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How much does Mai Franchising cost?
Initial Investment Range
$5,900 to $133,500
Franchise Fee
$4,150 to $49,500
The franchisee will operate a Mai sushi bar specializing in pre-packaged and made-to-order sushi, Japanese food, soups, hot and cold rice, hot and cold noodle bowls, hot and cold vegetable bowls and other food items.
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Mai Franchising October 16, 2024 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 19, 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 financial statements reveal significant signs of potential instability. As of June 30, 2024, the company has a negative member's equity (deficit) of ($97,890) and negative working capital. While profitable, the company distributes nearly all its income to its parent, leaving it with minimal cash. This practice, known as a cash sweep, could impair its ability to support franchisees or meet its obligations, as it relies on its parent for funding.
Potential Mitigations
- Your accountant must conduct a thorough review of the franchisor's financial statements, including the pattern of distributions to its parent company.
- Discuss the implications of the negative equity and cash sweep practices with a financial advisor to assess the risk to your investment.
- An attorney should review any guarantees provided by the parent company to determine if they are sufficient to back the franchisor's obligations.
High Franchisee Turnover
High Risk
Explanation
The data in Item 20, Table 3, indicates a high rate of franchisee turnover. In the 2024 fiscal year, 13 franchised outlets ceased operations or were terminated out of a starting base of 76, representing a churn rate of approximately 17%. Such a high rate can be a significant red flag, potentially indicating systemic issues such as franchisee unprofitability, dissatisfaction with the system, or insufficient support from Hana Group Franchising, LLC (Mai Franchising).
Potential Mitigations
- Contacting a significant number of former franchisees listed in Item 20 is essential to understand why they left the system.
- A business advisor can help you analyze the turnover data in Item 20 and compare it against industry averages.
- Discuss the specific reasons for the high number of ceased operations with the franchisor directly, with your attorney's guidance.
Rapid System Growth
Medium Risk
Explanation
Item 20 data shows the number of franchised units has grown rapidly, from 44 at the start of 2022 to 120 at the end of 2024. While growth can be positive, such a fast pace can strain a franchisor's ability to provide adequate site selection, training, and ongoing operational support to all franchisees. The quality of support may decline if the franchisor's infrastructure does not keep pace with its expansion, potentially affecting your business's performance.
Potential Mitigations
- Inquiring with both new and established franchisees about the current quality and responsiveness of franchisor support is a crucial step.
- Your business advisor should help you evaluate whether the franchisor's support team and systems seem adequate for its rapid growth.
- Your attorney can help you ask the franchisor about their specific plans for scaling their support infrastructure.
New/Unproven Franchise System
Medium Risk
Explanation
The franchisor, Mai Franchising, began offering franchises in 2015. While not a brand new startup, its rapid recent growth combined with a business model heavily dependent on third-party retailers presents a unique risk profile. An unproven model at this scale could lead to unforeseen challenges. The financial statements show profitability is being entirely distributed to the parent, which could impact long-term stability and support capabilities if the parent's situation changes.
Potential Mitigations
- A thorough due diligence process, involving discussions with a wide range of franchisees, is critical to assess the model's viability.
- Engage a franchise attorney to scrutinize the risks associated with the business model's dependency on third-party retailers.
- An accountant should evaluate the financial model's resilience, considering the franchisor's cash sweep practices.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. The business of providing prepared sushi and Japanese food items in retail locations is a well-established industry segment. A prospective franchisee should still assess the long-term viability of this specific business model and brand within its competitive landscape. Fads can relate not just to products but also to specific business execution models, so long-term consumer demand for this 'store-within-a-store' concept is a key consideration.
Potential Mitigations
- Consider engaging a business advisor to research the long-term market trends for prepared foods within grocery and retail settings.
- It is wise to evaluate the franchisor's plans for menu innovation and concept adaptation to stay relevant over time.
- Speaking with long-standing franchisees about the sustainability of the business can provide valuable insight.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD package. Item 2 indicates that the management team of Mai Franchising has prior experience in relevant fields such as retail, food service, and for some executives, prior roles within the parent or affiliate companies. However, a prospective franchisee should always conduct their own due diligence on the management team's track record and reputation in the industry.
Potential Mitigations
- Using a business advisor to conduct independent research on the background and reputation of the key executives listed in Item 2 is recommended.
- Asking current franchisees about their direct experiences with the management team's competence and support can offer practical insights.
- Your attorney can help you understand the roles and responsibilities of the key personnel.
Private Equity Ownership
High Risk
Explanation
The franchisor is a wholly-owned subsidiary of Hana Group US, LLC, which appears to exercise significant financial control. The franchisor's financials show that it distributes nearly all of its profits to the parent company, resulting in a negative net worth for the franchisor itself. This structure creates a dependency on the parent's financial health, which is not disclosed, and prioritizes investor returns over building the franchisor's own balance sheet, which may affect long-term stability.
Potential Mitigations
- Your accountant should carefully analyze the financial relationship between Mai Franchising and its parent company.
- It is important to discuss with your franchise attorney the enforceability of any parent company guarantees for the franchisor's obligations.
- Inquiring with existing franchisees about any perceived changes in support or strategy due to parent company directives is advisable.
Non-Disclosure of Parent Company
High Risk
Explanation
The franchisor, Mai Franchising, is a wholly owned subsidiary of Hana Group US, LLC. The franchisor is financially dependent on its parent, having a negative net worth and having its cash managed and swept by the parent. However, the financials for the parent, Hana Group US, LLC, are not provided. This lack of disclosure makes it impossible to fully assess the financial health of the ultimate controlling entity, which presents a significant risk to your investment.
Potential Mitigations
- Your attorney should request the financial statements of the parent company, Hana Group US, LLC, for a complete financial picture.
- An accountant should review the provided franchisor financials with a focus on the risks posed by the lack of parent company disclosure.
- Understanding the legal relationship and any formal support agreements between the parent and the franchisor is a discussion to have with your attorney.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 describes the franchisor's history, including a name change and its relationship with its parent, Hana Group US, LLC, and a predecessor, Peace Dining Corporation. While the history is complex, the disclosure appears to meet legal requirements. A prospective franchisee should still be aware that past issues under predecessors can sometimes carry over into a new system.
Potential Mitigations
- Your franchise attorney can help you review the disclosed history of the franchisor and its predecessors for any potential red flags.
- Independent online research into the history of the companies and brands mentioned may provide additional context.
- Asking long-term franchisees about their experiences under any previous ownership or company structure can be informative.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 states, "There is no litigation that must be disclosed in this Item." The absence of a pattern of franchisee-initiated lawsuits for fraud or franchisor-initiated suits for royalty collection is a positive sign. However, this does not guarantee a dispute-free relationship. You should still perform your due diligence with existing franchisees regarding their satisfaction with the franchisor.
Potential Mitigations
- Your attorney should confirm that no material litigation is pending by conducting independent legal research.
- It is still prudent to ask current and former franchisees about their relationship and any informal disputes they may have had with Mai Franchising.
- A business advisor can help you assess the overall health of the franchisee-franchisor relationship through these discussions.
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