Brunch It Up
Initial Investment Range
$782,500 to $2,010,000
Franchise Fee
$50,000 to $55,000
Brunch It Up LLC is offering franchises for the operation under the Brunch stylized logo of a modern restaurant serving classic and inventive breakfast and lunch fare amid cheery, colorful décor, which includes a patio for outdoor service, a bar for alcohol sales and that offers pick-up catering and delivery.
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Brunch It Up August 19, 2024 FDD Risk Analysis
Free FDD Library AI Analysis Date: July 16, 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
Brunch It Up LLC’s (Brunch It Up) audited financial statements reveal significant instability. As of year-end 2023, the company had a negative net worth of ($39,446) and has reported net losses every year since its 2021 inception. Note 4 also discloses that the company relies on advances from its founder's other businesses for working capital. This financial weakness may impair its ability to support you or grow the brand, posing a substantial risk to your investment.
Potential Mitigations
- A franchise accountant must conduct a thorough analysis of the franchisor's financial statements, including the notes, to assess its long-term viability.
- Discuss the franchisor's capitalization plan and path to profitability with your financial advisor to understand how they plan to fund operations and support.
- Your attorney should inquire if any states have required the franchisor to post a bond or establish an escrow due to its financial condition.
High Franchisee Turnover
Low Risk
Explanation
This risk was not identified in the FDD package. Item 20 data does not show any franchisee terminations, non-renewals, or other cessations. However, this is because the system is brand new, with only one franchisee who started in 2022. A lack of negative turnover data in a new system is not indicative of long-term franchisee satisfaction or success. High turnover is a major red flag in established systems, suggesting potential unprofitability or franchisee dissatisfaction.
Potential Mitigations
- Your business advisor should help you understand that with a new system, you are taking on the risk of being among the first to test its viability.
- Have your attorney help you interview the one existing franchisee to understand their experience, satisfaction, and profitability.
- An accountant can help you model a worst-case financial scenario, as there is insufficient system data to reliably project performance.
Rapid System Growth
Low Risk
Explanation
This risk was not identified, as Item 20 shows extremely slow growth (one franchisee in two years), not rapid expansion. While slow growth avoids the risks of an overstretched support system, it can also indicate difficulty in attracting new franchisees or potential issues with the business model's appeal. The core risk for this system is its newness, not rapid growth. Rapid growth in other systems can strain a franchisor's ability to provide adequate support.
Potential Mitigations
- In discussions with the franchisor, your business advisor can help you inquire about their growth strategy and the reasons for the current pace.
- Speaking with the single existing franchisee can provide insight into the support currently being provided, which your attorney can facilitate.
- Your accountant can assess if the franchisor's financial state supports even modest growth without straining resources.
New/Unproven Franchise System
High Risk
Explanation
Brunch It Up is a new and unproven franchise system. The company was formed in September 2021 and, as of the end of 2023, had only one operational franchisee. Item 1 explicitly states, "we have never operated a business of the type being franchised." This lack of a track record in franchising presents a significant risk regarding the viability of the business model, the effectiveness of its support systems, and its overall long-term stability.
Potential Mitigations
- Given the high risk, your attorney should attempt to negotiate more favorable terms, such as lower fees or enhanced franchisee protections.
- A thorough due diligence investigation of the founders' past business ventures is crucial, which your business advisor can assist with.
- Your accountant must help you create highly conservative financial projections, as there is no reliable system performance data available.
Possible Fad Business
Medium Risk
Explanation
The brunch restaurant concept operates in a highly developed and competitive market. While the breakfast and lunch segment has enduring appeal, the specific focus on being a trendy,
Potential Mitigations
- With a business advisor, conduct an independent market analysis to assess the long-term demand for this specific style of restaurant versus a more traditional concept.
- Ask the franchisor about their long-term plans for menu innovation and concept evolution to stay relevant beyond current trends.
- Your accountant can help model the financial impact of high competition and potential shifts in consumer dining preferences.
Inexperienced Management
High Risk
Explanation
The franchisor entity itself is inexperienced, stating in Item 1 that it has never operated this type of business. Furthermore, Item 2 reveals that the Chief Operating Officer's primary background is in the mortgage industry, not restaurant operations or franchising. While the CEO has experience running two similar restaurants, the lack of direct franchising experience within the management team poses a significant risk to their ability to provide effective support, training, and strategic guidance.
Potential Mitigations
- Your business advisor should help you probe the franchisor on how they plan to overcome their lack of direct franchising experience.
- It is essential to ask the one existing franchisee about the quality and effectiveness of the management support and guidance they have received.
- Your attorney could inquire if the franchisor has retained any experienced franchise consultants to guide their system's development.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 indicates the franchisor is a privately held limited liability company and does not disclose ownership by a private equity firm. This avoids risks often associated with PE ownership, such as a focus on short-term returns over the long-term health of the brand. However, franchisees should always be aware that the business could be sold in the future.
Potential Mitigations
- Your attorney should review the assignment clause in the Franchise Agreement to understand your rights if the company is sold in the future.
- Engaging a business advisor can help you research the backgrounds of the current owners to understand their long-term vision for the company.
- It is wise for your accountant to analyze how a future sale might impact your financial obligations and the support you receive.
Non-Disclosure of Parent Company
High Risk
Explanation
Brunch It Up does not appear to have a parent company that is required to be disclosed. It is a new, thinly capitalized LLC. The risk is not non-disclosure, but rather the lack of a financially strong parent to back its obligations. Its financial weakness, as shown in Item 21, means there is no financially robust parent entity to ensure its survival or ability to support franchisees. This amplifies the financial instability risk.
Potential Mitigations
- Your accountant must confirm that the franchisor's standalone financials present a complete and accurate picture of its financial health.
- It is important to understand with your financial advisor that there is no larger corporate entity to fall back on if the franchisor struggles.
- Your attorney can advise on the implications of investing in a franchise without the backing of a well-capitalized parent company.
Predecessor History Issues
Medium Risk
Explanation
Item 1 discloses that an affiliate, Brunch WI, LLC, is a predecessor as it licenses the intellectual property to the franchisor. However, the FDD does not disclose any negative history, such as litigation or bankruptcy, related to this predecessor. The risk here is less about hidden history and more about the unusual structure where the new, financially weak franchisor does not own its own core intellectual property, instead licensing it from a related company.
Potential Mitigations
- Your attorney should carefully review the intellectual property license agreement between the franchisor and its predecessor, mentioned in Item 13.
- A business advisor can help you research the business history of the predecessor entity, Brunch WI, LLC, for any public records of issues.
- Inquire with the franchisor about the stability and terms of the IP license to ensure it cannot be revoked, leaving you without brand rights.
Pattern of Litigation
Low Risk
Explanation
This specific risk was not identified in the FDD. Item 3 states, "No litigation is required to be disclosed in this Item." While this is a positive finding, it is important to remember that this can change at any time. A pattern of litigation, particularly claims of fraud brought by other franchisees, is a major red flag in other franchise systems as it may indicate systemic problems with the franchisor's practices.
Potential Mitigations
- Your attorney can conduct an independent public records search to see if any litigation has been filed since the FDD was issued.
- It is good practice to ask existing franchisees about any disputes they are aware of, even if not formal litigation.
- Understanding the dispute resolution process in the Franchise Agreement is crucial should a conflict arise later, a task for your legal counsel.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
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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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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