Risk Score
Pending analysis
Investment Range
$150,000 - $374,500
Franchise Fee
$25,000
Total US Locations
49
Business Summary
Flip Flop Shops operates retail shops specializing in the sale of flip flops, sandals, casual footwear, and related footwear and beach lifestyle accessories.
Corporate History
Flip Flop Shops, LLC was established as a California Limited Liability Company on May 22, 2018. Its parent company, Bearpaw Holdings, LLC, was formed in 2016. Flip Flop Shops, LLC acquired specific assets from its predecessor, Flip Flop Shops Franchise Company, on June 4, 2018. The predecessor had started offering franchises on October 9, 2007. Since the acquisition, Flip Flop Shops, LLC has focused on franchising retail stores that sell flip flops, sandals, casual footwear, and beach lifestyle accessories.
Financial Overview
Investment Range
$150,000 - $374,500
Franchise Fee (Low)
$25,000
Franchise Fee (High)
$25,000
Royalty %
5%
Marketing %
1%
Equipment Costs (Low)
$29,000
Equipment Costs (High)
$84,000
Working Capital
$27,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Disclaimer of opinion
Financial Health Notes
The auditors for Flip Flop Shops have expressed substantial doubt about the company's ability to continue as a going concern. As of December 31, 2023, Flip Flop Shops had a member's deficit of $4,519,531 and has been experiencing recurring losses from operations and negative cash flows. These financial challenges indicate significant uncertainty regarding Flip Flop Shops' future operations.
Financing Details
Flip Flop Shops does not offer any direct or indirect financing to its franchisees. Additionally, Flip Flop Shops does not guarantee any franchisee notes, leases, or other obligations.
Performance Metrics
Total US Locations
49
Franchised Units
49
Corporate Units
0
Avg Square Footage
1,000
Franchising Since
2007
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
3
Litigation Summary
Flip Flop Shops has a legal history involving three significant cases. In July 2023, Flip Flop Shops faced allegations from the California Department of Financial Protection and Innovation for failing to disclose prior litigation and selling franchises without proper registration between 2018 and 2022. The company settled this matter by paying a $52,500 penalty, agreeing to stop violating California franchise investment laws, completing remedial training, and notifying affected franchisees. This case is now closed. A lawsuit against Flip Flop Shops' predecessor, filed in June 2016, alleged fraudulent inducement and unfair business practices due to the predecessor requiring franchisees to use unlicensed real estate and legal service providers. A judgment of $429,581.12 was entered against the predecessor and other defendants in August 2020. Additionally, Thomas A. Romeo, a Managing Member and CEO of Flip Flop Shops, LLC, and his other company, Romeo & Juliette, Inc., were involved in a patent infringement and breach of contract lawsuit filed in April 2015. A jury found them liable for $5,250,838 in April 2018, and an injunction was issued. The case was settled out of court in January 2019, and the appeal was dismissed.
Bankruptcy History
Flip Flop Shops has no bankruptcy history to report.
Agreement Terms
Initial Term
10 years
Renewal Term
5 years
Renewal Conditions
To renew their Flip Flop Shops franchise agreement, franchisees must notify the company in writing between six and nine months before their current term ends. They must also update their shop and any required items to meet current brand standards, ensure they are not in default of their agreement, pay all outstanding money owed to Flip Flop Shops, and maintain their right to the current location. Additionally, they are required to pay a renewal fee equal to half of the then-current initial franchise fee, sign a general release of claims, and comply with all current qualification and training requirements. The new renewal agreement may have materially different terms than the original one.
Training & Support Program
Franchisor Assistance
Flip Flop Shops provides a range of support and assistance to its franchisees. Before opening, Flip Flop Shops offers site selection guidelines and assistance, including reviewing proposed locations and providing up to two on-site evaluations for a franchisee's first shop (additional or subsequent evaluations may incur a fee). Franchisees receive access to prototypical design plans, operational manuals, an approved inventory list, and a list of approved suppliers. Initial management training is provided for the Operating Principal and Lead Manager. Flip Flop Shops also offers at least two days of on-site opening assistance. For ongoing support, Flip Flop Shops conducts periodic evaluations of operations, provides advice and written materials on managing and operating the shops, and offers updated inventory and supplier lists. The company also provides additional training programs and seminars, with potential fees, and remedial on-site training if requested or deemed necessary. Franchisees also get access to proprietary software programs (with a potential license fee) and benefit from the Brand Building Fund, which Flip Flop Shops administers for advertising and promotional materials.
Initial Training Hours
84
Training Location
On-site at the franchised location, with some POS training delivered remotely with RICS and on-site.
Ongoing Support
After a Flip Flop Shops location opens, the company provides ongoing support by conducting periodic evaluations of operations and offering advice and written materials on management and operational techniques. Flip Flop Shops also makes merchandise available for resale and provides updated approved inventory and supplier lists. Franchisees can access additional training programs and seminars, as well as remedial on-site training if needed (which may incur a fee). The company also provides access to proprietary software programs (with a potential license fee) and administers a Brand Building Fund, supplying advertising and promotional materials.
Franchise Requirements
Ideal Candidate Profile
Flip Flop Shops seeks franchisees who will designate an Operating Principal directly responsible for the on-premises supervision of the business, holding at least a 10% ownership interest. This Operating Principal must dedicate their full time and best efforts to supervising operations and not engage in other businesses, unless a Lead Manager is appointed with company consent, in which case the Lead Manager must be full-time and the Operating Principal remains ultimately responsible. Franchisees must also appoint at least one Shop Manager 45 days before opening. These Shop Managers must meet Flip Flop Shops' educational and business criteria, be acceptable to the company, and devote their full time to the daily operation and management of the shop. Any Lead Managers, Shop Managers, and other personnel who have access to confidential information may be required to sign confidentiality and non-competition agreements.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Hands-On
Territory Type
Protected
Territory Size Requirements
Flip Flop Shops' franchise territories are defined as a "Designated Area" for site selection, which is non-exclusive and has no minimum size, excluding existing or future protected areas of other franchisees. Once a location is approved, the franchisee receives a "Protected Area" around that location. This Protected Area will be at least a 1-mile radius, but its actual shape and size are determined by analyzing factors such as population density, income level, and the number of households and businesses in the specific area.
Staffing Notes
Flip Flop Shops requires each franchise to have an Operating Principal responsible for on-premises supervision, holding at least a 10% ownership interest. This Operating Principal must dedicate their full time and best efforts to supervising operations, unless a Lead Manager is appointed with company consent, in which case the Lead Manager must be full-time and the Operating Principal remains ultimately responsible. Franchisees must also appoint at least one Shop Manager 45 days before opening. These Shop Managers must meet Flip Flop Shops' educational and business criteria, be acceptable to the company, and devote their full time to the daily operation and management of the shop. Any Lead Managers, Shop Managers, and other personnel who have access to confidential information may be required to sign confidentiality and non-competition agreements.