Stratus Building Solutions Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$109,550 - $345,950
Franchise Fee
$75,000
Min Cash Required
$25,000
Total US Locations
67
Business Summary
SBS Franchising, LLC grants master franchises that allow individuals or entities to sell and license individual commercial cleaning unit franchises within a specific territory. Stratus Building Solutions master franchisees operate a business focused on recruiting and supporting unit franchisees, rather than directly performing cleaning services. Master franchisees help their unit franchisees acquire cleaning contracts and provide administrative support such as billing and collections. The unit franchisees then offer commercial, industrial, institutional, and residential cleaning services, including specialty services like carpet care and floor care.
Corporate History
SBS Franchising, LLC was originally established as SBS Franchising, Inc., a Delaware company, on January 13, 2015. On January 1, 2018, it changed its structure to a limited liability company and adopted its current name. The company acquired all assets, including intellectual property and franchise agreements, from its predecessor, Stratus Franchising, LLC, on January 30, 2015. Stratus Building Solutions has been offering master franchises since this acquisition date in January 2015.
Financial Overview
Investment Range
$109,550 - $345,950
Franchise Fee (Low)
$75,000
Franchise Fee (High)
$210,000
Minimum Cash Required
$25,000
Royalty %
4%
Equipment Costs (Low)
$2,800
Equipment Costs (High)
$5,450
Working Capital
$62,500
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements for SBS Franchising, LLC for the year ending December 31, 2024, received an unqualified audit opinion, indicating they present fairly, in all material respects, the financial position in accordance with U.S. GAAP. The financial statements for 2023 were restated to correct errors related to prior period tax recordings, unrecognized tax refunds, deferred revenue, and intercompany balance eliminations. This restatement resulted in a decrease in members' interest and an increase in members' distributions for 2023. A prior auditor's report for 2023 mentioned a net loss and negative operating cash flow due to a deferred tax charge, and the company's dependence on shareholders for financial support to continue as a going concern at that time. However, the 2024 audit does not include a going concern qualification, suggesting this issue has been resolved. In 2024, restricted cash of $1,200,000, which was previously segregated, was released.
Financing Details
SBS Franchising, LLC may, at its discretion, provide financing for up to 20% of the initial franchise fee. This financing is typically structured through a promissory note, requiring monthly installments over a three-year period. The interest rate on these notes is 10% per annum. Franchisees can prepay the debt without any penalty. If a franchisee defaults on the promissory note or breaches the Master Franchise Agreement, SBS Franchising, LLC has the option to accelerate all principal and interest payments. Failure to cure a default within 30 days can lead to the termination of the Master Franchise Agreement. This financing is exclusively for the initial franchise fee and does not cover other startup costs.
Performance Metrics
Total US Locations
67
Franchised Units
53
Corporate Units
14
Avg Square Footage
1,600
Franchising Since
2015
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
3
Litigation Summary
SBS Franchising, LLC currently has one pending civil lawsuit filed in June 2024 by two existing franchisees. This lawsuit alleges that Stratus Building Solutions misclassified franchisees as employees, leading to unpaid wages and violations of California Labor Code. SBS Franchising, LLC denies these allegations and intends to vigorously defend itself. Additionally, the FDD discloses two older legal matters involving its predecessor, Stratus Franchising, LLC. In 2011, the Virginia State Corporation Commission alleged that the predecessor made untrue statements in connection with franchise sales, which resulted in a settlement and penalties. In 2015, the California Department of Business Oversight issued an injunctive order against the predecessor for misstating an executive's prior job title in franchise filings between 2007 and 2011.
Bankruptcy History
SBS Franchising, LLC has no bankruptcy history to report. The FDD explicitly states that no bankruptcy information is required to be disclosed for the company.
Agreement Terms
Initial Term
15 years
Renewal Term
15 years
Renewal Conditions
To renew their Master Franchise Agreement, SBS Franchising, LLC Master Franchisees must meet several conditions. They must provide written notice of their intent to renew between six and twelve months before the current term ends. The Master Franchisee must not be in default of their current agreement or any other agreements with SBS Franchising, LLC or its affiliates, and must have substantially complied with all terms throughout the initial term. All monetary obligations owed to SBS Franchising, LLC and its affiliates must be satisfied and have been met in a timely manner. The Master Franchisee must also fulfill SBS Franchising, LLC's then-current qualifications and training requirements. Finally, they are required to sign SBS Franchising, LLC's then-current form of Master Franchise Agreement and a general release. The new agreement may have materially different terms from the original, but the territory will not be reduced, and no additional initial franchise fee will be charged.
Training & Support Program
Franchisor Assistance
Before opening, Stratus Building Solutions advises master franchisees on determining and establishing their office location, which requires approval from Stratus Building Solutions. Master franchisees also receive confidential Brand Standards Manuals and training aids, and are granted the right to use the Stratus Marks and System. Stratus Building Solutions provides a four-phase training program, with the first week conducted at its home office in Los Angeles, California, and subsequent phases at the master franchisee's office. During operation, Stratus Building Solutions offers additional on-site assistance for office start-up, sales, operations, and administrative procedures. It also advises on system developments and new janitorial industry developments, informs of new promotional and sales materials, and is available for routine questions by phone and computer. In-depth business consultations are available for a daily fee after the first 12 months. Although not required by agreement, Stratus Building Solutions endeavors to find cost-efficient suppliers and performs periodic quality control visits to the master franchisee's office.
Initial Training Hours
188
Training Location
Los Angeles, California
Ongoing Support
After opening, Stratus Building Solutions provides ongoing training sessions, including mandatory annual and/or regional master franchise meetings and seminars. Master franchisees are responsible for their own travel and lodging costs for these events. If a master franchisee fails to attend an annual conference without extraordinary circumstances, Stratus Building Solutions may impose a non-attendance fee, currently set at $2,500 multiplied by the number of missed conferences. Stratus Building Solutions also has personnel available during normal business hours to provide technical assistance, consultation, and advice on marketing and operations procedures via telephone and/or computer. In-depth business consultations at the master franchisee's office or Stratus Building Solutions' headquarters are available for a fee after the first 12 months. Stratus Building Solutions also aims to find more cost-efficient sources of supplies and may conduct periodic quality control visits to the master franchisee's office.
Franchise Requirements
Ideal Candidate Profile
Stratus Building Solutions seeks Master Franchisees (or a designated Regional Director) who will be directly involved in the day-to-day operation and management of the Master Franchise business. These individuals must reside within their assigned territory. Candidates should possess the necessary skills, character, qualifications, and economic resources to effectively operate the franchised business and fulfill their obligations. All key participants, including owners, directors, officers, and managers, are required to adhere to strict confidentiality and non-competition terms.
Industry Experience Required
No
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
commercial
Owner Participation
supervisory
Territory Type
limited
Staff Count
3
Territory Size Requirements
Stratus Building Solutions defines its master franchise territories by the boundaries of designated Standard Combined Statistical Areas, specific county, city, or country borders, encompassing a specified population. The minimum population required for a master franchise region is 500,000 people, while the largest territory granted has a population of 3,036,114 people. The specific boundaries for a territory are determined by Stratus Building Solutions and provided to the master franchisee before the agreement is signed. Master franchisees are required to establish and maintain their principal office within this defined territory, and the territory size remains static throughout the agreement term.
Staffing Notes
Master Franchisees are required to participate directly in the operation of their Stratus Building Solutions business, either through their own full-time involvement or by appointing a full-time Regional Director. If a Regional Director is appointed, they must permanently reside within the assigned territory and manage the day-to-day operations. If Stratus Building Solutions determines a Regional Director is not performing adequately, the Master Franchisee must take corrective steps or replace them within 30 days. All partners, owners, and shareholders of the Master Franchisee are personally responsible for guaranteeing the performance of obligations and payments to Stratus Building Solutions, complying with confidentiality, and adhering to non-competition provisions. Master Franchisees are solely responsible for all employment decisions, including hiring, firing, and remuneration, for their own staff, and must ensure their employees comply with all applicable laws and regulations.