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How much does Ace Sushi cost?
Initial Investment Range
$18,275 to $227,650
Franchise Fee
$12,575 to $210,750
Ace Sushi Franchise Corporation grants franchises for the operation of Sushi Bars under the trade name “ACE SUSHI” which will offer fresh, healthy, high quality, raw and cooked sushi and other related Asian fusion food products for sale at competitive prices for eat-and-go and carry-out consumption.
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Ace Sushi April 30, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 21, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor explicitly warns that its financial condition calls its ability to provide support into question. The audited financial statements in Exhibit H confirm this, showing only $50,000 in stockholder's equity and zero retained earnings. The company operates by paying nearly all its revenue to its affiliate, Asiana Management Group (AMG), as a management fee. This structure makes the franchisor financially weak on a standalone basis and completely dependent on an affiliate whose financials are not provided.
Potential Mitigations
- A franchise accountant should thoroughly analyze the franchisor's balance sheet, income statement, and the critical note explaining the management fee arrangement with its affiliate.
- It is essential to discuss the implications of the franchisor's low net worth and dependency on its affiliate with your business advisor.
- Your attorney can help you formulate questions to the franchisor regarding the financial stability of the affiliate, AMG, which provides all key services.
High Franchisee Turnover
High Risk
Explanation
The franchisor directly discloses that the 'Turnover Rate' is a special risk. The data in Item 20 confirms this is an extremely significant issue. In 2024 alone, there were 32 outlets that were terminated, reacquired, or ceased operations against a starting base of 59 franchised units. This represents an exceptionally high annual churn rate, which is a critical warning sign of potential systemic problems, franchisee dissatisfaction, or lack of profitability within the system.
Potential Mitigations
- Your accountant must carefully analyze the franchise turnover tables in Item 20 to understand the scale of franchisee exits.
- Contacting former franchisees listed in Exhibit G is crucial to understanding why they left the system; your attorney can help prepare appropriate questions.
- A business advisor should help you evaluate if the high turnover rate suggests fundamental flaws in the business model's viability for franchisees.
Rapid System Growth
High Risk
Explanation
The number of franchised outlets has grown from 25 to 97 in three years, representing very rapid expansion. This level of growth can strain a franchisor's ability to provide adequate support, especially when combined with the franchisor's weak financial position and the system's extremely high turnover rate. These factors together suggest the support infrastructure may be insufficient to sustain both new and existing franchisees, increasing your operational risk.
Potential Mitigations
- Discussing the franchisor's capacity to support this rapid growth with your business advisor is highly recommended.
- Questioning current franchisees about the quality and timeliness of the support they receive is essential for due diligence.
- An accountant should help you assess whether the franchisor's financial resources, as shown in Item 21, are adequate to support this growth.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor, Ace Sushi Franchise Corporation (Ace Sushi FC), began offering franchises in 2005, according to Item 1. A new or unproven system can present higher risks due to the lack of a long-term performance track record, underdeveloped support systems, and minimal brand recognition. Franchisees in such systems may face greater uncertainty regarding the business model's viability and the franchisor's ability to provide effective support.
Potential Mitigations
- Engaging a business advisor to research the franchisor’s history and the maturity of its operating systems is a valuable step.
- Even with an established system, it's wise to have your attorney review the disclosed operating history for any red flags.
- An accountant can help assess if the franchisor's financial track record demonstrates stability over time.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. The franchise is for operating sushi bars, a well-established and long-standing segment of the food service industry, not a business based on a recent or potentially fleeting trend. Investing in a fad business carries the risk that consumer interest could decline rapidly, leaving you with a long-term contractual obligation for a business with diminishing demand and potential for failure.
Potential Mitigations
- A business advisor can help you research the long-term market trends for any industry you consider entering.
- It is important to evaluate a business model's resilience to changing consumer tastes with your financial advisor.
- Your attorney should review the franchise agreement to understand your obligations if the business becomes unviable.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD package. The executive biographies in Item 2 indicate that the key personnel have extensive and long-term experience with the franchisor or its affiliate, AMG, dating back to the 1990s and early 2000s. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, inadequate franchisee support, and a lack of proven operating systems, potentially jeopardizing the entire franchise network.
Potential Mitigations
- A thorough review of the management team's experience in both the specific industry and in franchising is a crucial due diligence step for any opportunity.
- Engaging a business advisor to help assess the leadership team's qualifications is a prudent measure.
- Contacting current franchisees to inquire about their direct experiences with the management team can provide valuable insight.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 does not disclose ownership by a private equity firm; the system appears to be privately held by its founders. When a franchisor is owned by a private equity firm, there can be a risk that decisions are focused on short-term investor returns rather than the long-term health of the franchisees and the brand, which might affect levels of support and franchisee profitability.
Potential Mitigations
- Your attorney should always verify the ownership structure disclosed in Item 1 of the FDD.
- When considering a franchise owned by a private equity firm, it is beneficial to have a business advisor research the firm's history with other brands.
- Discussing any changes in the system since a private equity acquisition with current franchisees can offer important perspectives.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The franchisor, Ace Sushi FC, is financially weak and dependent on its affiliate, Asiana Management Group (AMG), which provides the products and receives all the profit as a management fee. However, the FDD does not include the financial statements for AMG. Because AMG is essential to the operation and financial viability of the system, the absence of its financials means you cannot fully assess the stability of the enterprise you are depending on for support and supplies.
Potential Mitigations
- Your accountant must review the franchisor's financials and note the dependency on its parent, AMG.
- A discussion with your attorney is crucial to understand the risks of contracting with a thinly capitalized entity backed by an undisclosed parent.
- Inquiring with the franchisor why the parent company financials are not provided is a reasonable step your attorney can take.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 describes a history where an affiliate licensed individuals before formal franchising began, but it does not disclose a formal 'predecessor' entity with a negative history. A franchisor with a problematic predecessor could be inheriting issues like unresolved lawsuits or a poor reputation. The FDD must disclose information about predecessors to give you a complete picture of the system's history.
Potential Mitigations
- Your attorney should always review Item 1 carefully for any mention of predecessor companies.
- If a predecessor is disclosed, a business advisor can help you research its history and reputation.
- It is wise to ask long-term franchisees about their experiences under any previous ownership or company names.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses a history of regulatory trouble. The franchisor's affiliate, AMG, entered into consent orders with four different states (Maryland, Rhode Island, Virginia, and Washington) for violating franchise laws, primarily related to selling unregistered franchises. Item 3 also discloses a lawsuit from a former franchisee alleging fraud and misrepresentation. This pattern of past regulatory violations and significant franchisee litigation raises serious concerns about the franchisor's compliance practices and franchisee relations.
Potential Mitigations
- A franchise attorney must carefully review and explain the implications of the past litigation and regulatory actions disclosed in Item 3.
- These findings should prompt a deeper conversation with your business advisor about the potential risks to your investment.
- It is critical to discuss the company's litigation history with current and former franchisees to understand the context.
Disclosure & Representation Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Financial & Fee Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Legal & Contract Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Territory & Competition Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Regulatory & Compliance Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Franchisor Support Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Operational Control Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Term & Exit Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Miscellaneous Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems