Hudson Valley Swim
Fitness
Founded 201113 locationsCompany Profile
Year Founded:2011
Hudson Valley Swim Franchise Cost
| Franchise Fee: | $59,500Key Metric |
| Total Investment: | $94,000 - $122,000Key Metric |
| Liquid Capital: | $22,500 |
| Royalty Fee: | 7% of gross sales |
| Marketing Fee: | 2% of gross sales |
Quick ROI Calculator
Based on Hudson Valley Swim's actual financial data
Outlet Counts by Year
Historical outlet data extracted from FDD documents
Total US Locations:13
Scale relative to 1,000 locations
Franchised Units:6
Corporate Units:7
Additional Information
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Search Interests & Trends
Search Volume Data and Trend 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.
11
High Risk
Critical items
35% of total
17
Medium Risk
Monitor closely
55% of total
3
Low Risk
Manageable items
10% of total
31
Total Items
Factors analyzed
10 categories
6.29
Overall Score
Low RiskHigh Risk
010
Franchisor Stability Risks
3 risks identified
2
1
Limited Operating History of Franchisor
High
Explanation:
- HVSF, the franchisor, was only formed in May 2021 and began franchising in January 2022. This limited operating history as a franchisor presents a significant risk. There's no established track record of successfully supporting and growing a franchise network.
- The franchisor's lack of experience in franchising can lead to unforeseen challenges in providing adequate training, marketing support, and ongoing operational guidance to franchisees.
Potential Mitigations:
- Thoroughly research the management team's experience in business operations, even if not specifically in franchising. Look for evidence of successful business ventures in the past.
- Contact existing franchisees to discuss their experiences with the franchisor's support and training programs. Inquire about any challenges they faced and how the franchisor addressed them.
- Carefully review the Franchise Agreement for provisions related to termination, renewal, and transfer. Understand your rights and obligations in case the franchisor's inexperience leads to difficulties.
FDD Citations:
- Item 1: "HVSF is a New York limited liability company formed on May 17, 2021. We offer franchises ... since January 2022."
Dependence on Affiliate for Intellectual Property
High
Explanation:
- The franchisor, HVSF, licenses its intellectual property (IP) from an affiliate, HVSI. This dependence on a separate entity for crucial brand assets creates a potential risk. Disputes or financial difficulties at HVSI could disrupt the franchisee's ability to use the brand and operate their business.
- The shared principal address of HVSF and HVSI raises concerns about the true separation and independence of these entities. This interconnectedness could exacerbate the risk associated with HVSI's potential problems.
Potential Mitigations:
- Carefully review the licensing agreement between HVSF and HVSI. Understand the terms and conditions, including the duration, renewal clauses, and potential termination events.
- Assess the financial stability of HVSI. Request financial statements and inquire about any outstanding liabilities or legal issues.
- Consult with a legal professional specializing in franchise law to evaluate the potential risks associated with the IP licensing arrangement and to negotiate protective clauses in the Franchise Agreement.
FDD Citations:
- Item 1: "Our affiliate Hudson Valley Swim Inc. (“HVSI”) owns and controls the intellectual property ... and licenses it to us. HVSI shares our principal address."
Reliance on Third-Party Pool Facilities
Medium
Explanation:
- The business model relies on securing agreements with third-party pool facilities. This dependence creates a vulnerability. Loss of access to a pool, due to contract termination or other issues, could severely disrupt operations.
- Competition for suitable pool facilities could increase costs and limit expansion opportunities.
Potential Mitigations:
- Carefully review any proposed lease or license agreement for pool access. Negotiate favorable terms, including renewal options and termination clauses.
- Develop contingency plans for alternative pool facilities in case of unexpected disruptions.
- Investigate the availability and cost of pool facilities in the target territory before committing to the franchise.
FDD Citations:
- Item 1: "We anticipate that your Hudson Valley School Business will pay a third party, such as a hotel or fitness center, to utilize a Pool during designated time periods to provide swim lessons."
Disclosure & Representation Risks
3 risks identified
1
2
No Exclusive Territory
High
Explanation:
- The franchise agreement explicitly states a "non-exclusive" license to operate, meaning the franchisor can establish other Hudson Valley Swim businesses, including corporate-owned locations or additional franchisees, within or near your territory. This significantly increases competition and can cannibalize your customer base.
- Section 4 further emphasizes the franchisor's right to modify or reduce the territory without franchisee consent, creating uncertainty and potential for future market encroachment.
Potential Mitigations:
- Negotiate for a protected radius or specific geographic limitations within the territory, even if full exclusivity isn't possible.
- Carefully analyze the existing competitive landscape and potential for future market saturation before signing the agreement.
- Clearly understand the criteria the franchisor uses for approving new locations and ensure it considers the impact on existing franchisees.
FDD Citations:
- Item C, Section 2: "We grant you a non-exclusive license...within the Territory or other areas we may specify..."
- Item C, Section 4: "...we may modify, reduce, or expand the Territory at any time without your consent."
Limited Control Over Site Selection and Lease Terms
Medium
Explanation:
- The franchisor retains significant control over site selection and lease negotiations, requiring their approval for all locations and lease terms. This limits your autonomy in choosing a strategically advantageous and cost-effective site for your business.
- The franchisor's focus may not perfectly align with your local market knowledge, potentially leading to suboptimal site choices.
Potential Mitigations:
- Thoroughly review the franchisor's site selection criteria and process. Ensure it's transparent and considers factors important to your success.
- Engage a local real estate expert to independently assess potential sites and negotiate favorable lease terms, even if subject to franchisor approval.
- Request clarity on the franchisor's involvement in lease negotiations and ensure your interests are represented.
FDD Citations:
- Item C, Section 7: "...you must obtain our prior written approval for the location...and all lease terms."
Mandatory System Changes and Updates
Medium
Explanation:
- The franchisor has the unilateral right to change, improve, or modify the System, and you are obligated to comply with these changes. This can lead to unexpected costs for upgrades, equipment replacements, or retraining, potentially disrupting your operations and impacting profitability.
Potential Mitigations:
- Request details on the typical frequency and cost of system updates and modifications.
- Negotiate for a reasonable timeframe to implement changes and financial assistance for significant upgrades.
- Seek input from existing franchisees about their experience with system changes and associated costs.
FDD Citations:
- Item C, Section 2: "You acknowledge that we may change, improve or otherwise modify the System...and you agree to promptly accept and comply with any such changes..."
Financial & Fee Risks
3 risks identified
1
2
High Initial Franchise Fees and Variable Costs
High
Explanation:
- Item 5 details substantial initial franchise fees ranging from $59,500 to $194,500 depending on the number of businesses operated. This significant upfront investment represents a considerable financial burden and increases the risk of financial strain, especially in the early stages of operation.
- Additional costs like the Marketing Startup Package, Facility Equipment Startup Package, and Technology Fee also vary significantly, creating uncertainty in budgeting and financial planning. The variability makes it difficult to accurately project initial and ongoing expenses.
Potential Mitigations:
- Carefully review Item 5 and all related fee disclosures to fully understand the total investment required. Develop a comprehensive financial model that accounts for both high and low estimates of variable costs.
- Secure sufficient financing that covers the high end of the investment range and accounts for potential cost overruns. Explore various financing options and compare terms to minimize interest expenses.
- Negotiate with the franchisor for a more favorable fee structure or payment schedule, especially if opting for a multi-unit development agreement. Request clarity on what exactly is included in each variable cost category.
FDD Citations:
- Item 5: Table detailing initial franchise fees and associated costs for single and multi-unit developments.
Potential for Increased Costs with Multi-Unit Development
Medium
Explanation:
- Item 5 shows a significant increase in fees for Area Developers operating multiple Hudson Valley Swim businesses. While economies of scale might be expected, the FDD doesn't explicitly address potential cost savings, raising concerns about the proportionality of expenses and potential management complexities.
Potential Mitigations:
- Thoroughly analyze the cost structure for multi-unit development and compare it to the potential revenue generated by each additional unit. Develop realistic projections for each location, considering local market conditions.
- Consult with experienced multi-unit franchisees to understand the operational challenges and financial realities of managing multiple locations. Seek advice on best practices for cost control and revenue optimization.
- Negotiate with the franchisor for clearer definitions of support and resources provided for multi-unit developers. Ensure adequate training and operational guidance are provided for managing multiple businesses effectively.
FDD Citations:
- Item 5: Table outlining the escalating costs associated with operating two to five businesses.
Uncertainty Regarding State-Specific Regulations
Medium
Explanation:
- The FDD includes state-specific addenda that modify certain provisions of the franchise agreement. These variations introduce complexity and potential legal risks, particularly regarding liquidated damages, dispute resolution, and choice of law.
- The addenda for North Dakota, Washington, and Wisconsin highlight potential conflicts between the franchise agreement and state laws, creating uncertainty about the enforceability of certain clauses.
Potential Mitigations:
- Consult with legal counsel specializing in franchise law in the specific state of operation to understand the implications of the state addenda and ensure compliance with local regulations.
- Carefully review the addenda and compare them to the standard franchise agreement to identify any discrepancies or potential conflicts. Seek clarification from the franchisor on any ambiguous language.
- Request a written summary from the franchisor outlining the key differences between the standard agreement and the state-specific addenda, highlighting the impact on franchisee rights and obligations.
FDD Citations:
- North Dakota Addendum: Modifications related to dispute resolution, choice of law, liquidated damages, and waivers.
- Washington Addendum: Revisions to liquidated damages calculation and franchise fee deferral.
- Wisconsin Addendum: Superseding effect of Wisconsin Fair Dealership Law and limitations on waivers.
Legal & Contract Risks
3 risks identified
2
1
Superseding State Law (RCW 19.100.180)
Medium
Explanation:
- Washington's Franchise Investment Protection Act (FIPA) may override certain provisions in the franchise agreement, particularly regarding termination and renewal. This creates uncertainty about the enforceability of contract terms.
Potential Mitigations:
- Carefully review the franchise agreement alongside RCW 19.100.180 with legal counsel specializing in Washington franchise law to understand potential conflicts and your rights.
- Seek clarification from the franchisor on how they address potential conflicts between the agreement and FIPA.
FDD Citations:
- Item 2: "RCW 19.100.180 may supersede provisions in the franchise agreement...concerning termination and renewal."
Mandatory Washington Jurisdiction
Low
Explanation:
- Disputes related to the franchise must be resolved in Washington, potentially creating logistical and cost burdens for franchisees outside the state.
Potential Mitigations:
- Factor in potential travel and legal costs associated with Washington jurisdiction when evaluating the franchise opportunity.
FDD Citations:
- Item 3: "In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington..."
Invalidity of Certain Releases and Waivers
Medium
Explanation:
- The FDD states that certain releases or waivers of rights under Washington's FIPA are void, except under specific circumstances. This limits the franchisor's ability to enforce certain waivers and protects franchisee rights.
Potential Mitigations:
- Understand the specific circumstances under which a release or waiver is valid under RCW 19.100.220(2), particularly regarding independent legal counsel and negotiated settlements.
FDD Citations:
- Item 4: "A release or waiver of rights...purporting to bind the franchisee to waive compliance with any provision under the Washington Franchise Investment Protection Act...is void..."
Territory & Competition Risks
3 risks identified
3
Non-Exclusive Initial Search Area
Medium
Explanation:
- The initial Search Area is non-exclusive, meaning other franchisees could be awarded territories within your search area before you secure a pool location. This could lead to increased competition and limited pool options.
Potential Mitigations:
- Act quickly to identify and secure a suitable pool location within the Search Area.
- Thoroughly research the Search Area for existing competition and potential pool availability before signing the Franchise Agreement.
- Negotiate a larger or more desirable Search Area with the franchisor.
FDD Citations:
- Item 12: "The Search Area may contain multiple territory areas from which your Territory will ultimately be assigned. We may sell other franchised locations in the Search Area until part of it is assigned as your Territory."
Territory Size Variability
Medium
Explanation:
- Territory size is based on population (36,000-44,000 children) but can vary based on demographics, income levels, and other factors. A smaller than expected territory could limit revenue potential.
Potential Mitigations:
- Carefully analyze the demographics and market potential of any proposed territory before accepting it.
- Request detailed information from the franchisor about the factors influencing territory size determination.
- Negotiate for a larger territory if the initial offering seems insufficient.
FDD Citations:
- Item 12: "A Territory will typically consist of an area defined by one or more zip codes and a population of approximately 36,000 to 44,000 children... Depending on the demographics, population, income levels and other factors, your Territory may be smaller or larger."
Pool Agreement Restrictions
Medium
Explanation:
- Pool Agreements may contain competitive restrictions limiting proximity to other pools, potentially hindering expansion or creating unforeseen limitations within the territory.
Potential Mitigations:
- Carefully review all Pool Agreements before signing, paying close attention to any competitive restrictions.
- Negotiate with pool owners to minimize or remove restrictive clauses.
- Consult with a legal professional to fully understand the implications of any Pool Agreement restrictions.
FDD Citations:
- Item 12: "You must comply with the terms of each agreement, which may include competitive restrictions that dictate the minimum distance that you can operate from an additional Pool."
Regulatory & Compliance Risks
3 risks identified
2
1
Limited Operating History of Franchisor
High
Explanation:
- The franchisor, HV Swim Franchise LLC, was only formed in 2021 and began franchising in January 2022. This limited operating history as a franchisor presents a significant risk as there is less established track record to assess the franchisor's ability to provide adequate support, training, and marketing assistance.
- The franchisor has no prior experience operating a business of the type described in the FDD, raising concerns about their practical understanding of the business model and potential challenges.
Potential Mitigations:
- Thoroughly research the background and experience of the franchisor's management team, focusing on their expertise in the swimming instruction industry.
- Contact existing franchisees to discuss their experiences with the franchisor, including the level of support received and the overall profitability of their businesses.
- Seek legal advice to fully understand the terms of the franchise agreement and assess the risks associated with the franchisor's limited operating history.
FDD Citations:
- Item 1: "HVSF is a New York limited liability company formed on May 17, 2021. We offer franchises ... since January 2022."
- Item 1: "We do not conduct, and have never conducted, a business of the type described in this Franchise Disclosure Document."
Dependence on Third-Party Pool Facilities
High
Explanation:
- The business model relies heavily on securing agreements with third-party pool facilities, which introduces significant operational risk. Availability, cost, and terms of these agreements can be unpredictable and impact profitability.
- The FDD mentions Master Facility License Agreements (MFLAs) and MFLA Sublicense Agreements, which could create additional layers of cost and complexity, potentially reducing franchisee control and profitability.
Potential Mitigations:
- Carefully review the terms of any proposed pool agreements, including duration, renewal options, and fee structures.
- Negotiate favorable terms and ensure flexibility in case of unforeseen circumstances.
- Explore alternative pool options and develop contingency plans in case of disruptions with existing agreements.
- Thoroughly understand the implications of MFLAs and MFLA Sublicense Agreements, including any associated fees and restrictions.
FDD Citations:
- Item 1: "We anticipate that your Hudson Valley School Business will pay a third party...to utilize a Pool."
- Item 1: "In some instances, HVSF may have a master facility license agreement...which may require you to pay HVSF directly for your use of the Pool."
Competition in the Children's Swimming Lesson Sector
Medium
Explanation:
- The FDD acknowledges that the children's swimming lessons sector is "competitive and well-developed," including franchised operations, national chains, and other professionals. This competition could impact market share and profitability.
Potential Mitigations:
- Conduct thorough market research to understand the local competitive landscape and identify potential differentiators for the Hudson Valley Swim brand.
- Develop a strong marketing strategy to effectively target the desired customer base and highlight the unique benefits of the franchise.
- Focus on providing high-quality instruction and exceptional customer service to build a loyal customer base and establish a strong reputation in the community.
FDD Citations:
- Item 1: "The children’s swimming lessons sector is competitive and well-developed."
Franchisor Support Risks
3 risks identified
1
1
1
Dependence on Key Personnel (Lead Instructor)
Medium
Explanation:
- Franchise success is heavily reliant on the Lead Instructor, who must be approved by the franchisor and complete their training program.
- Loss of a Lead Instructor could disrupt operations and negatively impact revenue generation until a suitable replacement is found and trained.
- The cost of training replacement Lead Instructors falls on the franchisee, creating an additional financial burden.
Potential Mitigations:
- Develop a robust recruitment and retention strategy for Lead Instructors, offering competitive compensation and benefits.
- Invest in training and development for assistant instructors to create a pipeline of potential replacements.
- Negotiate with the franchisor to share the cost of training replacement Lead Instructors.
FDD Citations:
- FDD text: "If you will not be the Lead Instructor, you must hire a Lead Instructor approved by us. The Lead Instructor must satisfactorily complete our training program. If you replace your Lead Instructor, they will need to satisfactorily complete our training program at your cost."
Franchisor's Financial Stability
High
Explanation:
- The franchisor's stockholder's equity ($58,636) is significantly lower than the estimated initial investment ($88,845 - $126,995).
- This suggests the franchisor may be undercapitalized, potentially impacting their ability to provide ongoing support and fulfill their obligations to franchisees.
- This financial vulnerability increases the risk of franchisor insolvency or inability to invest in system-wide improvements.
Potential Mitigations:
- Carefully review the franchisor's financial statements and discuss their financial health with a financial advisor.
- Inquire about the franchisor's plans for future growth and investment in the franchise system.
- Consider seeking legal advice to understand the implications of the franchisor's financial position on your investment.
FDD Citations:
- FDD text: "Estimated Initial Investment. The franchisee will be required to make an estimated initial investment ranging from $88,845 and $126,995. This amount exceeds the franchisor’s stockholders’ equity as of December 31, 2023, which is $58,636."
Management Experience Requirements
Low
Explanation:
- The FDD doesn't specify experience requirements for the Franchise Manager or Responsible Owner, potentially leading to inexperienced individuals managing the business.
- Lack of management experience can negatively impact operational efficiency, customer service, and overall profitability.
Potential Mitigations:
- Thoroughly assess the experience and qualifications of the proposed Franchise Manager or Responsible Owner.
- Request additional training or support from the franchisor in areas where management experience is lacking.
- Consider hiring experienced consultants or advisors to provide guidance during the initial stages of operation.
FDD Citations:
- No specific citation, but inferred from the lack of experience requirements mentioned in the FDD text regarding the Franchise Manager and Responsible Owner.
Exit & Transfer Risks
4 risks identified
1
2
1
Restrictive Transfer Provisions Superseded by State Law
Medium
Explanation:
- While the FDD mentions several revisions to the Franchise Agreement regarding releases and waivers upon renewal or transfer (Items 19, 20), the initial language in Items 2 and 4 highlights potential conflicts between the Franchise Agreement and Washington State law concerning termination, renewal, and transfer rights. This suggests the original agreement may contain restrictive provisions that are superseded by state law, creating potential confusion and legal challenges during exit or transfer.
Potential Mitigations:
- Carefully review the Franchise Agreement, specifically sections related to transfer and termination, with legal counsel specializing in Washington franchise law. Ensure all provisions comply with RCW 19.100 and subsequent court decisions.
- Obtain written confirmation from the franchisor acknowledging the supremacy of Washington State law regarding transfer and termination rights, and clarifying any ambiguities in the agreement.
FDD Citations:
- Item 2: "RCW 19.100.180 may supersede provisions in the franchise agreement... concerning your relationship with the franchisor, including in the areas of termination and renewal of your franchise."
- Item 4: "In addition, any such release or waiver executed in connection with a renewal or transfer of a franchise is likewise void except as provided for in RCW 19.100.220(2)."
- Item 19: "Section 5.2.4 of the Franchise Agreement is revised..."
- Item 20: "Section 16.3.8 of the Franchise Agreement is revised..."
Limited Transfer Fee Justification
Low
Explanation:
- Item 6 states that transfer fees are collectable only to the extent of reasonable costs. Lack of transparency on how these costs are estimated or calculated creates a risk of excessive or unjustified fees upon transfer, impacting the final sale price and potentially deterring buyers.
Potential Mitigations:
- Request a detailed breakdown of potential transfer fees and the methodology used for their calculation. Negotiate a cap on these fees within the Franchise Agreement.
- Consult with other franchisees who have transferred their businesses to understand typical transfer costs and negotiate accordingly.
FDD Citations:
- Item 6: "Transfer fees are collectable only to the extent that they reflect the franchisor’s reasonable estimated or actual costs in effecting a transfer."
Potential for Disputes Over Liquidated Damages
Medium
Explanation:
- Item 24 acknowledges that the liquidated damages provision could be deemed a penalty under Washington law if it's not reasonably related to actual damages. This creates uncertainty and potential legal challenges upon termination, impacting the franchisee's exit strategy.
Potential Mitigations:
- Carefully review the liquidated damages clause with legal counsel specializing in Washington contract law. Ensure the calculation method is clearly defined and justifiable based on potential actual damages.
- Negotiate a more favorable liquidated damages clause that considers various termination scenarios and limits the potential financial burden on the franchisee.
FDD Citations:
- Item 24: "A liquidated damages provision in the Franchise Agreement may be construed as a penalty under Washington law if the amount is found to bear no reasonable relation to actual damages."
Unlawful Buy-Back Provisions Modified by State Law
High
Explanation:
- Item 8 reveals that the original Franchise Agreement likely contained provisions allowing the franchisor to repurchase the franchise without the franchisee's consent, which is unlawful under Washington law. While the FDD states this is unlawful, the fact that such a provision existed raises concerns about the franchisor's understanding and respect for Washington franchise law, potentially impacting future interactions and creating legal risks.
Potential Mitigations:
- Thoroughly review the revised Franchise Agreement to ensure the unlawful buy-back provision has been completely removed and replaced with language compliant with RCW 19.100.180(2)(j).
- Seek legal counsel specializing in Washington franchise law to review the entire agreement and confirm its compliance with state regulations.
- Discuss this issue with the franchisor and express concerns about the initial inclusion of the unlawful provision. Seek assurances of their commitment to complying with Washington State law.
FDD Citations:
- Item 8: "Provisions in franchise agreements or related agreements that permit the franchisor to repurchase the franchisee’s business for any reason during the term of the franchise agreement without the franchisee’s consent are unlawful pursuant to RCW 19.100.180(2)(j), unless the franchise is terminated for good cause."
Operational & Brand Risks
3 risks identified
1
2
Franchisor's Limited Financial Stability
High
Explanation:
- The franchisor's stockholders' equity ($58,636) is significantly lower than the estimated initial investment ($88,845 - $126,995). This indicates limited financial resources, which could impact the franchisor's ability to provide ongoing support, marketing, and development to franchisees. It also raises concerns about the franchisor's ability to weather economic downturns or unexpected challenges.
Potential Mitigations:
- Carefully review the franchisor's financial statements (Item 21) to understand their financial health and stability. Look for trends in revenue, expenses, and profitability.
- Inquire about the franchisor's plans for future growth and how they intend to fund those plans.
- Consider negotiating a lower franchise fee or royalty rate to compensate for the increased financial risk.
FDD Citations:
- Special Risks About This Franchise Page: "Estimated Initial Investment. The franchisee will be required to make an estimated initial investment ranging from $88,845 and $126,995. This amount exceeds the franchisor’s stockholders’ equity as of December 31, 2023, which is $58,636."
Dependence on Key Personnel
Medium
Explanation:
- The FDD emphasizes the importance of the Responsible Owner, Franchise Manager, and Lead Instructor, requiring specific training and approval by the franchisor. Over-reliance on these key personnel creates a risk if they leave, become incapacitated, or underperform. Replacing them may be difficult and time-consuming, potentially disrupting operations and impacting profitability.
Potential Mitigations:
- Develop clear job descriptions, performance expectations, and incentive programs for key personnel to encourage retention.
- Implement cross-training programs to ensure that other staff members can cover critical functions in the event of a key person's departure.
- Negotiate clear terms in employment agreements regarding non-compete clauses and intellectual property protection.
FDD Citations:
- Unnumbered Section after Washington Addendum: Requirements for Responsible Owner, Franchise Manager, and Lead Instructor, including training requirements.
Potential for Operational Complexity with Multiple Required Roles
Medium
Explanation:
- The FDD outlines several key roles (Responsible Owner, Franchise Manager, Lead Instructor) with distinct responsibilities. Managing these different roles and ensuring clear communication and coordination could add operational complexity, especially for new franchisees. This complexity could lead to inefficiencies, conflicts, and increased management overhead.
Potential Mitigations:
- Develop clear organizational charts and communication protocols to define roles and responsibilities.
- Implement robust management systems and software to track performance, manage schedules, and facilitate communication.
- Seek guidance from the franchisor on best practices for managing multiple roles within the franchise system.
FDD Citations:
- Unnumbered Section after Washington Addendum: Requirements for Responsible Owner, Franchise Manager, and Lead Instructor.
Performance & ROI Risks
3 risks identified
2
1
Lack of Financial Performance Representations
High
Explanation:
- The FDD explicitly states that no financial performance representations are provided other than Item 19, which is not included in this excerpt. This lack of information makes it difficult to assess the potential profitability of the franchise and creates significant uncertainty about return on investment.
- Without data on average franchisee revenue, expenses, or profits, prospective franchisees are forced to rely solely on their own market research and assumptions, which can be inaccurate and lead to unrealistic expectations.
Potential Mitigations:
- Conduct thorough independent market research in your target area to assess the demand for swim lessons and the competitive landscape.
- Consult with existing franchisees (listed in Exhibit E) to gain insights into their financial performance, though confidentiality agreements could limit this information.
- Develop conservative financial projections based on realistic assumptions and consider seeking advice from a financial advisor.
FDD Citations:
- Item 19: "Other than the financial performance representation contained in this 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."
- Item 20: Provides unit growth and status information, but no financial performance data.
Limited Operating History of Franchised Units
High
Explanation:
- The franchise system has a limited operating history with franchised units, starting with zero in 2022 and reaching only six by the end of 2024. This short track record makes it difficult to assess the long-term viability and success of the franchise model.
- The rapid growth in franchised units (+1, +3, +2) could indicate aggressive expansion, which may outpace the franchisor's ability to provide adequate support and training to new franchisees.
Potential Mitigations:
- Carefully evaluate the franchisor's experience and infrastructure to ensure they can handle the rapid growth and provide adequate support.
- Speak with existing franchisees about their experiences with the franchisor's support and training programs.
- Consider the implications of being part of a relatively new and rapidly expanding franchise system, including potential growing pains and adjustments to the business model.
FDD Citations:
- Item 20, Table 1: Shows the number of franchised outlets from 0 in 2022 to 6 in 2024.
Dependence on Pool Rental Agreements
Medium
Explanation:
- The business model relies on securing and maintaining agreements with pool facilities, creating dependence on third-party landlords. Loss of a pool rental agreement could significantly disrupt operations.
Potential Mitigations:
- Negotiate favorable long-term lease agreements with pool owners.
- Develop contingency plans for alternative pool locations in case of lease termination.
- Explore potential partnerships with multiple pool facilities to diversify risk.
FDD Citations:
- Item 7: Pool Rent (3 months) listed as an initial investment expense.
FDD Documents by Year
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FDD Year: 2025
Uploaded: 8/8/2025
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