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How much does Advanced Fresh Concepts cost?
Initial Investment Range
$4,025 to $251,404
Franchise Fee
$4,025 to $237,074
Advanced Fresh Concepts Franchise Corp. (“AFC”) will grant you a franchise to use our system to offer prepared sushi and other Asian style foods.
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Advanced Fresh Concepts July 22, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 19, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
Medium Risk
Explanation
Advanced Fresh Concepts Franchise Corp.'s (AFC) audited financials show profitability. However, the auditor's report includes an "Emphasis of Matter" paragraph highlighting the company's dependency on its parent company, Zensho Holdings. Additionally, dividend payments in the most recent fiscal year exceeded net income. This dependency could pose a risk to you if the parent company's situation or support changes, which could affect the stability of the entire franchise system.
Potential Mitigations
- Your accountant should review the financial statements, paying close attention to the notes on related-party transactions and the auditor's emphasis of matter.
- A discussion with your business advisor about the risks of a franchisor's dependency on its parent company would be beneficial.
- Ask your attorney to clarify the terms of any parent company guarantees for AFC's obligations to you.
High Franchisee Turnover
High Risk
Explanation
The FDD explicitly warns of a high turnover rate. Item 20 data for the "Zenshi" brand in the most recent fiscal year shows terminations, non-renewals, re-acquisitions, and other cessations totaling over 20% of the outlets at the start of the year. Such a high rate of franchisees leaving the system could indicate potential issues with profitability, franchisor support, or the business model itself, representing a significant risk to your investment.
Potential Mitigations
- It is crucial to contact a significant number of former franchisees from the list in Exhibit M to understand why they left the system.
- Your business advisor can help you analyze the Item 20 data and compare the churn rate to industry benchmarks.
- Discuss the implications of high franchisee turnover and the franchisor's explanation for it with your attorney before proceeding.
Rapid System Growth
High Risk
Explanation
The system has undergone massive and rapid change, rebranding many "AFC" counters to the new "Zenshi" brand while also adding new units. In the last two fiscal years, the Zenshi brand grew from zero to over 3,500 franchised outlets. Such explosive growth, even if driven by rebranding, can strain a franchisor's ability to provide adequate training, site support, and quality control, which may affect your business operations and success.
Potential Mitigations
- Inquiring with new and established franchisees about the quality and timeliness of franchisor support is a key due diligence step.
- A business advisor can help you assess if the franchisor's support infrastructure seems adequate for such a large, rapidly changed system.
- Ask the franchisor directly about how they have scaled their support teams to manage this rebranding and growth.
New/Unproven Franchise System
High Risk
Explanation
While the franchisor has been in business since 2002, the "Zenshi" brand concept is very new, having been offered only since June 2023. Investing in a recently launched or rebranded concept carries risks, as its market acceptance, operational procedures, and long-term profitability may not yet be fully proven. You are investing in a system that is still in a state of significant transition and development.
Potential Mitigations
- A business advisor should help you evaluate the market potential and risks associated with this newly rebranded concept.
- Speaking with franchisees who have recently converted to or opened a Zenshi-branded counter is critical to understanding the transition.
- Your attorney can help you assess if there are any additional protections you can negotiate given the unproven nature of the Zenshi brand.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. The business model of offering prepared sushi and Asian foods in grocery stores is well-established and has a long history of consumer demand. However, in any food business, it is important to assess how the franchisor adapts to changing consumer tastes and dietary trends to ensure long-term relevance and profitability.
Potential Mitigations
- Engage a business advisor to research the long-term market trends for this type of food service in your specific area.
- When speaking with the franchisor, inquire about their research and development process for new menu items and concepts.
- An accountant can help you model different scenarios to assess the business's resilience to shifts in consumer preferences.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. Item 2 indicates that the key executives of AFC have significant prior experience in the food service and franchising industries, including long tenures with AFC or related companies. An experienced management team is generally better equipped to provide effective support, make sound strategic decisions, and manage the franchise system.
Potential Mitigations
- It is always a good practice to research the backgrounds of the key management team with your business advisor.
- When interviewing current franchisees, ask about their direct experiences and the quality of support from the management team.
- Your attorney can help you understand the management structure and decision-making authority within the company.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified. Item 1 discloses that the franchisor's ultimate parent is Zensho Holdings Co., Ltd., a large, publicly traded Japanese food company, not a private equity firm. This ownership structure may suggest a focus on long-term brand health rather than the shorter-term investment horizons sometimes associated with private equity ownership.
Potential Mitigations
- It's advisable to research the parent company's history and its management of other subsidiary brands with your business advisor.
- Your attorney can help clarify the legal relationship between the franchisor and its parent company.
- An accountant can analyze the parent company's financial stability if their statements are publicly available.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. Item 1 of the FDD provides extensive disclosure regarding AFC's immediate and ultimate parent companies, Zensho Holdings Co., Ltd., and its various affiliates. When a franchisor is part of a large corporate structure, it is important for prospective franchisees to have this information to understand the overall organization and potential influences on the franchise system.
Potential Mitigations
- Your attorney should review the roles and responsibilities of the parent and affiliate companies as described in the FDD.
- A business advisor can help you understand the potential benefits or risks of being part of a large, international food service conglomerate.
- Inquire about the specific nature of the relationship and support provided by the parent company to the franchisor.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified. Item 1 of the FDD states that the franchisor has no predecessors. A predecessor is a company from which the franchisor acquired the business concept, and their history, including any litigation or bankruptcy, must be disclosed. The absence of a predecessor means the franchisor's own history is the primary focus for due diligence.
Potential Mitigations
- Your attorney can confirm the franchisor's corporate history and verify the 'no predecessor' statement.
- A business advisor should help you focus your due diligence on the franchisor's own track record since its inception.
- When speaking with long-term franchisees, confirm their experiences have always been with the current franchisor entity.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses several concluded lawsuits and arbitrations involving franchisees. These cases include claims brought by franchisees against AFC alleging wrongful termination, fraud, and misrepresentation, as well as cases brought by AFC against franchisees. While outcomes have varied, this history of disputes, particularly a settled case involving fraud claims, suggests a potentially litigious environment and could indicate underlying issues within the franchise relationship that may pose a risk to you.
Potential Mitigations
- Your attorney must carefully review the nature and outcomes of the disclosed litigation to assess potential risks.
- Attempting to contact the franchisees involved in these past lawsuits, if possible, could provide invaluable insight.
- A business advisor can help you evaluate whether this litigation history is typical for a system of this size.
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