Famous Dave's
Initial Investment Range
$68,500 to $4,510,750
Franchise Fee
$60,000 to $135,750
Famous Dave’s of America, Inc. franchises authentic, down-home barbecue restaurants featuring genuine smoked barbecue.
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Famous Dave's 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor's parent and guarantor, MTY Franchising USA, Inc., reported a net loss of over $12.5 million for the fiscal year ended November 30, 2024, a sharp reversal from a net income of nearly $17 million the prior year. This loss was driven by significant impairment charges of over $44 million on intangible assets and goodwill. Such financial instability could potentially impact the franchisor's ability to support you and invest in the brand's growth.
Potential Mitigations
- A franchise accountant should thoroughly analyze the guarantor's audited financial statements, including all footnotes and the auditor's report, to assess its financial health.
- Discuss the reasons for the net loss and impairment charges with the franchisor to understand their plan for returning to profitability.
- Your attorney should review any performance guarantees from the parent company to understand their scope and enforceability.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals a notable rate of franchisee exits. In fiscal year 2023, 11 franchised outlets ceased operations for "other reasons" out of a starting base of 91, representing a 12% churn rate from this category alone. In 2022, 10 units exited (3 reacquired, 7 ceased) from a base of 97 (10.3% churn). This pattern, especially the high number of cessations, may indicate systemic issues, franchisee dissatisfaction, or challenges with profitability within the system.
Potential Mitigations
- It is critical to contact a significant number of current and former franchisees from the list in Exhibit E-1 to discuss their experiences and reasons for leaving.
- Your business advisor can help you analyze the turnover data for trends over the past three years and compare it to industry benchmarks.
- Inquire directly with the franchisor for specific, non-generic reasons behind the high number of units that have "ceased operations for other reasons."
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchisor's parent company, MTY Food Group, Inc. (MTY), operates a vast system, suggesting that while the Famous Dave's brand itself may be growing at a manageable pace, the parent company has experience managing large-scale operations. However, rapid growth in any system can strain support resources. You should still evaluate the quality and availability of support for new franchisees.
Potential Mitigations
- Your business advisor should help you assess whether the franchisor's support infrastructure seems adequate for its current number of franchisees.
- Interviewing a broad range of existing franchisees, both new and established, can provide insight into the quality of franchisor support.
- An accountant's review of the parent company's financials can help determine if resources are being allocated to support brand growth.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified in the FDD Package. Famous Dave's is a well-established brand, having commenced its franchise program in 1998 and operated restaurants since 1994. The system is mature, with a significant number of franchised and company-owned outlets. The franchisor and its parent, MTY, have extensive experience in the restaurant industry and franchising.
Potential Mitigations
- While the system is mature, a discussion with your business advisor about the brand's current market position and growth strategy is still valuable.
- Consulting with your attorney to understand the complexities of dealing with a large, established franchisor is recommended.
- Even with a proven system, having an accountant help you build a conservative financial model is a prudent step.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD Package. Barbecue restaurants represent a long-established and popular segment of the restaurant industry in the United States. While consumer tastes can change, the core concept of barbecue has demonstrated sustained demand over many decades and is not typically considered a short-term fad.
Potential Mitigations
- A business advisor can help you analyze the long-term consumer demand for this specific style of barbecue in your local market.
- Reviewing the franchisor's plans for menu innovation and brand adaptation in Item 11 is still a useful exercise.
- An analysis of the competitive landscape for similar restaurant concepts in your area should be conducted with a real estate professional.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 2 indicates that the key personnel of the franchisor and its parent companies (MTY, Kahala Brands) have extensive and long-term experience in the restaurant and franchising industries. Many executives have held their positions or similar roles within the affiliated companies for several years.
Potential Mitigations
- It is still beneficial to discuss with your business advisor how the management structure of a large parent company might affect support for your specific unit.
- Interviewing current franchisees about their direct experiences with the management team's responsiveness and support is recommended.
- Your attorney can help you understand the roles and responsibilities of the key personnel listed in Item 2.
Private Equity Ownership
Medium Risk
Explanation
The franchisor is part of a complex corporate structure ultimately controlled by MTY Food Group, Inc., a publicly-traded company that holds a vast portfolio of restaurant brands. This structure could create risks where decisions are made to benefit the parent company or its shareholders over the long-term health of the Famous Dave's brand, such as diverting resources or selling the brand. The Franchise Agreement gives the franchisor broad rights to sell or assign the system without your consent.
Potential Mitigations
- A business advisor can help you research MTY's track record with its other franchised brands.
- It's important to ask current franchisees about any changes in support or system direction they have experienced under the current ownership structure.
- The full implications of the franchisor's right to sell the system should be reviewed with your attorney.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD Package. The FDD clearly discloses the parent company structure, with MTY Franchising USA, Inc. identified as the Guarantor. Audited consolidated financial statements for this Guarantor are provided in Exhibit B-1, and a formal Guarantee of Performance is included as Exhibit B-2, which appears to comply with standard disclosure requirements.
Potential Mitigations
- Your accountant should review the provided parent company financials to assess the strength of the guarantee.
- It is advisable for your attorney to review the specific language of the Guarantee of Performance to understand its protections and limitations.
- Asking the franchisor about the relationship and operational integration between the parent and the Famous Dave's brand can provide useful context.
Predecessor History Issues
High Risk
Explanation
Item 3 discloses extensive litigation involving various predecessor and affiliated entities under the MTY corporate umbrella, such as Kahala Franchising, SFF (SweetFrog), and Papa Murphy's. This history includes numerous franchisee disputes, some alleging misrepresentation, and regulatory actions. While not all are directly tied to Famous Dave's, it reveals a litigious history within the broader organization that you are joining, which could be a material consideration for a prospective franchisee.
Potential Mitigations
- A thorough review of the entire litigation history in Item 3 with your franchise attorney is crucial to understand the nature and pattern of these disputes.
- Discussing the corporate culture and dispute resolution philosophy with current franchisees can provide valuable context.
- Your business advisor can help you assess the potential risks associated with being part of a large, complex organization with such a history.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses a significant and extensive history of litigation involving the franchisor's parent and affiliated companies. Multiple concluded cases involved franchisees or area developers alleging fraud, misrepresentation, and breach of contract, some resulting in substantial settlement payments by the franchisor's affiliates. This pattern of franchisee-initiated legal action across the broader organization suggests a potentially litigious environment and raises concerns about the franchisor's business practices and relationships with its franchisees.
Potential Mitigations
- Your franchise attorney must carefully analyze the details of all litigation disclosed in Item 3 to understand the pattern of claims and outcomes.
- Considering the volume of litigation, speaking with an attorney about the potential risks of entering into a relationship with this organization is highly advisable.
- It is crucial to contact franchisees listed in Item 20 to inquire about their relationship with the franchisor and the company's dispute resolution culture.
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
Unlock Full Risk Analysis
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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
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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