Risk Score
Pending analysis
Investment Range
$250,719 - $1,875,464
Franchise Fee
$10,000
Min Cash Required
$75,000
Total US Locations
44
Business Summary
GloStation Franchising USA, Inc. operates Sandbox VR Businesses, which are entertainment venues offering live-action, hyper-reality experiences. These experiences include virtual reality and physical adventures, utilizing a full-body tracking system. A typical Sandbox VR Business features at least four game rooms, known as Holodecks, with each supporting between two to six participants per virtual reality experience. The business offers a variety of these experiences, identified by its trademarks, service marks, and commercial symbols.
Corporate History
GloStation Franchising USA, Inc., doing business as Sandbox VR, was formed in Delaware on December 19, 2017. The company first began offering franchises in April 2019. Its parent company, GloStation USA, Inc. (GSUSA), and ultimate parent, Sandbox VR Inc., have owned and operated Sandbox VR Businesses, and an affiliate in Hong Kong also operates one. Another affiliate, Glo Franchising LTD, has offered Sandbox VR franchises outside of the United States since February 2018.
Financial Overview
Investment Range
$250,719 - $1,875,464
Franchise Fee (Low)
$10,000
Franchise Fee (High)
$50,000
Minimum Cash Required
$75,000
Royalty %
5%
Marketing %
7%
Equipment Costs (Low)
$1,160,292
Equipment Costs (High)
$2,232,267
Working Capital
$87,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
GloStation Franchising USA, Inc. is financially dependent on its parent company and affiliated entities for corporate and administrative support, as it does not have its own employees. Operating funds are advanced by the parent and affiliates as needed and repaid from sales. The company has limited operations and primarily purchases equipment for sale only when a franchise agreement is executed. The FDD notes that the franchisor's financial condition, as reflected in its financial statements, may call into question its ability to provide services and support, advising prospective franchisees to consult a financial advisor about this potential risk. Furthermore, the parent company, GloStation USA, Inc., and several affiliates underwent Chapter 11 bankruptcy reorganization proceedings, which commenced in August 2020 and concluded in February 2021.
Financing Details
GloStation Franchising USA, Inc. does not offer any direct or indirect financing to its franchisees. The franchisor also does not guarantee any notes, leases, or other obligations for franchisees.
Performance Metrics
Total US Locations
44
Franchised Units
9
Corporate Units
35
Avg Square Footage
8,600
Franchising Since
2019
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
Yes
Litigation Count
2
Litigation Summary
GloStation Franchising USA, Inc. is involved in litigation with one of its Canadian franchisees, Vortex Gaming Ltd. and Vortex Gaming T1 Ltd. In January 2023, Sandbox VR terminated several franchise agreements with Vortex due to non-payment. Vortex subsequently filed a lawsuit in the Ontario Superior Court of Justice in February 2023, seeking an injunction to prevent termination and a declaration that the terminations were wrongful. Vortex alleges that Sandbox VR breached its agreements by terminating them before delivering certain equipment and also breached a statutory duty of fair dealing, seeking CAD$151.6 million in damages. Sandbox VR, in turn, initiated a separate arbitration proceeding with the American Arbitration Association, seeking a declaration that the terminations were proper and damages for a breach of another franchise agreement. In the arbitration, Vortex counter-claimed, seeking CAD$11.548 million. A final hearing was scheduled for late May 2024, and the parties are in the process of documenting a tentative settlement.
Bankruptcy History
GloStation Franchising USA, Inc.'s parent company, GloStation USA, Inc. (GSUSA), along with several affiliates including Sandbox VR Topanga, LLC, Sandbox VR Mission Valley, LLC, and others, commenced voluntary Chapter 11 bankruptcy reorganization cases in the United States Bankruptcy Court for the Central District of California on August 13, 2020. Before filing, these entities and their ultimate parent, Sandbox VR Inc., entered into a Plan Support Agreement with their secured lenders to restructure their debt and support a reorganization plan. The joint Chapter 11 plan was confirmed by the Court on November 25, 2020, and the final decree closing the case was issued on February 11, 2021. Sandbox VR Inc. itself, the ultimate parent, was not part of this filing.
Agreement Terms
Initial Term
10 years
Renewal Term
5 years
Renewal Conditions
To renew their franchise, Sandbox VR franchisees must comply with all their obligations under the Franchise Agreement and any other related agreements. They must provide written notice of their intent to renew between 12 to 15 months before the current term expires and demonstrate their right to maintain possession of the site for at least five years after the current agreement ends. Franchisees are also required to renovate or remodel their business to meet Sandbox VR's then-current standards for new locations and pay a successor franchise fee of $12,500. Additionally, they must sign a general release of any claims against Sandbox VR and its affiliates.
Training & Support Program
Franchisor Assistance
Before a franchisee opens a Sandbox VR Business, GloStation Franchising USA, Inc. assists by approving the site and lease, defining the territory, and providing design specifications for the facility. The franchisor also provides and installs the initial virtual reality equipment package and offers a mandatory initial training program for the franchisee's key management team. Additionally, Sandbox VR provides access to its Operations Manual and helps with developing a grand opening marketing plan. During operations, Sandbox VR periodically advises on business operations, provides updates to the Operations Manual and System Standards, and manages the Brand Development Fund and the System Website. It also adds and removes available virtual reality experiences, offers assistance with material customer complaints, may implement a 'mystery shopper' quality control program, and provides the Reservation Operating Platform for customer bookings.
Initial Training Hours
56
Training Location
A Sandbox VR Business designated by the franchisor in the U.S.
Ongoing Support
After opening, Sandbox VR franchisees receive ongoing support including periodic operational advice based on reports and inspections. The franchisor provides updates to the Operations Manual and System Standards, manages the Brand Development Fund and the System Website, and updates available virtual reality experiences. Sandbox VR may also assist with resolving significant customer complaints and can implement a 'mystery shopper' quality control program. The franchisor currently provides the Reservation Operating Platform and may require franchisees and their personnel to attend various ongoing training courses and programs, as well as conventions. If a franchisee receives multiple complaints related to poor gaming experiences or customer service that are not resolved, Sandbox VR may send trainers or provide technical support on-site at the franchisee's expense.
Franchise Requirements
Ideal Candidate Profile
Sandbox VR is looking for franchisees who are committed to operating the business faithfully, honestly, and diligently throughout the entire term, ensuring all granted rights are fully utilized. If the franchisee is an entity, an approved Managing Owner must hold over 50% of the ownership interests, possess authority over management and policies, and dedicate sufficient time to the business's promotion and operation. While direct on-premises involvement for the Managing Owner is recommended, it is not mandatory. A General Manager, also approved by Sandbox VR, must commit their full business time to the on-premises management and operation of the Sandbox VR Business. Both the Managing Owner and General Manager are required to complete the initial training program to the franchisor's satisfaction. For those entering a Development Rights Agreement, personal supervision of the development of Sandbox VR Businesses is recommended.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
retail
Owner Participation
supervisory
Territory Type
limited
Territory Size Requirements
Sandbox VR typically determines its franchise territories using population and geographic boundaries such as counties, cities, ZIP Codes, or city blocks. A territory may be as small as a 0.5-mile radius from the approved site or have a minimum population of 250,000 people. The specific size and boundaries of a territory depend on various market characteristics, including demographics, traffic flow, natural and man-made boundaries, the location of competing businesses, neighborhoods covered, and population density.
Staffing Notes
Sandbox VR requires a Key Management Team composed of a Managing Owner, a General Manager, and one assistant manager to complete an Initial Training Program. The Managing Owner, if the franchisee is an entity, must hold over 50% of the ownership interests, possess authority over management and policies, and dedicate sufficient time to the business's promotion and operation. While direct on-premises involvement for the Managing Owner is recommended, it is not mandatory. The General Manager must be approved by Sandbox VR, dedicate all their business time to the on-premises management and operation of the Sandbox VR Business, and is not required to have an ownership interest. The Managing Owner may also serve as the General Manager, subject to prior approval. Additional staff can attend initial training for an extra fee. Any replacement for a Key Management Team member must attend and successfully complete the required training within 30 days. Sandbox VR may mandate ongoing training for the General Manager and other personnel. If a Sandbox VR Business receives more than three customer complaints in a month regarding gaming experiences or customer service that are not satisfactorily resolved, Sandbox VR may send one or more trainers to provide on-site assistance or technical support at the franchisee's expense. All employees with access to confidential information must sign confidentiality agreements. The Operations Manual outlines specific job descriptions for roles like Store Manager, Assistant Store Manager, Lead, and Guest Experience Guide, and details procedures for recruiting, scheduling, and deploying the team.