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How much does Döner Haus cost?
Initial Investment Range
$366,958 to $675,715
Franchise Fee
$45,000 to $80,000
You will operate a quick-service restaurant that features doner kebab and other products under the trademark.
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Döner Haus April 22, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 22, 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 FDD explicitly warns that the franchisor’s financial condition calls its ability to provide support into question. Financial statements in Exhibit D confirm Doner Haus Franchising, LLC (Doner Haus) was only formed in June 2024, has no revenue, and incurred a net loss. This extreme lack of financial history and reliance on owner contributions presents a significant risk that Doner Haus may be unable to fulfill its obligations to you.
Potential Mitigations
- An experienced franchise accountant must thoroughly review the financial statements and assess the franchisor's capitalization and burn rate.
- It's critical to discuss with your business advisor the franchisor's funding plans and ability to survive without new franchise fee revenue.
- Your attorney should ask the franchisor for their detailed business plan and proof of sufficient capitalization to support the system.
High Franchisee Turnover
Low Risk
Explanation
This risk was not identified as Item 20 shows Doner Haus has not had any franchised outlets operating, so there is no history of franchisee turnover. In general, high turnover rates can be a major red flag, potentially indicating systemic problems, franchisee dissatisfaction, or lack of profitability within a franchise system.
Potential Mitigations
- You should ask the franchisor about their franchisee support and retention strategies, a topic your business advisor can help you explore.
- It is wise for your attorney to review the default and termination clauses in the Franchise Agreement.
- Once franchisees exist, speaking with them will be a key part of future due diligence.
Rapid System Growth
Low Risk
Explanation
This risk was not identified, as Item 20 data shows the system is brand new and has no history of rapid growth. Generally, when a franchise system expands too quickly, a franchisor's support infrastructure can be strained, potentially leading to inadequate training, site selection assistance, and ongoing operational guidance for its franchisees.
Potential Mitigations
- Engaging a business advisor to question the franchisor about their controlled growth strategy and plans for scaling support is a prudent step.
- An accountant can help assess if their financial model supports sustainable growth.
- Your attorney should review the franchisor's stated obligations for support in the Franchise Agreement.
New/Unproven Franchise System
High Risk
Explanation
The franchisor is a startup, formed in June 2024 with no franchisees operating as of the FDD date. The FDD's "Special Risks" section explicitly highlights the "Short Operating History," stating this is a riskier investment than a system with a longer track record. As one of the first franchisees, you will be part of an unproven system.
Potential Mitigations
- A thorough investigation into the founders' industry and franchising experience is essential, which your business advisor can assist with.
- Seeking legal counsel to negotiate more franchisee-favorable terms to offset the heightened risk is advisable.
- An accountant should scrutinize the business model's viability and the franchisor's capitalization.
Possible Fad Business
Medium Risk
Explanation
The business operates in the competitive quick-service restaurant market. While doner kebab is an established food item, the long-term consumer demand for this specific brand and its approach is unproven. Investing in any new restaurant concept carries the risk that it may not achieve sustained market acceptance, potentially impacting your long-term viability after any initial novelty fades.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term local demand for this specific concept.
- Understanding the franchisor's strategy for product innovation and brand evolution is crucial.
- An accountant can help you model financials based on conservative, long-term sales projections, not just initial hype.
Inexperienced Management
High Risk
Explanation
The executive team, particularly the CEO, appears to lack extensive prior experience in managing a franchise system or a multi-unit restaurant chain, as per Item 2. The COO's direct operational experience with the brand is also very recent. This management inexperience could translate into challenges in providing effective franchisee support, strategic guidance, and operational systems, increasing your risk as an early franchisee.
Potential Mitigations
- Your business advisor can help you probe the management team on their specific plans to overcome their lack of franchise system experience.
- You should speak with any affiliate employees or managers about the quality of operational leadership.
- Your attorney might ask if they have retained experienced franchise consultants to guide them.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified, as FDD Item 1 does not indicate that the franchisor is owned by a private equity firm. When PE firms own a franchise, there can be a risk that short-term financial goals for investors may take priority over the long-term health of the brand and the profitability of individual franchisees.
Potential Mitigations
- In any franchise review, your attorney should examine the franchisor's assignment rights in the agreement.
- A business advisor can help research the ownership structure and its potential impact on system strategy.
- Speaking with your accountant about how PE ownership could affect fees and required spending is also prudent.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk does not appear to be present, as Item 1 of the FDD clearly discloses a parent company, Doner Haus Group, LLC. Generally, a risk arises if a franchisor is a subsidiary of another company but fails to disclose that parent entity or its financials, which can obscure the true financial backing and control of the system.
Potential Mitigations
- Your attorney should always verify the corporate structure described in Item 1.
- If a parent company exists, an accountant should review its financial statements if provided, especially if the parent guarantees the franchisor's performance.
- A business advisor can help research the parent's history and reputation.
Predecessor History Issues
Low Risk
Explanation
This risk was not found, as the franchisor states in Item 1 that it has no predecessor. This type of risk occurs when a franchisor acquires a business but fails to fully disclose the predecessor's history, which might include issues like litigation or high franchisee failure rates, thereby presenting an incomplete picture of the system's past performance.
Potential Mitigations
- When a predecessor is disclosed, your attorney should carefully examine their litigation and bankruptcy history in Items 3 and 4.
- A business advisor can help you research the predecessor's reputation and performance.
- It would be wise to ask your accountant to analyze any available financial data from the predecessor's operations.
Pattern of Litigation
Low Risk
Explanation
The FDD does not disclose any litigation in Item 3. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a significant warning sign about a franchisor's practices and the health of the franchise system. Likewise, a high number of suits filed by the franchisor against franchisees can indicate an overly aggressive relationship.
Potential Mitigations
- Having your attorney conduct an independent public records search for litigation involving the franchisor and its principals is a wise precaution.
- A business advisor can help you frame questions for current franchisees about any disputes they are aware of.
- An accountant can review if litigation costs are impacting the franchisor's financial stability.
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