Built Custom Burgers Logo

Built Custom Burgers

MTY Franchising USA, Inc.
https://www.builtcustomburgers.com/
1-480-362-4800
9311 E Via De Ventura, Scottsdale, Arizona 85258

Initial Investment Range

$408,500 to $1,297,000

Franchise Fee

$25,000 to $52,500

Built Custom Burgers is a fast casual restaurant featuring build-your-own burgers, signature burgers, side dishes, sandwiches, salads, desserts, ice-cream shakes, non-alcoholic beverages and certain alcoholic beverages, including, at a minimum, beer and wine.

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Built Custom Burgers March 28, 2025 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.

1

Franchisor Stability Risks

Start Here
Total: 10
4
1
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor’s 2024 consolidated financial statements show a significant net loss of over $12.5 million and impairment charges exceeding $44 million. While stockholder's equity remains positive, the substantial loss and asset value writedowns raise questions about the company's recent performance and financial stability. This could potentially impact MTY Franchising USA, Inc.'s (MTY USA) ability to support and grow the brand, presenting a notable risk to you as a franchisee.

Potential Mitigations

  • A thorough review of the franchisor's financials, including all footnotes and the auditor's report, by an experienced franchise accountant is essential.
  • Discuss the specific reasons for the 2024 net loss and impairment charges with the franchisor to understand their plan for future profitability.
  • Your business advisor should help you assess whether the franchisor has sufficient capital and cash flow to meet its support obligations.
Citations: Item 21, FDD Exhibit V

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals a very small system, with only three franchised units operating at the end of 2024. In 2022, one of the three operating units ceased operations, which could be interpreted as a high percentage of churn for that year. While the small numbers make statistical analysis difficult, the lack of growth and the instance of a closure in such a tiny system could indicate potential challenges with the business model or franchisee success.

Potential Mitigations

  • It is critical to contact the current and former franchisees listed in Item 20 to discuss their experiences and reasons for leaving.
  • Your business advisor can help you assess the viability of a franchise system with such a small footprint and history of closures.
  • An accountant should assist in developing extremely conservative financial projections, given the limited and concerning system data.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support. This system is not experiencing rapid growth; in fact, Item 20 data shows it has remained static at three units for the past three years, indicating a risk more related to stagnation than to overly ambitious expansion.

Potential Mitigations

  • Engage a business advisor to evaluate the franchisor's growth strategy and its potential impact on system support and brand value.
  • During discussions with existing franchisees, inquire about the quality and consistency of franchisor support as the system evolves.
  • Your attorney can help clarify the franchisor's contractual obligations for support, regardless of the system's size or growth rate.
Citations: Item 20

New/Unproven Franchise System

High Risk

Explanation

MTY USA began franchising this concept in 2017, yet as of late 2024, only three franchised units are operational. This extremely limited number of operating units over a seven-year period suggests a significant lack of market acceptance or franchisee success for the brand. Investing in such a small, stagnant system carries a very high risk, as the business model appears unproven at a franchise level, and brand recognition is likely minimal.

Potential Mitigations

  • Extensive due diligence is required, including mandatory calls to all current and former franchisees to understand the system's challenges.
  • A business advisor should help you critically evaluate why a system of this age has failed to grow.
  • Your accountant must help you prepare financial models that account for the high risk associated with an unproven concept.
Citations: Items 1, 2, 20, 21

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. A fad business is one tied to a fleeting trend, which can threaten long-term viability. While the custom burger concept is competitive, it is a well-established segment of the restaurant industry rather than a temporary fad. The primary risks for this business appear to stem from execution and competition, not the transient nature of the concept itself.

Potential Mitigations

  • A business advisor can help you research the long-term market trends for the specific industry to gauge its stability.
  • When speaking with the franchisor, inquire about their plans for innovation and product development to adapt to changing consumer tastes.
  • Review Item 11 with your attorney to understand the franchisor's commitment to research and development.
Citations: Item 1, Item 11

Inexperienced Management

Low Risk

Explanation

This risk was not identified in the FDD package. Item 2 shows that the management team, primarily from parent company MTY and its large affiliate Kahala Brands, possesses extensive experience in the restaurant industry and in franchising many different concepts. The risk here may not be a lack of experience, but rather the specific application of that experience and the potential for franchisee support to be diluted across a vast portfolio of brands.

Potential Mitigations

  • A business advisor can help you evaluate the direct relevance of the management team's experience to this specific brand.
  • Discuss with current franchisees their direct experiences with the management team's support and operational guidance.
  • Your attorney can help clarify which individuals or departments are contractually responsible for providing support.
Citations: Item 2, Item 3, Item 11

Private Equity Ownership

Medium Risk

Explanation

The franchisor, MTY USA, is part of a very large, publicly-traded portfolio company, MTY Food Group, Inc., which operates through numerous subsidiaries and affiliates like Kahala Brands. This complex structure, which behaves similarly to a private equity-owned system, may prioritize investor returns, rapid acquisitions, and cost-cutting over the long-term health of any single brand. Decisions could be made to benefit the parent's portfolio rather than your specific franchise, creating potential conflicts of interest.

Potential Mitigations

  • Research the parent company's history and reputation for managing its various franchise brands with help from a business advisor.
  • Discuss with franchisees how the parent company's ownership structure impacts day-to-day support and strategic direction.
  • Your attorney should review the Franchise Agreement for terms related to the sale of the system or assignment of the agreement.
Citations: Item 1

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent companies, MTY Franchising Inc. and MTY Food Group, Inc. Furthermore, Item 21 provides audited, consolidated financial statements for the U.S. franchisor entity, MTY USA, and its subsidiaries, which is the appropriate entity under franchise disclosure rules. There is no indication that a required parent company's financial information has been omitted.

Potential Mitigations

  • An accountant can confirm that the financial statements provided are for the correct legal entity and comply with disclosure rules.
  • If a parent company guarantees the franchisor's obligations, your attorney should verify that the parent's financials are included if required by law.
  • Your business advisor can help you understand the relationships between the franchisor, its parents, and its affiliates.
Citations: Item 1, Item 21

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 and Item 3 provide extensive histories of the franchisor's predecessors and affiliates, including Kahala Brands and the various other companies acquired by the MTY Food Group. While the history disclosed in Item 3 is concerning due to the volume of litigation, the FDD does not appear to be hiding or obscuring the identity or history of its predecessors.

Potential Mitigations

  • A franchise attorney can help you analyze the history of the franchisor and its predecessors as disclosed in Items 1, 3, and 4.
  • When speaking with long-term franchisees of affiliated brands, you can ask about their experience under prior ownership.
  • A business advisor can assist in researching the public reputation of any predecessor companies.
Citations: Item 1, Item 3, Item 4

Pattern of Litigation

High Risk

Explanation

A significant risk exists due to the extensive litigation history detailed in Item 3. Numerous lawsuits have been filed by franchisees against MTY USA's affiliates and predecessors, such as Papa Murphy's, SweetFrog, and Kahala Brands, alleging misrepresentation, fraud, and breach of contract. Several of these cases resulted in substantial settlements paid to the franchisees. This pattern suggests potential systemic issues within the larger organization's franchising practices, which could affect your experience.

Potential Mitigations

  • A franchise attorney's review of the numerous cases in Item 3 is absolutely essential to understand the nature and severity of the allegations.
  • Acknowledge that this history indicates a higher potential for disputes and consider this a major red flag in your investment decision.
  • You should ask the franchisor to explain the pattern of franchisee lawsuits across its affiliated brands.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
3
2
10

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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3

Financial & Fee Risks

Total: 10
5
4
1

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.

4

Legal & Contract Risks

Total: 16
7
3
6

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.

5

Territory & Competition Risks

Total: 5
2
2
1

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.

6

Regulatory & Compliance Risks

Total: 10
5
3
2

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.

7

Franchisor Support Risks

Total: 4
2
2
0

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.

8

Operational Control Risks

Total: 12
5
5
2

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.

9

Term & Exit Risks

Total: 18
12
4
2

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.

10

Miscellaneous Risks

Total: 2
2
0
0

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.