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How much does MidnighTreats cost?
Initial Investment Range
$132,900 to $396,000
Franchise Fee
$34,000 to $36,000
The franchise that we offer is for MidnighTreats, a 100% plant-based dessert shop featuring specialty gourmet cookies, ice cream sandwiches, specialty beverages, and other products and services.
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MidnighTreats February 13, 2025 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
MidnighTreats Franchising, LLC (MidnighTreats) is a new company with a weak financial position. The audited balance sheet for the period ending December 31, 2024, shows a members' deficit (negative net worth) of ($6,651). The FDD also explicitly lists 'Financial Support' as a Special Risk, questioning the company's ability to provide services. This may impact its ability to support you, grow the brand, or even remain in business, posing a significant risk to your investment.
Potential Mitigations
- Your accountant must conduct a deep analysis of the franchisor's complete financial statements, including all footnotes and cash flow statements.
- A business advisor can help you assess if the franchisor has sufficient capital to fulfill its support obligations without relying on new franchise sales.
- Inquire with your attorney about the implications of the franchisor's negative net worth and whether financial assurances like a bond are required by your state.
High Franchisee Turnover
Low Risk
Explanation
This risk, concerning a high rate of franchisees leaving the system, was not identified. Item 20 shows the system is new, with the first two franchisees added in 2024, so there is no history of turnover yet. High turnover in an established system can be a major red flag, often indicating issues with profitability, franchisor support, or the business model itself. You should monitor future FDDs for this data.
Potential Mitigations
- A business advisor can help you analyze franchisee turnover rates in future FDDs to gauge system health and satisfaction.
- It is wise to ask your attorney to help you frame questions for current franchisees about their satisfaction and intent to renew.
- When reviewing future data, have your accountant compare the system's turnover rate to any available industry benchmarks.
Rapid System Growth
Medium Risk
Explanation
As a new franchisor established in 2024, MidnighTreats has no history of managing system growth. Rapid expansion is projected in Item 20 Table 5, but the company's weak financial state, as shown in Item 21, raises concerns about its ability to scale support systems, training, and staff to adequately serve a growing number of franchisees. Over-expansion without sufficient resources could lead to a decline in support quality for all franchisees.
Potential Mitigations
- A business advisor should help you question the franchisor about their specific, funded plans for scaling support infrastructure to match projected growth.
- Engage with the first franchisees listed in Item 20 to gauge the current quality and responsiveness of the support they are receiving.
- Your accountant can assess if the franchisor's financial model appears sustainable to support growth without being entirely dependent on new franchise fees.
New/Unproven Franchise System
High Risk
Explanation
MidnighTreats is a new franchisor, established in January 2024 and beginning to franchise in February 2024. The FDD explicitly highlights 'Short Operating History' as a Special Risk. Investing in a new, unproven system carries higher risk because the business model, brand recognition, and support systems are not yet time-tested. The success of the initial company-owned stores may not translate to franchisee success, making this a riskier venture than an established brand.
Potential Mitigations
- A business advisor can help you conduct extensive due diligence on the founders' prior experience in both the food service industry and in franchising.
- Your accountant must scrutinize the financial projections, as the lack of a long operating history makes them inherently less reliable.
- Consulting with the very first franchisees about their early experiences will be critical for your own assessment.
Possible Fad Business
Medium Risk
Explanation
The business model is centered on plant-based desserts, a market segment that has seen recent growth. However, you should consider the risk that the specific concept could be tied to a niche or passing trend rather than sustained, long-term consumer demand. If the trend fades, your business could face declining sales, even if you are locked into a long-term franchise agreement. The FDD provides little information on research and development to adapt to changing tastes.
Potential Mitigations
- It is important to conduct your own local market research with a business advisor to gauge the long-term viability of a specialty plant-based dessert shop.
- Question the franchisor on their long-term vision and plans for product innovation to adapt to evolving consumer preferences.
- Your financial advisor can help you analyze the potential return on investment against the risk of the concept being a short-term trend.
Inexperienced Management
Medium Risk
Explanation
The key executives, Johnny and Diana Nguyen, have experience operating the affiliate-owned MidnighTreats shops since 2018 and 2022, respectively. However, Item 2 does not disclose any prior experience in managing a franchise system, which involves different skills like franchisee support, system-wide marketing, and training program development. This lack of specific franchising experience could pose a risk to the quality of support you receive.
Potential Mitigations
- A business advisor can help you assess whether the management team has hired experienced franchise professionals to assist them.
- It is crucial to speak with the initial franchisees about the quality and effectiveness of the training and support they have received.
- During your evaluation, ask management directly about how their prior experience translates to supporting a franchise network.
Private Equity Ownership
Low Risk
Explanation
This risk, where a franchisor is owned by a private equity firm that might prioritize short-term returns over franchisee health, was not identified in the FDD. Item 1 indicates MidnighTreats is a new LLC, and Item 2 lists the founders as the key executives, with no mention of outside private equity ownership. Such ownership can sometimes lead to rapid changes, cost-cutting in franchisee support, or a focus on a quick sale of the company.
Potential Mitigations
- A business advisor can help you research the ownership structure of any franchise you consider to understand the ultimate decision-makers.
- It is always prudent to ask existing franchisees about any changes in support or philosophy if ownership changes have occurred.
- Your attorney can review the assignment clauses in the franchise agreement to understand your rights if the franchisor is sold.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. Item 1 clearly discloses the franchisor and its affiliates, MidnighTreats, LLC and MidnighTreats RTC, LLC. It does not appear the franchisor is a subsidiary of a larger, undisclosed parent company. In some cases, a franchisor might be a new, thinly capitalized entity created by a larger parent, and the parent's financial health could be material. Here, the franchisor appears to be a standalone startup.
Potential Mitigations
- Your attorney can help you verify the corporate structure of a franchisor to ensure all controlling entities are properly disclosed.
- If a parent company exists and provides guarantees, an accountant should review the parent's financial statements.
- Always ask your attorney to clarify the relationships between all affiliated companies mentioned in Item 1.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified. The franchisor, MidnighTreats Franchising, LLC, was established in January 2024 and Item 1 states it has no predecessors. A predecessor is a company from which the franchisor acquired the business concept. If a predecessor existed, its history of litigation, bankruptcy, or franchisee relations would be important to understand as it could reveal inherited problems with the system.
Potential Mitigations
- It is important for your attorney to review Item 1 carefully to identify any disclosed predecessors and their history.
- A business advisor can help you research the history of a brand, especially if it was acquired from a predecessor company.
- Asking long-term franchisees about their experiences under any previous ownership is a key due diligence step.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified. Item 3 of the FDD states that 'No litigation is required to be disclosed in this Item.' While this is positive, it is important to remember that this is a very new company with only two franchisees. The absence of litigation is expected at this early stage. You should continue to monitor Item 3 in future FDDs for any emerging patterns of disputes, which could be a red flag.
Potential Mitigations
- Your attorney should confirm that no litigation exists that should have been disclosed under FTC rules.
- A business advisor can help you conduct independent online searches for any news or reports of disputes involving the company.
- In future years, it will be crucial to analyze the nature of any disclosed litigation 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