GRIMALDI's PIZZERIA
Food and Beverage
Founded 201946 locationsCompany Profile
Year Founded:2019
GRIMALDI's PIZZERIA Franchise Cost
| Franchise Fee: | $50,000Key Metric |
| Total Investment: | $1,390,000 - $1,840,000Key Metric |
| Liquid Capital: | $302,500 |
| Royalty Fee: | 6% of gross sales |
| Marketing Fee: | Not specified |
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Based on GRIMALDI's PIZZERIA's actual financial data
Outlet Counts by Year
Historical outlet data extracted from FDD documents
Total US Locations:46
Scale relative to 1,000 locations
Franchised Units:4
Corporate Units:42
Additional Information
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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.
12
High Risk
Critical items
38% of total
18
Medium Risk
Monitor closely
56% of total
2
Low Risk
Manageable items
6% of total
32
Total Items
Factors analyzed
10 categories
6.56
Overall Score
Low RiskHigh Risk
010
Franchisor Stability Risks
3 risks identified
1
2
Limited Operating History as Franchisor
High
Explanation:
- Grimaldi's began franchising in March 2019, representing a relatively short history in franchising. This limited track record makes it difficult to fully assess the long-term viability and success of the franchise model.
- While the brand itself is older, the franchising entity's inexperience could lead to unforeseen challenges in supporting franchisees, adapting to market changes, and managing the franchise network effectively.
Potential Mitigations:
- Thoroughly research the management team's experience and expertise in franchising. Inquire about their plans for franchisee support and system development.
- Contact existing franchisees to discuss their experiences with the franchisor, including training, marketing support, and overall satisfaction.
- Carefully review the FDD, particularly Items 1 and 20, to understand the franchisor's history, growth plans, and support structure.
FDD Citations:
- Item 1: "We began offering franchises for Grimaldi’s Restaurants in March 2019."
- Item 20: Tables provide limited data on franchisee performance due to the short operational history.
Dependence on Affiliates for Restaurant Operations
Medium
Explanation:
- The FDD states that company-operated restaurants are run by an affiliate, CBOP. This dependence on affiliates creates potential conflicts of interest and raises concerns about the franchisor's direct operational experience.
- Decisions made by CBOP could prioritize the interests of company-owned locations over franchisees, potentially impacting franchisee profitability and support.
Potential Mitigations:
- Investigate the relationship between the franchisor and CBOP. Understand the contractual agreements and any potential conflicts of interest.
- Inquire about the franchisor's oversight of CBOP's operations and how they ensure fair treatment of franchisees.
- Review the FDD for any clauses addressing potential conflicts of interest and how they are resolved.
FDD Citations:
- Item 1: "We do not operate any Grimaldi’s Restaurants, however... our affiliates operated 42 Grimaldi’s Restaurants..."
- Item 20, Note 2: "Our Company-Operated Restaurants are operated by our affiliate, CBOP."
Limited Franchise Sales and Growth
Medium
Explanation:
- Item 20 reveals a small number of franchised restaurants and limited growth since franchising began. As of December 31, 2024, there are only four franchised locations in the US and one international location.
- Slow franchise sales could indicate challenges with the franchise model, lack of market interest, or inadequate franchisee support.
Potential Mitigations:
- Analyze the reasons for the slow franchise growth. Inquire about the franchisor's marketing and sales strategies for attracting franchisees.
- Speak with existing franchisees to understand their reasons for joining the system and their perspectives on growth potential.
- Assess the market demand for the Grimaldi's concept in your target area.
FDD Citations:
- Item 20, Table 1: Shows limited growth in franchised restaurants from 2022-2024.
- Item 20, Table 3: Details the status of franchised restaurants, highlighting the small number of operating units.
Disclosure & Representation Risks
6 risks identified
2
3
1
Inconsistent State Registration Information
Medium
Explanation:
- Exhibit A lists state administrators and agents for service of process where Grimaldi's "intends" to register. This language creates ambiguity about current registration status, potentially exposing franchisees to legal and operational risks in states where registration is required but not yet completed.
- Discrepancies between listed administrators and agents could further complicate compliance and create confusion.
Potential Mitigations:
- Verify Grimaldi's current franchise registration status in your target state with the relevant regulatory authority.
- Confirm the accuracy of contact information for administrators and agents listed in Exhibit A.
- Consult with legal counsel specializing in franchising to assess potential risks and ensure compliance with state-specific regulations.
FDD Citations:
- Item 23, Exhibit A: "We intend to register this disclosure document as a “franchise” in some or all of the following states…"
Unclear System Standards and Modification Process
Medium
Explanation:
- While the FDD mentions "standards, policies, and procedures," Section 8 of the Franchise Agreement lacks specifics about the System Standards and the process for modifications. This ambiguity could lead to disputes over changes imposed by the franchisor, potentially impacting franchisee profitability and operational flexibility.
Potential Mitigations:
- Request a detailed explanation of the System Standards, including written documentation outlining all requirements and procedures.
- Negotiate for greater clarity regarding the modification process, including franchisee input and notification periods.
- Consult with a franchise attorney to review the agreement and ensure adequate protection against unreasonable changes.
FDD Citations:
- Franchise Agreement, Section 8: "SYSTEM STANDARDS AND MODIFICATIONS" (lack of specific details)
- Recitals: General description of the System's characteristics.
Broad Franchisor Discretion Over System Changes
High
Explanation:
- The FDD states that Franchisor "may change, improve, and further develop" the System over time. This broad discretion, coupled with the lack of detail regarding the process in Section 8 of the Franchise Agreement, raises concerns about potential unilateral changes that could negatively impact franchisees.
- Changes to core aspects of the System, such as menu items, sourcing, or technology, could significantly affect franchisee operations and profitability without their consent.
Potential Mitigations:
- Negotiate limitations on Franchisor's ability to make unilateral changes, particularly regarding core elements of the System.
- Request specific criteria for evaluating proposed changes and a mechanism for franchisee input.
- Seek legal counsel to review the agreement and ensure adequate protection against detrimental modifications.
FDD Citations:
- Recitals: "…all of which Franchisor may change, improve and further develop over time."
- Franchise Agreement, Section 8: "SYSTEM STANDARDS AND MODIFICATIONS"
Limited Information on Franchisee Obligations
Medium
Explanation:
- While the Franchise Agreement Table of Contents lists sections like "Performance Standards" and "Uniformity of Operation," the provided FDD excerpt lacks details about the specific obligations of franchisees. This lack of transparency makes it difficult to fully assess the operational and financial demands of the franchise.
Potential Mitigations:
- Request a complete copy of the Franchise Agreement and carefully review all sections detailing franchisee obligations.
- Seek clarification on any ambiguous or unclear requirements.
- Consult with a franchise attorney to assess the reasonableness and potential impact of these obligations.
FDD Citations:
- Franchise Agreement, Table of Contents: Sections 11, 12, etc. (lack of detail within the provided excerpt)
Potential for Disputes Over Termination and Option to Purchase
High
Explanation:
- The Franchise Agreement includes sections on "Default and Termination" and "Option to Purchase." Without the full text of these sections, it's impossible to assess the fairness and potential risks associated with these provisions. Unfavorable terms could lead to disputes and financial losses for franchisees.
Potential Mitigations:
- Carefully review the full text of the "Default and Termination" and "Option to Purchase" sections in the Franchise Agreement.
- Negotiate for more equitable terms, including clear definitions of default, due process procedures, and fair valuation methods for the option to purchase.
- Consult with a franchise attorney to assess the potential risks and ensure adequate protection.
FDD Citations:
- Franchise Agreement, Table of Contents: Sections 18 and 20
Limited Financial Performance Representations
Low
Explanation:
- The provided FDD excerpt does not include Item 19, which typically contains Financial Performance Representations (FPRs). The absence of FPRs makes it difficult to assess the potential profitability of the franchise and compare it to other investment opportunities.
Potential Mitigations:
- Request the full FDD and carefully review Item 19 for any available FPRs.
- If FPRs are not provided, conduct independent market research and financial analysis to assess the potential profitability of the franchise.
- Consult with a financial advisor to evaluate the investment opportunity and compare it to other options.
FDD Citations:
- N/A (Item 19 not included in the excerpt)
Financial & Fee Risks
3 risks identified
2
1
Deferred Franchise Fees Due to Franchisor's Financial Condition
High
Explanation:
- Item 5 and the State Addenda for South Dakota and Illinois disclose that the franchisor, due to its financial condition, is deferring payment of both the Development Fee and the Initial Franchise Fee until the restaurant opens. This raises serious concerns about the franchisor's financial stability and ability to support franchisees.
- This deferral, while potentially helpful in the short term, could indicate underlying financial weaknesses that could impact the franchisor's ability to provide ongoing support, marketing, and other crucial services.
- The Illinois addendum explicitly states that the Illinois Attorney General's Office imposed this deferral due to the franchisor's financial condition, further highlighting the severity of the situation.
Potential Mitigations:
- Carefully review the franchisor's financial statements (Item 21) to understand the nature and extent of their financial difficulties.
- Inquire directly with the franchisor about their current financial status, plans for improvement, and how they will ensure adequate support for franchisees despite the deferral.
- Consult with a financial advisor to assess the franchisor's financial health and the potential risks associated with investing in the franchise given these disclosures.
- Consider negotiating stronger guarantees or protections in the franchise agreement to mitigate the risk of franchisor default or inadequate support.
FDD Citations:
- Item 5: "The South Dakota Division of Securities has required that, due to our financial condition, we defer the payment of..."
- Exhibit H - Illinois Addendum: "The Illinois Attorney General’s Office imposed this deferral requirement due to Franchisor’s financial condition."
Potential Impact of Franchisor's Financial Condition on Support and Resources
High
Explanation:
- The franchisor's financial difficulties, as evidenced by the deferred fee structure, could negatively impact their ability to provide adequate support and resources to franchisees.
- This could include reduced marketing and advertising spend, limited training and operational support, and delays in new product development or system upgrades.
- Franchisees may experience difficulties accessing necessary resources and support, hindering their ability to launch and operate their businesses successfully.
Potential Mitigations:
- Thoroughly review Items 11 (Franchisor's Obligations) and 12 (Franchisee's Obligations) to understand the specific support and resources promised by the franchisor.
- Seek clarification from the franchisor on how they will fulfill these obligations despite their financial challenges.
- Contact existing franchisees to inquire about their experiences with the franchisor's support and resources, particularly in light of the financial situation.
- Negotiate specific performance guarantees related to support and resources in the franchise agreement.
FDD Citations:
- Item 5: See references in previous risk.
- Item 11: Review franchisor obligations.
- Item 12: Review franchisee obligations.
State-Specific Legal Requirements and Restrictions
Medium
Explanation:
- The FDD includes specific addenda for California and Illinois, indicating variations in legal requirements and restrictions based on the franchise location.
- These variations can impact key aspects of the franchise relationship, such as non-compete clauses, governing law, and dispute resolution.
- Franchisees must be aware of and comply with the specific regulations applicable to their state, which can add complexity to the franchise agreement and operations.
Potential Mitigations:
- Carefully review the relevant state addendum to understand the specific legal requirements and restrictions applicable to your franchise location.
- Consult with legal counsel specializing in franchise law in the relevant state to ensure compliance with all applicable regulations.
- Factor in the potential impact of these state-specific requirements on your business operations and legal obligations.
FDD Citations:
- Exhibit H - California Addendum: Specific modifications for California franchisees.
- Exhibit H - Illinois Addendum: Specific modifications for Illinois franchisees.
Legal & Contract Risks
3 risks identified
2
1
Choice of Law/Forum Restrictions
Medium
Explanation:
- The FDD specifies New York law and forum for dispute resolution. This could disadvantage franchisees outside of New York due to travel costs, unfamiliarity with NY law, and potential bias.
- While the FDD mentions Article 33 of the NY General Business Law, it's unclear how this interacts with other state franchise laws, creating potential conflicts.
Potential Mitigations:
- Consult with an attorney specializing in franchise law in your state to understand the implications of the choice of law and forum provisions.
- Negotiate with the franchisor to modify these clauses, especially if you are located far from New York.
- Understand the protections afforded by Article 33 of the NY General Business Law and how it might benefit or hinder you.
FDD Citations:
- Item 17(v) and 17(w): "The foregoing choice of law...General Business Law of the State of New York."
Waiver of Rights Restrictions
Medium
Explanation:
- The FDD states that franchisees cannot waive claims under state franchise laws, including fraud. This is generally positive, but the interaction with other contractual clauses needs careful review.
- The clause "This provision supersedes any other term..." could lead to conflicts with other parts of the agreement and requires clarification.
Potential Mitigations:
- Have an attorney review the entire franchise agreement to ensure consistency and identify any potential conflicts with this non-waiver clause.
- Seek clarification from the franchisor on the scope and intent of this clause in relation to other agreement provisions.
FDD Citations:
- Item 22: "No statement, questionnaire or acknowledgement...executed in connection with the franchise."
State-Specific Disclosure Variations
Low
Explanation:
- The FDD includes specific disclosures for various states (South Dakota, Illinois, Michigan, New York). These variations can create complexity and potential inconsistencies.
Potential Mitigations:
- Carefully review the disclosures relevant to your state and ensure you understand their implications.
- Consult with an attorney familiar with franchise law in your state to clarify any state-specific requirements or restrictions.
FDD Citations:
- Item 22: State-specific disclosure sections.
Territory & Competition Risks
3 risks identified
2
1
No Exclusive Territory
High
Explanation:
- The FDD explicitly states that no exclusive territory is granted. This means franchisees may face direct competition from other Grimaldi's restaurants, including those owned by the franchisor or other franchisees, even within close proximity.
- This lack of territorial protection can significantly impact sales and profitability, especially in densely populated areas.
Potential Mitigations:
- Carefully evaluate the proposed location and surrounding areas for existing and potential Grimaldi's restaurants. Request information from the franchisor regarding their development plans for the area.
- Negotiate with the franchisor for a clearly defined area of primary responsibility, even if it's not formally exclusive, to understand their intentions regarding future development.
- Focus on building strong local brand recognition and customer loyalty to differentiate from other Grimaldi's locations.
FDD Citations:
- Item 12: "You will not receive an exclusive territory under the Franchise Agreement. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control."
- Item 12: "You will not receive any exclusive territory under the Development Agreement. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control."
Competition from Other Channels
High
Explanation:
- The franchisor retains the right to sell Grimaldi's products through other channels, including online, catalogs, and other retail outlets. This could create competition for the franchisee and potentially cannibalize sales.
- The FDD also mentions the franchisor's right to operate or license other restaurant concepts, which could further increase competition.
Potential Mitigations:
- Clarify with the franchisor their current and future plans for alternative distribution channels and other restaurant concepts in the franchisee's area.
- Focus on providing exceptional in-restaurant dining experience and customer service to differentiate from other sales channels.
- Explore opportunities to collaborate with the franchisor on local marketing and promotional activities.
FDD Citations:
- Item 12: "...from other channels of distribution or competitive brands that we control."
- Item 12: "We retain all rights not specifically granted to you."
- Item 12: "(4) sell anywhere (within or outside your Development Area) the same or similar products that are authorized for sale at Grimaldi’s Restaurants under the Marks or under other trademarks or trade dress and through any other channel of distribution..."
Competition from Non-Traditional and Captive Market Locations
Medium
Explanation:
- The franchisor reserves the right to operate or license Grimaldi's restaurants in non-traditional locations (e.g., airports, stadiums) and captive market locations (e.g., hotels, gas stations) within or outside the development area. This could create competition for traditional franchisees.
Potential Mitigations:
- Inquire about existing and planned non-traditional and captive market locations in the vicinity of the proposed franchise location.
- Assess the potential impact of these locations on the target customer base.
- Focus on differentiating the traditional restaurant experience to attract customers seeking a full-service dining experience.
FDD Citations:
- Item 12: "We and our affiliates reserve the right to: (1) operate or license others to operate Grimaldi’s Restaurants at any Non-Traditional Facility or Captive Market Location (as defined below) within or outside your Development Area;"
Regulatory & Compliance Risks
3 risks identified
1
2
Mandatory Sourcing Restrictions
High
Explanation:
- Franchisees are required to purchase Proprietary Items and other designated products/services exclusively from approved suppliers, potentially limiting cost savings and flexibility.
- Dependence on designated suppliers creates vulnerability to supply chain disruptions, price increases, and quality control issues.
- The franchisor's ability to profit from supplier relationships raises concerns about potential conflicts of interest and inflated pricing.
Potential Mitigations:
- Carefully review Item 8 and the Franchise Agreement to fully understand the scope of sourcing restrictions and associated costs.
- Negotiate for greater flexibility in sourcing non-proprietary items during the franchise agreement negotiation process.
- Develop contingency plans for alternative suppliers in case of disruptions or dissatisfaction with designated suppliers.
FDD Citations:
- Item 8: "You may only buy Proprietary Items from a designated supplier (that may include us and our affiliates)..."
- Item 8: "We may (1) limit the number of approved suppliers with whom you may deal, (2) designate sources that you must use..."
Supplier Approval Process
Medium
Explanation:
- The franchisor has sole discretion in approving alternate suppliers, which can be a lengthy and costly process for the franchisee.
- The franchisor's criteria for supplier approval are not fully disclosed in the FDD, creating uncertainty and potential for arbitrary decisions.
- The franchisor may require inspections, testing, and fees from potential suppliers, adding further costs and delays.
Potential Mitigations:
- Request a detailed explanation of the supplier approval process and criteria during due diligence.
- Negotiate clear timelines and cost limitations for supplier approval requests in the franchise agreement.
- Build relationships with potential alternative suppliers in advance to expedite the approval process if needed.
FDD Citations:
- Item 8: "You may submit a written request for approval of an alternate supplier...We have the right to require...inspection...testing..."
- Item 8: "We will typically notify you of our decision within 60 days."
System Standards Enforcement
Medium
Explanation:
- Franchisees are required to strictly adhere to system standards, which can be extensive and subject to change at the franchisor's discretion.
- Failure to comply with system standards can result in penalties, including termination of the franchise agreement.
- The franchisor's broad authority to enforce system standards can create operational challenges and limit franchisee autonomy.
Potential Mitigations:
- Thoroughly review the Manual and all system standards documentation before signing the franchise agreement.
- Clarify any ambiguities regarding system standards and enforcement procedures with the franchisor.
- Establish strong communication channels with the franchisor to stay informed of any changes to system standards.
FDD Citations:
- Item 8: "You must operate your Franchised Restaurant in strict conformance with our System standards..."
- Item 8: "The System standards may relate to any aspect of the appearance, function, cleanliness, and operation..."
Franchisor Support Risks
3 risks identified
1
2
Inadequate Marketing Support and Brand Fund Management
Medium
Explanation:
- The franchisor collects, administers, and spends advertising funds. Lack of transparency and potential misuse of these funds are risks.
- Ineffective marketing campaigns or insufficient brand building could negatively impact franchisee sales.
Potential Mitigations:
- Carefully review Item 11 for details on Brand Fund management, including how funds are allocated and audited.
- Inquire about the franchisor's marketing expertise and track record.
- Request regular reports on Brand Fund expenditures and campaign performance.
FDD Citations:
- Item 11: Details of the Brand Fund.
- Franchise Agreement, Section 6.C: Franchisor's responsibilities regarding the Brand Fund.
Limited Control over Local Marketing
Medium
Explanation:
- While the franchisor approves annual advertising plans, franchisees may have limited flexibility in tailoring local marketing efforts.
- This could hinder responsiveness to local market conditions and customer preferences.
Potential Mitigations:
- Clarify the extent of local marketing autonomy during the due diligence process.
- Negotiate for greater flexibility in adapting marketing materials and campaigns to local needs.
FDD Citations:
- Franchise Agreement, Section 6.D.(1): Franchisor's right to review and approve annual advertising plans.
Dependence on Franchisor for Technology and POS System
High
Explanation:
- Mandated use of a specific POS system (Toast) creates dependence on the franchisor and the vendor.
- Potential issues include system failures, inadequate support, and costly upgrades.
- Lack of control over POS data and access by the franchisor raises privacy concerns.
Potential Mitigations:
- Thoroughly research the Toast POS system and its reputation.
- Negotiate service level agreements with Toast and the franchisor.
- Clarify data ownership and access rights in the Franchise Agreement.
FDD Citations:
- FDD, Point of Sale System Section: Details on the required POS system, costs, and vendor.
Exit & Transfer Risks
2 risks identified
2
Choice of Law and Forum Restrictions
Medium
Explanation:
- The FDD specifies New York law and forum for dispute resolution. This could pose a significant burden and expense for franchisees located far from New York, making legal recourse more difficult and costly.
- While the FDD mentions not waiving rights under New York General Business Law Article 33, the interaction between this law and the chosen forum/law remains unclear and could lead to legal complexities.
Potential Mitigations:
- Consult with an attorney specializing in franchise law in both your state and New York to understand the implications of the choice of law and forum clauses.
- Assess the potential travel and legal costs associated with potential disputes in New York and factor this into your overall investment considerations.
- Negotiate with the franchisor to explore alternative dispute resolution mechanisms, such as mediation or arbitration, that may be more cost-effective and convenient.
FDD Citations:
- Item 17(v) and 17(w): "The foregoing choice of law... conferred upon the franchisor or upon the franchisee by Article 33 of the General Business Law of the State of New York."
- Item 17(v) and 17(w): "Each provision of these Additional Disclosures shall be effective only to the extent... that the jurisdictional requirements of New York General Business Law... are met."
California Interest Rate Cap
Medium
Explanation:
- The FDD mentions a 10% per annum maximum interest rate in California. While this information is relevant for California franchisees, it lacks clarity on how financing arrangements and interest rates are determined for franchisees in other states. This ambiguity could lead to unfavorable financing terms for non-California franchisees.
Potential Mitigations:
- Inquire with the franchisor about the specific interest rates and financing terms offered in your state.
- Compare the franchisor's financing options with other lenders to ensure you are receiving competitive rates and terms.
- Consult with a financial advisor to assess the long-term financial implications of the proposed financing arrangements.
FDD Citations:
- Item 6: "The maximum interest rate permitted in California currently is 10% per annum."
Operational & Brand Risks
3 risks identified
1
2
Mandatory Supplier Dependence
High
Explanation:
- Franchisees are required to purchase Proprietary Items and other designated products from specific suppliers, potentially limiting cost savings and flexibility.
- Dependence on designated suppliers creates vulnerability to supply chain disruptions, price increases, and quality control issues beyond the franchisee's control.
- The franchisor's ability to collect allowances from suppliers may create a conflict of interest, potentially prioritizing franchisor profits over franchisee costs.
Potential Mitigations:
- Carefully review the supplier agreements and pricing structures to understand potential cost implications.
- Negotiate with the franchisor for greater flexibility in sourcing non-proprietary items.
- Develop contingency plans for alternative suppliers in case of disruptions with designated vendors.
FDD Citations:
- Item 8: "You may only buy Proprietary Items from a designated supplier..."
- Item 8: "We have the right to collect and retain all manufacturing allowances..."
Limited Supplier Approval Process
Medium
Explanation:
- The franchisor controls the supplier approval process, which can be lengthy and costly for franchisees seeking alternative suppliers.
- The franchisor's criteria for supplier approval may be subjective and not fully transparent, creating potential for unfair or inconsistent application.
Potential Mitigations:
- Thoroughly understand the supplier approval process and criteria outlined in the FDD and Manual.
- Proactively identify potential alternative suppliers and initiate the approval process early.
- Negotiate clear service level agreements with approved suppliers to ensure quality and reliability.
FDD Citations:
- Item 8: "If we have designated a specific supplier... you may submit a written request for approval of an alternate supplier..."
- Item 8: "We have the right to require... that our representatives be permitted to inspect the supplier’s facilities..."
Mandatory Participation in Franchisor Programs
Medium
Explanation:
- Franchisees are required to participate in Off-Premises Programs, gift card programs, and loyalty programs, potentially incurring additional costs and operational complexities.
- Mandatory participation limits franchisee autonomy and flexibility in tailoring their offerings to local market demands.
Potential Mitigations:
- Carefully evaluate the costs and benefits of participating in mandatory programs.
- Negotiate with the franchisor for greater flexibility in implementing and managing these programs.
- Ensure that the franchisor provides adequate training and support for implementing and operating these programs.
FDD Citations:
- Item 8: "We have the right (but no obligation) to establish... Off-Premises Programs...If we establish a mandatory Off-Premises Program... you must pay the fees and costs associated with participating..."
- Item 8: "You must participate in our programs relating to gift cards..."
Performance & ROI Risks
3 risks identified
2
1
Limited Franchised Restaurant Performance Data
High
Explanation:
- Item 19 relies heavily on company-operated restaurant data, with only one franchised restaurant's performance included for 2024.
- This limited sample size makes it difficult to assess the typical performance of a franchised unit and may not accurately reflect the potential ROI for a new franchisee.
- Item 20 shows only 4 franchised locations open at the end of 2024, further limiting the available performance data.
Potential Mitigations:
- Request written substantiation (Item 19, Note 4) for the provided financial performance representation to understand the context of the single franchised restaurant's results.
- Inquire about the reasons for the closure of two company-operated restaurants during the Reporting Period (Item 19) to assess potential systemic issues.
- Seek independent financial and market analysis to evaluate the brand's potential in your target market.
- Contact existing franchisees (if possible) to discuss their experiences and actual performance.
FDD Citations:
- Item 19: "The following tables present information about the historic Gross Sales of 42 Company-Operated Restaurants and one Franchised Restaurant..."
- Item 20, Table 3: "Restaurants at End of Year: 4 (Franchised Restaurants in 2024)"
Gross Sales Focus Without Cost Information
High
Explanation:
- Item 19 presents only gross sales figures without providing details on cost of goods sold, operating expenses, or other costs.
- This makes it impossible to determine the profitability or net income potential of a franchised restaurant based on the provided data.
- Without understanding the cost structure, potential franchisees cannot accurately project their ROI.
Potential Mitigations:
- Conduct thorough independent research on typical costs associated with operating a similar restaurant in your target market.
- Consult with experienced restaurant operators or financial advisors to develop realistic cost projections.
- Request detailed information from the franchisor regarding typical operating expenses, including rent, labor, food costs, and marketing expenses.
FDD Citations:
- Item 19, Note 3: "We have not included the costs of sales, operating costs or other costs and expenses..."
Variability in Gross Sales Performance
Medium
Explanation:
- The wide range of gross sales figures within each tier in Item 19 indicates significant performance variability among company-operated restaurants.
- This suggests that factors like location, management, and local market conditions can significantly impact revenue.
Potential Mitigations:
- Carefully evaluate the proposed location and its demographics to assess its potential for success.
- Develop a strong business plan that addresses potential challenges and incorporates local market analysis.
- Discuss site selection criteria and support provided by the franchisor.
FDD Citations:
- Item 19, Table 1: Wide range within each tier (e.g., Tier 1: $3,252,921 - $5,322,819)
FDD Documents by Year
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FDD Year: 2025
Uploaded: 8/9/2025
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Uploaded: 8/25/2025
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