Pita Pit Logo

Pita Pit

Pita Pit Franchising, LLC
105 N. 4 Street, Suite 201, Coeur d’Alene, Idaho 83814

Initial Investment Range

$353,154 to $685,075

Franchise Fee

$20,000 to $50,000

The Franchisee will operate a single retail establishment devoted to the preparation and sale of pita sandwiches and other food items under the trade name PITA PIT.

Enjoy our complimentary free risk analysis below

Unlock the full risk analysis to access 9 more categories covering 100+ risks.

Pita Pit July 2, 2024 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
4
1
5

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

Pita Pit Franchising, LLC (PPF) was formed in March 2023 after the predecessor's new owners defaulted and the original owners took back the assets via foreclosure. The audited financials show a very small net income for 2023 and a heavy reliance on supplier rebates. Several state addenda require fees to be deferred due to PPF's financial condition, explicitly highlighting this as a significant risk to PPF's ability to provide support.

Potential Mitigations

  • Your accountant must thoroughly review the financial statements, including all footnotes and the history of the predecessor entity outlined in Item 1.
  • Discuss the implications of the recent foreclosure and the franchisor’s reliance on rebate revenue for its own profitability with a business advisor.
  • It is crucial to have your attorney analyze the protections offered by any state-mandated financial assurances, like deferred fees.
Citations: Item 1, Item 21, State Addenda (Maryland, North Dakota, Washington)

High Franchisee Turnover

High Risk

Explanation

The franchise system is shrinking at an alarming rate. Item 20 data shows the number of franchised outlets declined from 131 to 74 between 2021 and 2023, a 43.5% reduction. In 2023 alone, 25 outlets (out of a starting base of 98) closed or were terminated. This extremely high turnover rate, also noted as a “Special Risk” by the franchisor, signals potential systemic problems with profitability, franchisee satisfaction, or support.

Potential Mitigations

  • A thorough analysis of the Item 20 tables with your accountant is essential to understand the scale of franchisee churn.
  • You should contact a significant number of the former franchisees listed in Exhibit I to understand why they left the system.
  • Discussing the reasons for this high turnover directly with the franchisor should be a priority, with guidance from your attorney.
Citations: Item 20, FDD Page 6

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. The franchise system is shrinking significantly, not growing rapidly. Rapid growth can strain a franchisor's ability to provide adequate support and training to all its new franchisees, potentially diluting the brand's quality and leaving you without the help you need to succeed. Constant monitoring of a franchisor's growth rate in Item 20 is important.

Potential Mitigations

  • Your business advisor can help you assess if a franchisor's support infrastructure is keeping pace with its unit growth.
  • Inquiring with both new and established franchisees about the quality and timeliness of support provides valuable insight.
  • An accountant should review the franchisor's financials to see if they are reinvesting in support systems during periods of growth.
Citations: Not applicable

New/Unproven Franchise System

High Risk

Explanation

The current franchisor entity, PPF, was formed in March 2023. While the brand has history, this franchising company is new and was created after a recent foreclosure of the prior ownership structure. The FDD's “Special Risks” section explicitly highlights the franchisor's “Short Operating History.” This newness creates uncertainty about the stability and effectiveness of the current management and support systems, making it a riskier investment.

Potential Mitigations

  • Engage a business advisor to scrutinize the business plan and the operational capacity of this newly formed franchisor entity.
  • It is wise to interview franchisees who have operated under both the old and new ownership to gauge changes in support.
  • Your attorney should help you understand the legal implications of contracting with such a recently formed company.
Citations: Item 1, FDD Page 6

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. The concept of selling pita sandwiches is part of the established fast-casual restaurant sector and does not appear to be a short-term trend. A fad-based business carries the risk that consumer interest may decline rapidly, potentially leaving you with a worthless investment and ongoing liabilities long after the trend has passed.

Potential Mitigations

  • A business advisor can help you research the long-term market demand and historical resilience of the industry a franchise operates in.
  • Evaluating a franchisor's commitment to ongoing research and development in Item 11 can indicate their ability to adapt beyond initial trends.
  • Your accountant can help model the financial impact if sales were to decline due to shifting consumer tastes.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

The management team listed in Item 2 has extensive history with the Pita Pit brand, as they were the original leaders prior to the 2018 sale. However, they also presided over the sale to an entity that ultimately defaulted, leading to the recent foreclosure and restructuring. While they are not inexperienced, this troubled recent history raises questions about past strategic decisions and the current stability of the system under their resumed leadership.

Potential Mitigations

  • Engaging a business advisor to research the full history of the management team and the circumstances of the 2018 sale and 2023 foreclosure is recommended.
  • You should ask the franchisor directly about what has changed in their management approach to prevent similar issues in the future.
  • Discuss the leadership team's track record and its potential impact on your investment with current long-term franchisees.
Citations: Item 1, Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified in the FDD package. The franchisor's history does not indicate it is currently owned by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term profitability and a quick exit strategy, which may not align with the long-term health of franchisees. This can manifest as increased fees, reduced support, or pressure to grow too quickly.

Potential Mitigations

  • Your business advisor can help you research the ownership structure of any franchisor, including whether it is backed by private equity.
  • If a franchisor is PE-owned, it is wise to investigate the firm's reputation and track record with other franchise brands.
  • An attorney can review the Franchise Agreement for clauses that facilitate an easy sale of the system by the franchisor.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent company, Pita Pit USA 4.0, Inc. Failing to disclose a parent entity that guarantees obligations or exerts significant control can obscure the true financial health and power structure of the franchise system. Full transparency is required by law so you can properly assess the stability of the entire enterprise you are investing in.

Potential Mitigations

  • Your attorney should verify the franchisor's corporate structure and identify all parent and affiliate companies.
  • If a parent company exists, it is critical to understand its role and financial condition, which may require a review by your accountant.
  • A business advisor can help you assess the potential influence of a parent company on the franchise system's operations and strategy.
Citations: Not applicable

Predecessor History Issues

High Risk

Explanation

Item 1 discloses a highly unusual and troubled predecessor history. The prior franchising entity was sold, the new owners defaulted on their payments, and the original sellers took the assets back through a strict foreclosure in March 2023 before forming the current franchisor. This history of a failed sale and system disruption introduces significant uncertainty and risk regarding the overall stability and health of the franchise network you would be joining.

Potential Mitigations

  • Your attorney must carefully analyze the legal implications of the predecessor's foreclosure and the formation of the new franchisor entity.
  • It is important to discuss with current long-term franchisees how this transition has affected them and the support they receive.
  • A business advisor can help you assess the risks associated with this unstable history and its potential impact on the brand's reputation.
Citations: Item 1

Pattern of Litigation

Low Risk

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. A pattern of litigation, particularly claims of fraud or misrepresentation brought by other franchisees, can be a major red flag. It may indicate systemic issues within the franchisor's operations, sales process, or relationship with its franchisees. Conversely, numerous lawsuits filed by the franchisor against franchisees could suggest an overly aggressive or unsupportive culture.

Potential Mitigations

  • An attorney should always carefully review Item 3 for any disclosed litigation and assess its potential impact on the system.
  • Even with no disclosed litigation, asking current franchisees about any informal disputes can provide valuable insight.
  • Your business advisor can help you search public records for any litigation that may not have been disclosed.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
8
1
6

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.

3

Financial & Fee Risks

Total: 10
2
6
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.

4

Legal & Contract Risks

Total: 16
10
3
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
1
2
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
4
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.

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
8
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.

9

Term & Exit Risks

Total: 18
8
4
6

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: 2
2
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.