Daddy’s Chicken Shack
Initial Investment Range
$168,800 to $825,900
Franchise Fee
$125,000 to $750,000
As a Daddy’s Chicken Shack regional developer, you will offer franchises for the establishment and operation of, and you will provide services to, Daddy’s Chicken Shack restaurants under the Daddy’s Chicken Shack trade name and business system.
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Daddy’s Chicken Shack May 21, 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
The franchisor explicitly warns that its financial condition calls its ability to provide support into question. Audited financials in Exhibit B confirm this, showing significant and recurring net losses, a substantial negative net worth of ($771,820) as of year-end 2023, and negative working capital. The company's survival appears dependent on capital infusions from its parent, which is a significant risk to you as they may be unable to fulfill their support obligations.
Potential Mitigations
- Your accountant must conduct a deep analysis of the franchisor's financial statements, including the notes, to assess its long-term viability.
- A franchise attorney should review the parent company's obligations and determine if there is a binding commitment to continue funding the franchisor.
- Developing a contingency plan with your business advisor for a scenario where franchisor support diminishes or ceases is a crucial step.
High Franchisee Turnover
Low Risk
Explanation
This risk was not identified in the FDD package. Item 20, which tracks franchisee turnover, shows consistent growth for this new system with no terminations, non-renewals, or other cessations. High turnover in a franchise system can be a major red flag, often indicating systemic problems such as low franchisee profitability, inadequate support, or an unsustainable business model. Continuous monitoring of these figures in future FDDs would be prudent.
Potential Mitigations
- Engaging an accountant to analyze future Item 20 tables for any negative trends in franchisee turnover is a wise practice.
- Speaking with a range of franchisees with the help of a business advisor can provide qualitative insight into franchisee satisfaction and system health.
- Your attorney can help you understand the typical reasons for franchisee exits and what to look for in Item 20 data.
Rapid System Growth
High Risk
Explanation
The franchisor is growing very quickly, expanding from zero to 15 Regional Developer agreements in its first two years of franchising. This rapid expansion is occurring while the company is experiencing significant financial losses, as detailed in Item 21. Such fast growth could strain their limited financial and human resources, potentially compromising the quality and availability of the training, site selection assistance, and ongoing support that you and the franchisees you recruit will depend on.
Potential Mitigations
- In discussions with the franchisor, your business advisor can help you probe their specific plans for scaling support infrastructure to match growth.
- It is important to ask current Regional Developers about the quality and responsiveness of the support they are currently receiving.
- An attorney should review the franchisor's contractual support obligations to determine if they are specific and enforceable.
New/Unproven Franchise System
High Risk
Explanation
The franchisor explicitly discloses a "Short Operating History" as a special risk. The company was formed in 2021 and only began offering Regional Developer franchises in 2022. This lack of a long-term track record means the business model, support systems, and brand recognition are largely unproven in the marketplace. Investing in such a new system carries a higher level of risk compared to investing in an established brand with a history of sustained success.
Potential Mitigations
- A thorough investigation of the management team's prior experience in both franchising and the specific industry is critical; your business advisor can help.
- Speaking with the earliest Regional Developers listed in Item 20 can provide valuable insight into the system's initial challenges and progress.
- Your attorney might be able to negotiate more favorable terms in the agreement to help offset the higher risk associated with a new system.
Possible Fad Business
Low Risk
Explanation
This specific risk was not identified in the FDD package. The business model, focused on chicken sandwiches and related items, is part of a large and established segment of the fast-casual restaurant industry rather than a niche or fleeting trend. A fad business poses a risk because its popularity may be short-lived, potentially leading to a sharp decline in sales after the initial trend fades, even though your long-term contractual obligations remain.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term consumer demand for the products or services offered.
- It is wise to evaluate the franchisor's stated plans for menu innovation, marketing, and adapting to changing consumer tastes.
- Consider working with a financial advisor to analyze the business model's resilience to economic shifts and competitive pressures.
Inexperienced Management
Medium Risk
Explanation
While some members of the management team have extensive franchising experience with other major brands like RE/MAX, their collective experience is not specifically in the chicken restaurant sector. Furthermore, the franchisor entity itself is very new. A lack of direct, long-term experience in operating this specific type of business could present challenges in providing nuanced operational guidance, product innovation, and effective support for you and the franchisees in your territory.
Potential Mitigations
- A business advisor can help you thoroughly vet the backgrounds of key operational personnel to gauge their direct industry experience.
- It would be beneficial to ask current Regional Developers about the quality and relevance of the operational support and guidance provided.
- In your discussions, ask the franchisor how they supplement their team's experience, for instance, through specialized consultants or staff.
Private Equity Ownership
Medium Risk
Explanation
The franchisor's ultimate parent company is Area 15 Ventures, LLC. While not explicitly identified as a traditional private equity firm, its role as a holding company for this and other franchise concepts (like Port of Subs) suggests an investment-focused ownership structure. This could lead to decisions that prioritize investor returns over the long-term health of the system, potentially impacting support levels, fees, or leading to a future sale of the brand, which is permitted in the agreement.
Potential Mitigations
- Your business advisor can help you research Area 15 Ventures and its track record with other businesses it has owned or managed.
- It is important to speak with current franchisees about any changes they have observed in system focus or support since the current ownership took over.
- An attorney should explain your rights and the potential risks if the franchise system is sold to another company.
Non-Disclosure of Parent Company
Medium Risk
Explanation
This risk is not present, as the FDD discloses the parent company, Daddy's Chicken Shack Holdings, LLC. However, the financials provided are for the franchisor entity only, not the parent. While the parent is not guaranteeing obligations, the franchisor's severe financial weakness and reliance on the parent for funding make the parent's financial health a material fact. The lack of parent financials creates a gap in the information needed for a complete risk assessment of the franchisor's funding source.
Potential Mitigations
- Your accountant should carefully review the franchisor's financials and note the dependency on the parent company for funding.
- It is advisable for your attorney to ask the franchisor if they will voluntarily provide the parent company's financial statements for review.
- A business advisor can help you assess the risk of relying on a parent company's promise of support without seeing its financial capacity to do so.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. The franchisor, Daddy's Chicken Shack Franchising, LLC, is a new entity and states in Item 1 that it does not have any predecessors. Therefore, there is no hidden history of prior business failures, litigation, or bankruptcy under a different name associated with this specific franchise system. This simplifies due diligence, as the analysis can focus solely on the current entity's short track record.
Potential Mitigations
- An attorney can confirm the lack of predecessors and focus due diligence on the current entity's brief history and financial state.
- A business advisor can help you concentrate your franchisee interviews on their experiences with the current management team.
- Your accountant's review can be centered on the provided financials without the need to trace back to prior entities.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. This is a positive sign, as a pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can indicate systemic problems with a franchisor's practices or franchisee relations. However, given the franchisor's very short operating history, the absence of litigation is expected and may not be indicative of long-term performance.
Potential Mitigations
- An attorney should confirm the clean litigation history and explain the types of lawsuits that would be red flags in the future.
- It is still crucial to speak with current and former franchisees about their relationship with the franchisor, with guidance from a business advisor.
- You should continue to monitor Item 3 in future FDDs for any changes.
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
Unlock Full Risk Analysis
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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
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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