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How much does HHC cost?
Initial Investment Range
$715,950 to $1,910,000
Franchise Fee
$57,500 to $217,500
As a franchisee, you will operate a fast-casual restaurant under the name “HHC®” serving fried chicken sandwiches and chicken tenders seasoned with our proprietary spices, french fries, salads, and related food and drink items served in new age, hipster atmosphere.
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HHC 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 franchisor's audited financials show a history of instability. It had a net loss of over $347,000 and negative equity of over $392,000 in 2022. While now profitable, the balance sheet reveals a very large receivable ($2.4M) due from an affiliate. This suggests cash is being moved out of the franchisor entity you contract with, and the financial health of the affiliate holding the funds is unknown, posing a significant structural risk to you.
Potential Mitigations
- Your accountant must conduct a deep analysis of the financial statements, including the large affiliate receivable and its implications for the franchisor's solvency.
- A business advisor can help you assess if the recent profitability is sustainable or primarily driven by one-time franchise sales.
- Ask your attorney about the legal ramifications of contracting with an entity that may not hold its own operating cash.
High Franchisee Turnover
High Risk
Explanation
The franchisee turnover data in Item 20, while involving small numbers due to the system's youth, indicates potential instability. In 2023, the system experienced one termination, which represented a significant portion of the small number of operating franchises at the time. This could be a warning sign of issues with the business model, support, or franchisee profitability that may become more pronounced as the system grows.
Potential Mitigations
- It is critical to contact current and former franchisees, especially the one who terminated, to understand their experiences and reasons for leaving.
- Your franchise attorney can help you formulate specific questions for former franchisees regarding their departure.
- Discuss the turnover rate and the specific circumstances of the termination directly with the franchisor, with guidance from your business advisor.
Rapid System Growth
High Risk
Explanation
Item 20 data reveals extremely rapid growth. The number of franchised units more than doubled in 2024, growing from 7 to 17 locations. While growth can be positive, such a fast pace can severely strain a young franchisor's ability to provide adequate site selection guidance, training, and ongoing operational support to all franchisees. This may lead to quality control issues and diluted brand value.
Potential Mitigations
- A business advisor should help you question the franchisor about their plans and capacity for scaling support infrastructure to match this rapid growth.
- Speaking with franchisees who opened during this growth spurt is essential to gauge if support levels have been maintained.
- Your accountant can review the financials to assess if the franchisor is reinvesting sufficiently in support staff and systems.
New/Unproven Franchise System
High Risk
Explanation
HHC Franchising, LLC is a very new and unproven franchise system, having been formed in late 2021 and beginning to offer franchises only in January 2022. Investing in such a young system carries higher-than-average risk, as the business model's long-term viability, the effectiveness of the support systems, and overall brand recognition are not yet established. Early financial instability underscores this risk.
Potential Mitigations
- Conducting thorough due diligence on the founders' and management's specific experience in franchising is critical.
- A business advisor can help you evaluate the sustainability of the concept and its competitive advantages.
- Consulting with your attorney is important to understand the risks associated with a franchisor that has a limited operating history.
Possible Fad Business
Medium Risk
Explanation
The 'hot chicken' concept is part of a very popular and recent food trend. While currently in high demand, there is a risk that this could be a 'fad' business. If consumer tastes shift or the market becomes oversaturated, demand could decline significantly. This poses a long-term risk to your investment, as your franchise agreement obligations would continue even if the trend fades.
Potential Mitigations
- A business advisor can help you research the long-term market data for this specific food concept versus broader, more established restaurant categories.
- It would be wise to ask the franchisor about their plans for menu innovation and brand evolution to stay relevant beyond the current trend.
- Creating financial models with your accountant that project performance under scenarios of both sustained and declining consumer demand is a prudent step.
Inexperienced Management
Medium Risk
Explanation
While the management team has prior restaurant industry experience, HHC Franchising, LLC itself is new to franchising. Managing a franchise system requires a different skill set than running restaurants, focusing on support, training, and compliance. The company's disclosed regulatory action in Virginia for selling franchises without registration highlights this inexperience and raises concerns about their internal legal and compliance controls, which could affect you in the future.
Potential Mitigations
- It is important to ask the franchisor directly about the specific franchise management experience of their key support staff.
- When speaking with existing franchisees, inquire specifically about the quality and responsiveness of the support and training they have received.
- Your attorney should review the FDD for any other signs of regulatory inexperience or compliance gaps.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Private equity ownership can introduce risks related to a focus on short-term returns over long-term system health, potentially leading to increased fees, reduced support, or a quick sale of the franchise system. It is important to understand the ownership structure of a franchisor.
Potential Mitigations
- Your business advisor can help you research the ownership structure of the franchisor and any parent companies.
- If a private equity firm is involved, it's wise to investigate its track record with other franchise brands they have owned.
- Consulting your attorney is crucial to understand any clauses in the agreement that permit the franchisor to sell the system without your consent.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. The FDD discloses the parent company, HHC Worldwide Inc. While failure to disclose a parent can be a risk, a related concern here is that the parent's financials are not provided. Given the significant financial transactions between the franchisor and its affiliates, the absence of parent financials limits a full understanding of the entire enterprise's financial health.
Potential Mitigations
- Your accountant should carefully analyze the disclosed affiliate transactions and assess their potential impact on the franchisor's stability.
- It may be prudent for your attorney to inquire why the parent company financials are not included, especially if the parent guarantees any obligations.
- A business advisor can help you research the parent company and its principals to gauge their financial strength.
Predecessor History Issues
Low Risk
Explanation
This risk is not applicable as the FDD indicates HHC Franchising, LLC has no predecessors. When a franchisor has predecessors, it is important to review their history for issues like litigation, bankruptcy, or high franchisee turnover, as these can indicate inherited problems within the system you are joining.
Potential Mitigations
- When reviewing an FDD that does list predecessors, your attorney should pay close attention to their history in Items 1, 3, and 4.
- A business advisor can help you research the reputation and track record of any predecessor entities.
- It is always a good practice to ask long-term franchisees about their experience under any previous ownership.
Pattern of Litigation
Medium Risk
Explanation
Item 3 discloses a recent administrative action where the franchisor was fined for selling franchises in Virginia without being properly registered. While this is a single event and not a broad pattern, its nature is a significant red flag for a new franchisor. It suggests potential weaknesses in their legal and regulatory compliance procedures, which could expose the system and its franchisees to future risks.
Potential Mitigations
- Your attorney must carefully review this disclosure and discuss its potential implications for the franchisor's operational diligence.
- You should ask the franchisor what specific steps have been taken to improve their compliance procedures since this event.
- A business advisor can help you assess if this event is indicative of broader management or procedural issues.
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