Cousins Maine Lobster
Initial Investment Range
$267,000 to $969,300
Franchise Fee
$91,000 to $147,000
As a franchisee, you will operate a restaurant serving lobster, seafood, and other items under the name “Cousins Maine Lobster” from a storefront location.
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Cousins Maine Lobster April 29, 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
CML Storefront, LLC (CML Storefront) has a members' deficit (negative net worth) of ($49,875) for fiscal year 2024, an improvement from ($110,292) in 2023, but still a significant concern. The FDD explicitly flags this as a "Financial Condition" risk. This financial weakness could potentially impact its ability to provide support and meet its obligations, even with a guarantee from its more financially stable affiliate, CML Franchise LLC.
Potential Mitigations
- Your accountant must conduct a detailed analysis of the franchisor's financial statements, including cash flow and the nature of the affiliate guarantee.
- It is advisable to discuss the practical implications of the franchisor's negative net worth on its support capabilities with your business advisor.
- Legal counsel should review the terms of the affiliate guarantee to assess its strength and enforceability.
High Franchisee Turnover
High Risk
Explanation
Item 20 data indicates a very high rate of franchisee churn. In 2023, two of seven franchises left the system (a 28.5% churn rate), and in 2024, two of five left (a 40% churn rate), through non-renewals and cessations of operation. Such high turnover is a significant red flag that may suggest systemic problems with profitability, franchisee satisfaction, or the business model itself, representing a substantial risk to your investment.
Potential Mitigations
- Contacting several current and former franchisees from the lists in Exhibit H is crucial to understand why so many have left the system.
- A discussion with your business advisor is necessary to evaluate the potential systemic issues that such a high turnover rate may indicate.
- Your accountant should use this information to create more conservative financial projections for your potential business.
Rapid System Growth
Medium Risk
Explanation
The system is relatively small, with only four franchised outlets at the end of 2024. While not growing at an unsustainable speed in terms of unit count, the high franchisee turnover combined with the franchisor's weak financial position presents a risk. It suggests that the support infrastructure may be strained or that the system's growth model is focused on selling franchises rather than ensuring franchisee success.
Potential Mitigations
- In discussions with current franchisees, inquire specifically about the quality and responsiveness of franchisor support.
- Your business advisor should help you assess whether the franchisor's management team has the capacity to support its franchisees effectively given the system's churn.
- An accountant should review the franchisor's financials to determine if it has adequate resources to support existing and future franchisees.
New/Unproven Franchise System
High Risk
Explanation
CML Storefront began offering franchises in 2017 and the system remains very small, with only four franchised units operating at the end of 2024. This limited operational history, combined with high franchisee turnover and the franchisor's negative net worth, indicates a system that may still be unproven. This increases the risk that the business model, support systems, and brand recognition may not be fully developed or sustainable long-term.
Potential Mitigations
- A thorough due diligence investigation into the founders' and management's experience in both the restaurant industry and franchising is critical; a business advisor can assist.
- Speaking with the earliest franchisees on the Item 20 list will provide valuable insight into the system's evolution and challenges.
- Your attorney may be able to negotiate more favorable terms to compensate for the higher risks associated with an unproven system.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. A fad business is one based on a short-lived trend, which can be a significant risk for a long-term investment like a franchise. Evaluating whether a business concept has enduring consumer appeal versus being a novelty is an important part of due diligence. The long-term success of your franchise depends on sustained market demand for its products or services.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term consumer demand for the core products.
- You should evaluate the franchisor's stated plans for innovation, new product development, and brand evolution to gauge its adaptability.
- Consider the business model's resilience to economic shifts and changing consumer tastes with your financial advisor.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD package. Franchisor management appears to have significant experience in the industry, with some executives having backgrounds at major companies like The Wendy's Company. Assessing management's experience in both the specific industry and in franchising is vital, as it directly impacts the quality of support, training, and strategic guidance you will receive. Inexperienced management can be a major liability for a franchise system.
Potential Mitigations
- A business advisor can assist you in researching the backgrounds of the key executives listed in Item 2.
- When speaking with existing franchisees, asking specific questions about their interactions with and the effectiveness of the management team is recommended.
- Your attorney can help you understand the roles and responsibilities of the key personnel as described in the FDD.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor does not appear to be owned by a private equity firm. When a franchisor is owned by a PE firm, there can be a risk that decisions are driven by short-term financial targets, such as a quick sale of the system, rather than the long-term health of the franchisees. This can sometimes lead to reduced support or increased fees.
Potential Mitigations
- Your attorney can help you investigate the ownership structure of the franchisor to confirm who the ultimate decision-makers are.
- A business advisor can research a private equity firm's history with other franchise brands if one is involved.
- Asking current franchisees about any changes in system philosophy or support levels is crucial if PE ownership exists.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not directly identified. Item 1 discloses several affiliate companies, including CML Franchise LLC, which acts as a guarantor for CML Storefront in several states. The FDD package appropriately includes the financial statements for this key affiliate. In franchising, it is important that the financial health of any parent or critical affiliate company is disclosed if they guarantee performance or are essential to the system's operation, which has been done here.
Potential Mitigations
- Your accountant should review the financial statements of both the franchisor and any guaranteeing parent or affiliate company.
- It is wise to have your attorney analyze the legal relationship between the franchisor and its affiliates to understand interdependencies.
- A business advisor can help you assess the operational role of any parent or affiliate company in the franchise system.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package, as CML Storefront states it does not have any predecessors. When a franchisor has predecessors, it is important to review their history for any signs of trouble, such as litigation, bankruptcy, or high franchisee failure rates. A negative history with a predecessor could indicate underlying problems with the business model or management that may have carried over to the current franchisor.
Potential Mitigations
- Your attorney should always verify the information about predecessors in Item 1.
- If a predecessor exists, a business advisor can help research public records and news archives for information about that entity's history.
- Speaking with long-term franchisees who operated under a predecessor can provide invaluable insight.
Pattern of Litigation
Medium Risk
Explanation
Item 3 discloses one litigation case initiated by the franchisor's affiliate against a former franchisee for abandoning their franchise. While not a pattern of franchisee-initiated fraud claims, a history of the franchisor suing its franchisees can indicate an aggressive or litigious relationship. The case was settled with the franchisee agreeing to pay the franchisor. This suggests a willingness by the franchisor to enforce its agreements through legal action.
Potential Mitigations
- Having your attorney carefully review the details and outcome of any disclosed litigation is important.
- It is prudent to discuss the franchisor's relationship with its franchisees with a number of those listed in Item 20.
- A business advisor can help you assess if the nature of the litigation suggests broader problems within the system.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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