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How much does Extreme Pita cost?
Initial Investment Range
$192,260 to $513,000
Franchise Fee
$104,500 to $194,600
The franchise offered is for the rights to operate a franchised restaurant from MTY Franchising USA, Inc. doing business as "The Extreme Pita" (“Extreme Pita”), which specializes in the retail sale of "wrap-style" hot and cold pita and wrap sandwiches, flat baked pitas, salads, soups and other assorted foods and drinks, and other menu items related to the Extreme Pita concept, using the trade name EXTREME PITA.
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Extreme Pita March 28, 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 franchisor's 2024 financials show a net loss of over $12.5 million, reversing a prior-year profit. This is driven by impairment charges exceeding $43 million, indicating a significant write-down in the value of its assets and brands. Such financial volatility raises concerns about the franchisor’s stability and its long-term ability to support its franchise systems, including Extreme Pita.
Potential Mitigations
- A franchise-experienced accountant must analyze the consolidated financial statements, paying close attention to the footnotes explaining the large impairment charges.
- Discuss the franchisor’s financial health and the specific reasons for the asset value write-downs with your business advisor.
- Inquire with your attorney about the financial stability of the ultimate parent company, MTY Food Group, Inc., and if it guarantees the franchisor's obligations.
High Franchisee Turnover
High Risk
Explanation
The data in Item 20 reveals an extremely high turnover rate for this very small US system. In 2022, the single existing franchised unit ceased operations, representing a 100% churn rate. While a new unit was added in 2023, this history of unit failure raises significant concerns about the viability, profitability, and sustainability of the Extreme Pita franchise model in the United States.
Potential Mitigations
- It is critical to attempt to contact the former franchisee who ceased operations to understand the reasons for their failure; your attorney can help structure these questions.
- A thorough discussion with the single current franchisee is essential to assess their experience and profitability.
- Your business advisor should help you evaluate if this brand has a proven and sustainable model in the US market, given the turnover data.
Rapid System Growth
Low Risk
Explanation
This risk was not identified. The franchise system in the U.S. is not experiencing rapid growth; Item 20 data shows it is extremely small and stagnant. In general, excessively rapid expansion can strain a franchisor's ability to provide adequate support, training, and quality control to its franchisees.
Potential Mitigations
- When evaluating any franchise, your business advisor can help you assess if the franchisor's support infrastructure is keeping pace with its growth.
- Your accountant should review the franchisor's financials to see if they are reinvesting in support systems.
- Consulting with both new and established franchisees can provide insight into the quality of franchisor support over time.
New/Unproven Franchise System
High Risk
Explanation
The Extreme Pita system in the U.S. is extremely small, with only one franchised unit operating at the end of 2024 and a history of unit failure. This lack of a track record of successful franchisees in the U.S. indicates an unproven business model in this market. This presents a higher risk of business failure due to minimal brand recognition and untested operational support systems.
Potential Mitigations
- Extensive due diligence on the parent company's experience with similar brands is essential for your business advisor to perform.
- It is critical to speak with the single current U.S. franchisee about their experience and the franchisor's support.
- Your attorney may be able to negotiate more favorable terms, such as lower initial fees, to compensate for this higher risk.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. While any food concept can be subject to changing tastes, the wrap and sandwich concept is well-established. Generally, a prospective franchisee should be cautious of business models built on new or fleeting trends, as the long-term nature of a franchise agreement can outlast a concept's popularity.
Potential Mitigations
- Your business advisor can help you assess the long-term market demand for any franchise's core products or services.
- It is wise to evaluate a franchisor's plans for innovation and adaptation to stay relevant in the market.
- Consider the sustainability of the business model beyond current trends with your financial advisor.
Inexperienced Management
Low Risk
Explanation
The franchisor, MTY Franchising USA, Inc. (MTY USA), is part of a very large and experienced restaurant holding company. The executives listed in Item 2 generally have extensive experience in the restaurant and franchising industries, primarily through their roles at parent MTY or affiliate Kahala Brands. Therefore, this specific risk is not identified.
Potential Mitigations
- When evaluating any franchise, your business advisor can help you vet the management team's background and relevant experience in both the industry and in franchising.
- Speaking with existing franchisees often provides the best insight into management's competence and responsiveness.
- An accountant can review financials to see if executive compensation seems aligned with the company's performance and size.
Private Equity Ownership
Medium Risk
Explanation
The franchisor is a subsidiary of MTY Food Group, Inc., a publicly-traded company that owns dozens of brands. This structure presents risks, such as decisions prioritizing shareholder returns over franchisee profitability, potential cost-cutting in support, and the possibility of the entire system being sold. The focus may be on larger brands within the portfolio, potentially leaving smaller brands like Extreme Pita with limited resources or attention.
Potential Mitigations
- Research the parent company's track record with its other franchise systems with the help of your business advisor.
- It is crucial to talk to franchisees about any changes in support, fees, or system direction.
- The implications of the franchisor's broad right to sell the system should be carefully reviewed with your attorney.
Non-Disclosure of Parent Company
Low Risk
Explanation
The FDD clearly identifies MTY Franchising USA, Inc. (MTY USA) as the franchisor and discloses that it is a subsidiary of MTY Food Group, Inc. The provided financial statements in Item 21 are for the consolidated entity, MTY USA and its subsidiaries, which is appropriate. The risk of non-disclosure of a relevant parent company was not identified.
Potential Mitigations
- Your attorney should always verify the corporate structure if there's suspicion of an undisclosed controlling entity.
- If a parent company provides a guarantee for the franchisor's obligations, your accountant should ensure the parent's financials are provided and reviewed.
- It is wise to have an attorney confirm that the entity signing your franchise agreement is the same entity disclosed in Item 1.
Predecessor History Issues
High Risk
Explanation
The FDD discloses that MTY USA acquired the brand from predecessors and is affiliated with numerous other brands acquired over time (e.g., Kahala, Papa Murphy's). Item 3 discloses a significant litigation history involving these affiliates and predecessors, with claims of misrepresentation and fraud. This suggests a pattern of issues that may be inherited or systemic across the parent company's portfolio, presenting a risk to new franchisees.
Potential Mitigations
- A careful review of the litigation history of all predecessors and affiliates in Item 3 with your attorney is crucial.
- Your business advisor can help you research the track record of these predecessor companies and their franchisee relationships.
- Inquiring with long-term franchisees about their experience under any previous ownership can provide valuable context.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses a significant number of lawsuits involving the franchisor's parent and affiliate companies against their franchisees. The cases listed involve serious allegations such as misrepresentation, fraud, and violations of franchise law. This extensive history of litigation across the larger MTY portfolio is a major red flag, suggesting potentially systemic issues with the franchisor's business practices or franchisee relations that could also affect your franchise.
Potential Mitigations
- Your franchise attorney must carefully review the details, allegations, and outcomes of all lawsuits disclosed in Item 3.
- Considering the volume of litigation, performing independent research into these cases with the assistance of your attorney is advisable.
- You should treat this pattern of litigation as a significant risk and discuss its implications for your potential relationship with the franchisor with your attorney.
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