Great Steak Logo

Great Steak

Kahala Franchising, L.L.C.
https://www.kahalamgmt.com
1-480-362-4800
9311 E. Via De Ventura, Scottsdale, Arizona 85258

Initial Investment Range

$153,500 to $662,850

Franchise Fee

$15,500 to $60,000

We offer Great Steak franchises. As a franchisee, you will operate a restaurant called Great Steak, preparing, specializing in, and serving Philadelphia cheesesteak sandwiches, baked potatoes with all of the toppings, hamburgers and related fast food menu items.

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Great Steak 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.

1

Franchisor Stability Risks

Start Here
Total: 10
3
2
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The parent company, MTY Franchising USA, Inc., reported a net loss of over $12.5 million for fiscal year 2024, a significant downturn from the prior year's profit. The Maryland state addendum also discloses that regulators required a financial assurance due to the franchisor's financial condition, forcing a deferral of initial fees. These factors indicate potential financial weaknesses that could impact Kahala Franchising, L.L.C.'s (Kahala) ability to provide long-term support and grow the brand.

Potential Mitigations

  • Your accountant should thoroughly analyze the parent company's consolidated financial statements, paying close attention to the reasons for the recent net loss.
  • Discuss the implications of the state-mandated financial assurance with your franchise attorney to understand the underlying financial health concerns.
  • A business advisor can help you assess whether the franchisor's current financial state can adequately support the entire franchise system.
Citations: Item 21, Exhibit V, Exhibit A (Maryland Addendum)

High Franchisee Turnover

High Risk

Explanation

Item 20 data reveals a significant negative trend, with the number of U.S. franchised outlets shrinking from 31 to 24 over the last three years. The turnover rates in 2022 and 2023 were particularly high, at over 15% annually due to non-renewals and outlets ceasing operations. This consistent decline suggests potential systemic issues, which could range from franchisee unprofitability to dissatisfaction with the system, posing a risk to your investment.

Potential Mitigations

  • Speaking with a significant number of former franchisees from the list in Exhibit U is critical to understand why they left the system.
  • Your franchise attorney can help you frame specific questions for the franchisor regarding the high turnover and unit closures.
  • A business advisor should help you evaluate if the factors causing this decline could affect your potential for success.
Citations: Item 20 (Tables 1, 3)

Rapid System Growth

Low Risk

Explanation

This risk was not identified. The franchise system has been shrinking, not growing rapidly, over the last three years. Rapid growth can strain a franchisor's resources, potentially leading to inadequate support for new franchisees. While not a risk here, understanding a system's growth trajectory is crucial for assessing franchisor stability and support capacity.

Potential Mitigations

  • When evaluating any franchise, your business advisor can help analyze the system's growth rate in Item 20 to ensure it is sustainable.
  • Your accountant should review the franchisor's financial statements to confirm it has the capital to support its stated growth plans.
  • Consulting with a franchise attorney is advisable to understand the franchisor's support commitments in the franchise agreement.
Citations: Not applicable

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified. The Great Steak brand and its predecessors have been operating and franchising for many years, as detailed in Item 1. Investing in a new or unproven system carries higher risks, as the business model may be untested and the franchisor may lack experience in providing support. This does not appear to be the case here.

Potential Mitigations

  • When considering a newer franchise, your business advisor should help you research the management team’s industry and franchising experience.
  • For any emerging system, an accountant's review of the franchisor’s capitalization is critical to assess its ability to fund initial growth and support.
  • Your attorney can help you scrutinize the support promises made by a new franchisor in the franchise agreement.
Citations: Not applicable

Possible Fad Business

Low Risk

Explanation

This risk was not identified. The business model, focused on cheesesteaks and related fast food, is part of a well-established segment of the restaurant industry and is not based on a new or fleeting trend. Fad-based businesses carry the risk that consumer interest will decline, potentially harming your long-term investment after the trend passes.

Potential Mitigations

  • For any franchise concept, your business advisor can help you conduct independent market research to gauge long-term consumer demand.
  • It is wise to assess a franchisor's plans for product innovation and adaptation with your marketing consultant.
  • An accountant can help you model the financial viability of a business beyond its initial trendiness.
Citations: Not applicable

Inexperienced Management

Low Risk

Explanation

This risk was not identified. The executive team detailed in Item 2 appears to have extensive and long-term experience within the franchising industry and with the parent company, Kahala/MTY. Inexperienced management can pose a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support.

Potential Mitigations

  • It is prudent to research the backgrounds of the key executives listed in Item 2 with a business advisor.
  • Your attorney can help you formulate questions for existing franchisees about their confidence in the current management team's direction and support.
  • An accountant can help assess if management's financial decisions appear sound based on the Item 21 statements.
Citations: Not applicable

Private Equity Ownership

Medium Risk

Explanation

The franchisor is part of a large, publicly-traded company, MTY Food Group, Inc., which owns dozens of other brands. This structure can create pressure to prioritize shareholder returns, which may not always align with the long-term health of an individual franchisee. Decisions about fees, support levels, or system-wide changes could be influenced by broader corporate financial goals rather than the specific needs of Great Steak franchisees.

Potential Mitigations

  • It would be beneficial to have your business advisor research MTY Food Group's reputation and its management of other subsidiary franchise brands.
  • You should discuss with existing franchisees whether they have observed any changes in support or strategy driven by the parent company.
  • Your attorney should review the assignment clause in the Franchise Agreement to understand how easily the brand could be sold.
Citations: Item 1

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified. The FDD clearly discloses the parent company, MTY Franchising USA, Inc., in Item 1 and provides its audited financial statements in Item 21 along with a performance guaranty. Failure to disclose a parent company's identity or financials, when required, can obscure significant risks related to the true financial stability and control of the franchise system.

Potential Mitigations

  • A franchise attorney can help verify the full corporate structure of a franchisor to ensure all relevant parent companies are disclosed.
  • Your accountant should confirm that if a parent company guarantees the franchisor's obligations, its financial statements are included and audited.
  • If a franchisor is a newly formed subsidiary, your business advisor should assess its capitalization and reliance on the parent.
Citations: Not applicable

Predecessor History Issues

Medium Risk

Explanation

Item 1 details a complex history with multiple predecessors and acquisitions under the MTY Food Group umbrella. Item 3 discloses past litigation involving some of these predecessor and affiliate entities, including cases with allegations of misrepresentation. While these specific cases are concluded, this history suggests you are joining a system that has been assembled through numerous corporate transactions, which can sometimes lead to integration challenges or legacy issues affecting your franchise.

Potential Mitigations

  • It is advisable to have your attorney carefully review the disclosed history of predecessors and affiliates and the litigation in Item 3.
  • When speaking with long-term franchisees, you could ask about their experience through any corporate transitions or acquisitions.
  • Your business advisor can help research the public reputation and history of the various entities involved in the brand's past.
Citations: Items 1, 3

Pattern of Litigation

High Risk

Explanation

Item 3 discloses a history of litigation and regulatory actions involving the franchisor's parent company and its various affiliated brands. These cases include allegations of misrepresentation, fraud, and violations of state franchise laws, with multiple cases concluding with franchisor entities paying settlements to franchisees. This pattern, while not all directly involving the Great Steak brand, indicates a potentially litigious environment within the larger corporate family you would be joining.

Potential Mitigations

  • A thorough review of every case listed in Item 3 with your franchise attorney is essential to understand the nature and outcomes of these disputes.
  • Your attorney can help you conduct independent research for more details on these cases, which are a matter of public record.
  • You should ask the franchisor to explain the circumstances surrounding this history of litigation and the steps taken to address the underlying issues.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
6
1
8

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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3

Financial & Fee Risks

Total: 10
4
5
1

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.

4

Legal & Contract Risks

Total: 16
5
8
3

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.

5

Territory & Competition Risks

Total: 5
2
1
2

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.

6

Regulatory & Compliance Risks

Total: 10
5
2
3

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.

7

Franchisor Support Risks

Total: 4
2
2
0

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.

8

Operational Control Risks

Total: 12
3
7
2

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.

9

Term & Exit Risks

Total: 18
7
7
4

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.

10

Miscellaneous Risks

Total: 1
1
0
0

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.