment and supplies...including all of those described in Item 1 and Item 5."
- Second paragraph: "Our officers...have ownership interests in 1 Percent Lists IP, LLC and 1 Percent Lists, LLC."
- Third paragraph: "You are obligated to purchase or lease...all marketing materials, supplies and other goods...that meet our minimum standards and specifications."
Potential for Supplier Rebates and Undisclosed Revenue
Medium
Explanation:
- While the FDD states they currently don't receive rebates from approved suppliers (other than their own affiliated companies), they explicitly state they *may* in the future. This lack of transparency creates uncertainty and the potential for hidden fees impacting franchisee profitability.
Potential Mitigations:
- Inquire specifically about the franchisor's plans for receiving rebates and how these might affect future costs.
- Negotiate for transparency in any future rebate arrangements.
- Consult with a franchise attorney to understand the implications of potential rebate programs.
FDD Citations:
- Fifth paragraph: "We currently do not derive any revenue from your purchases from Approved Suppliers other than us; but we may in the future. See \"Rebates\" below."
System Standards Enforcement and Modifications
Medium
Explanation:
- The franchisor has broad discretion to enforce and modify System Standards, including specifications, pricing, and operating procedures. This could lead to unexpected costs and operational disruptions for franchisees.
- Modifications to System Standards may require additional capital investment, potentially straining franchisee finances.
Potential Mitigations:
- Thoroughly review the current System Standards and understand the process for modifications.
- Negotiate for limitations on the franchisor's ability to unilaterally impose costly changes.
- Maintain adequate financial reserves to accommodate potential future investments required by System Standard modifications.
FDD Citations:
- Last paragraph: "We may periodically modify System Standards...and these modifications may obligate you to invest additional capital in your Business and/or incur higher operating costs."
- Time to Opening section: "You may not open the 1 Percent Lists® Business for business until: (1) we consent to the 1 Percent Lists® Business as developed according to our specifications and standards..."
Franchisor Support Risks
3 risks identified
2
1
Limited Protection of Intellectual Property
High
Explanation:
- The FDD states "There currently are no effective determinations of the Copyright Office or any court regarding any of the copyrighted materials." This lack of legal precedent creates uncertainty about the strength and enforceability of the franchisor's intellectual property rights, potentially exposing franchisees to infringement risks.
- The FDD also mentions, "We are not required by any agreement to protect or defend copyrights or confidential information, although we intend to do so when this action is in the best interests of the 1 Percent Lists® Business system. We need not participate in your defense and/or indemnify you for damages or expenses in proceedings involving a copyright or patent." This lack of commitment to defend franchisees' use of the IP raises concerns about potential legal costs and business disruption for franchisees in case of disputes.
Potential Mitigations:
- Request clarification from the franchisor regarding their strategy for securing and enforcing their intellectual property rights. Inquire about any pending applications or planned legal actions to strengthen their IP protection.
- Consult with an intellectual property attorney to assess the risks associated with the franchisor's current IP status and to understand potential legal liabilities for franchisees.
- Negotiate stronger protections in the Franchise Agreement regarding IP defense and indemnification, seeking greater commitment from the franchisor to support franchisees in case of infringement claims.
FDD Citations:
- Item 11, Item 8: Discussion of copyrighted materials and lack of legal determinations.
- Item 11, Item 8: Statement regarding franchisor's discretion in defending IP rights and lack of indemnification obligation.
One-Sided Intellectual Property Ownership
High
Explanation:
- The FDD states that all franchisee-developed ideas, concepts, etc., related to the business become the franchisor's property. This broad ownership claim could stifle franchisee innovation and create resentment, especially if franchisees invest significant effort in developing new marketing strategies or operational improvements.
Potential Mitigations:
- Negotiate clearer definitions of what constitutes "ideas, concepts, techniques or materials" belonging to the franchisor. Seek to limit the scope of this clause to protect franchisees' independent intellectual property.
- Explore the possibility of a shared ownership or licensing agreement for franchisee-developed innovations that benefit the entire system.
- Seek legal counsel to review the implications of this clause and to understand your rights as a franchisee regarding intellectual property development.
FDD Citations:
- Item 11: "All ideas, concepts, techniques or materials relating to a 1 Percent Lists® Business... will be considered our property..."
Limited Franchisor Commitment to Dispute Resolution
Medium
Explanation:
- The FDD mentions that the franchisor will "use [their] business judgment to informally mediate and attempt to resolve" problems among franchisees, but "[they] are not responsible for the outcome of or to achieve a resolution." This limited commitment could leave franchisees vulnerable in disputes with other franchisees or with the franchisor itself.
Potential Mitigations:
- Request clarification on the franchisor's dispute resolution process and seek examples of how they have handled past disputes.
- Consider adding clauses to the Franchise Agreement that outline a more formal dispute resolution mechanism, such as mediation or arbitration.
FDD Citations:
- Item 11: "...use our business judgment to informally mediate...But we are not responsible for the outcome..."
Exit & Transfer Risks
3 risks identified
1
2
Restrictive Post-Termination Covenants
High
Explanation:
- The Non-Disclosure/Non-Solicitation Agreement (Exhibit G-1) includes broad restrictions on franchisees and their staff, including a 2-year non-compete and non-solicitation clause after termination or expiration of the agreement. These clauses prohibit working with any employee of 1 Percent Lists, its affiliates, or other franchisees, and soliciting any of their business contacts. Such broad restrictions could severely limit a franchisee's ability to earn a living after leaving the franchise system, especially in the same industry.
- The agreement also includes perpetual restrictions on the use of trade secrets, which are not clearly defined. This lack of clarity creates uncertainty and potential legal challenges.
- The agreement states that the restrictive period will be automatically extended for any breach, potentially creating an indefinite period of restriction.
Potential Mitigations:
- Consult with an experienced franchise attorney to review the agreement and negotiate narrower, more reasonable restrictions. Focus on limiting the scope of the non-compete to a specific geographic area and the non-solicitation to only existing clients of the franchisee.
- Seek clarification on the definition of "trade secrets" to ensure a clear understanding of the perpetual restrictions.
- Negotiate a more reasonable extension clause for breaches, limiting the extension to a specific time period.
FDD Citations:
- Exhibit G-1: Entire agreement regarding Non-Disclosure/Non-Solicitation.
- Exhibit G-1, Section 1.A: "During the term of this Agreement and for a period of 2 years following its termination or expiration for any reason…"
- Exhibit G-1, Section 1.B: "The same restrictions above will apply forever to our trade secrets."
- Exhibit G-1, Section 4: "The time period… will be automatically extended by any length of time during which you… are in breach…"
Enforceability of Restrictive Covenants
Medium
Explanation:
- The enforceability of the restrictive covenants in the Non-Disclosure/Non-Solicitation Agreement may vary depending on state law. Item 17.h highlights specific state laws (Virginia and Washington) that may supersede the franchise agreement, particularly regarding termination and renewal. This suggests that the restrictive covenants may not be fully enforceable in these states or others with similar laws.
- The FDD mentions that certain provisions, such as those unreasonably restricting the statute of limitations or right to a jury trial, may not be enforceable.
Potential Mitigations:
- Consult with legal counsel in the specific state of operation to determine the enforceability of the restrictive covenants.
- Negotiate the agreement to ensure compliance with applicable state laws.
- Consider the potential legal costs and challenges associated with enforcing or defending against these covenants.
FDD Citations:
- Item 17.h: Discussion of Virginia and Washington state franchise laws.
- Exhibit G-1: Entire agreement regarding Non-Disclosure/Non-Solicitation.
Transfer Restrictions and Fees
Medium
Explanation:
- The FDD mentions transfer fees, but doesn't provide details on the amount or calculation method. This lack of transparency makes it difficult to assess the potential financial impact of transferring the franchise.
- While the FDD states that transfer fees reflect reasonable costs, the absence of specific details creates a risk that the fees could be excessive or arbitrarily determined.
Potential Mitigations:
- Request a clear schedule of transfer fees and the basis for their calculation.
- Negotiate a cap on transfer fees or a more transparent process for determining them.
- Consult with a franchise attorney to review the transfer provisions in the franchise agreement.
FDD Citations:
- Item 17.h: "Transfer fees may be collected to the extent that they reflect our reasonable estimated or actual costs in effectuating a transfer."
Operational & Brand Risks
3 risks identified
3
Delayed Opening Impacting ROI
Medium
Explanation:
- The FDD states a timeframe of 1-6 months for opening, with potential extensions up to 2 months. Delays beyond this can significantly impact initial return on investment and create financial strain.
- Factors contributing to delays include site selection, build-out, equipment delivery, financing, training, and local regulations. These factors are often outside the franchisee's direct control.
Potential Mitigations:
- Proactive site selection and due diligence before signing the Franchise Agreement.
- Secure financing early in the process.
- Maintain open communication with the franchisor regarding potential delays and leverage their support for navigating local regulations.
- Develop a detailed project plan with realistic timelines and contingency buffers.
FDD Citations:
- Item 8: "We estimate that there will be an interval of approximately 1 to 6 months between the signing of the Franchise Agreement and the opening of the 1 Percent Lists® Business…We may grant extensions, but we expect most will occur within 2 months."
Dependence on Franchisor's System Standards
Medium
Explanation:
- Franchisees are obligated to adhere to the franchisor's System Standards, which cover various aspects of the business, including operations, marketing, and purchasing. Changes to these standards could require additional investment and impact profitability.
- The franchisor has sole discretion to modify System Standards, potentially increasing costs or requiring operational changes that may not be beneficial to all franchisees.
Potential Mitigations:
- Carefully review the existing System Standards and understand the potential for changes.
- Maintain a financial reserve to accommodate potential future investments required by System Standard modifications.
- Actively participate in franchisee associations or communication channels to voice concerns and influence future System Standard changes.
FDD Citations:
- Item 11: "We may periodically modify System Standards, which may accommodate regional or local variations as we determine or to comply with applicable laws, rules and regulations, and these modifications may obligate you to invest additional capital in your Business and/or incur higher operating costs."
Brand Reputation Damage from Other Franchisees
Medium
Explanation:
- The performance and actions of other franchisees can directly impact the overall brand reputation. Negative publicity or poor service at one location can negatively affect all franchisees.
- The FDD mentions the franchisor's role in mediating disputes among franchisees, but doesn't guarantee resolution. Unresolved conflicts could escalate and damage the brand.
Potential Mitigations:
- Maintain high operational standards and customer service to differentiate your business.
- Actively participate in franchisee associations to foster a positive and collaborative environment.
- Engage in local marketing and public relations to build a strong local reputation.
FDD Citations:
- Item 11: "We, in our sole discretion, may make the Manuals accessible to you on-line or via other forms of electronic format…The Manuals may be modified, updated and revised periodically to reflect changes in System Standards."
- Item 11: "Use our business judgment to informally mediate and attempt to resolve, and establish procedures for resolving, problems among franchisees with our System Standards. But we are not responsible for the outcome of or to achieve a resolution to any disputes among franchisees."
Performance & ROI Risks
7 risks identified
2
3
2
No Financial Performance Representations
High
Explanation:
- The FDD explicitly states that no representations are made about future financial performance, including past performance of company-owned or franchised outlets.
- This lack of information makes it difficult to assess the potential profitability and return on investment (ROI) of the franchise.
- Relying solely on individual research and market analysis increases the uncertainty and risk of financial underperformance.
Potential Mitigations:
- Conduct thorough independent market research in your target area to assess the demand for real estate services and the competitive landscape.
- Consult with experienced real estate professionals and business advisors to develop realistic financial projections.
- Prepare a detailed business plan with conservative revenue estimates and expense forecasts to understand potential profitability under various scenarios.
FDD Citations:
- Item 19: "We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets."
Limited Operating History
High
Explanation:
- 1 Percent Lists was founded in 2020, indicating a relatively short operating history.
- This limited track record makes it harder to assess the long-term viability and sustainability of the business model.
- The franchise system may not have been fully tested through various economic cycles and market conditions.
Potential Mitigations:
- Carefully evaluate the franchisor's experience and expertise in the real estate industry.
- Research the company's growth trajectory and market penetration since its inception.
- Inquire about the franchisor's plans for future development and support for franchisees.
FDD Citations:
- General Information: "Founded: 2020"
Dependence on Real Estate Market
Medium
Explanation:
- The real estate industry is cyclical and subject to fluctuations based on economic conditions, interest rates, and local market dynamics.
- A downturn in the real estate market could significantly impact the demand for the franchise's services and affect profitability.
Potential Mitigations:
- Analyze the local real estate market trends and assess the potential for future growth.
- Develop a diversified marketing strategy to reach a wider customer base.
- Build strong relationships with local real estate professionals to generate referral business.
FDD Citations:
- General Information: "Industry: Real Estate"
No Franchisor Financing
Medium
Explanation:
- The FDD states that the franchisor does not offer direct or indirect financing for the initial investment.
- This lack of financing options may limit access for potential franchisees and require securing funding from third-party lenders.
- Obtaining financing from external sources can be challenging and may involve higher interest rates or stricter lending terms.
Potential Mitigations:
- Explore various financing options, including bank loans, Small Business Administration (SBA) loans, and personal savings.
- Develop a strong business plan and financial projections to improve the chances of securing financing.
- Consult with a financial advisor to determine the best financing strategy based on individual circumstances.
FDD Citations:
- Item 13: "We do not offer financing directly or indirectly for any part of the initial investment."
Potential for Non-Refundable Payments to Third Parties
Medium
Explanation:
- While payments to the franchisor are non-refundable, payments to third parties *may* be refundable depending on individual agreements.
- This ambiguity creates a risk of losing significant capital if agreements with third-party vendors are not carefully negotiated.
Potential Mitigations:
- Thoroughly review all agreements with third-party vendors before making any payments.
- Negotiate clear refund policies and ensure they are documented in writing.
- Seek legal advice to understand the terms and conditions of third-party contracts.
FDD Citations:
- Item 13: "Payments made to third parties may be refundable if you and the third party mutually agree to allow for a refund."
Limited Projected Growth
Low
Explanation:
- Item 20 projects only two new franchised outlets in the next fiscal year.
- This limited expansion may indicate slow growth potential for the franchise system and could impact brand recognition and market share.
Potential Mitigations:
- Discuss the franchisor's long-term growth strategy and plans for expanding the franchise network.
- Evaluate the potential for market saturation in your target area.
FDD Citations:
- Item 20, Table No. 5: "Projected New Outlets in the Next Fiscal Year (2024): 2"
Potential Restrictions on Communication with Current/Former Franchisees
Low
Explanation:
- The FDD mentions that some current and former franchisees may have signed agreements restricting their ability to speak openly about their experiences.
- This could limit the ability to gather unbiased information and insights from existing franchisees.
Potential Mitigations:
- Attempt to contact as many current and former franchisees as possible, despite potential restrictions.
- Focus questions on objective aspects of the business, such as training and support provided by the franchisor, rather than subjective opinions.
- Utilize online forums and social media platforms to connect with franchisees and gather information.
FDD Citations:
- Item 20: "In some instances, current and former franchisees will sign or will be asked to sign provisions restricting their ability to speak openly about their experience with 1 Percent Lists® Businesses."
FDD Documents by Year
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FDD Year: 2024
Uploaded: 8/5/2025
FDD Documents
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