Qahwah House Logo

Qahwah House

Qahwah House Franchisor, LLC
https://www.qahwahhouse.com/
1-313-467-0438
5320 Oakman Boulevard, Dearborn, MI 48126

Initial Investment Range

$572,800 to $939,400

Franchise Fee

$141,000 to $198,000

The Qahwah House Coffee Shop franchise is a specialty coffee shop devoted to selling specialty coffee, coffee related products, and desserts for dine-in or carry out.

Enjoy our complimentary free risk analysis below

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

Qahwah House April 21, 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
4
0
6

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The franchisor explicitly warns that its “Financial Condition… calls into question the franchisor's financial ability to provide services and support.” Financial statements in Item 21 confirm Qahwah House Franchisor, LLC (Qahwah House) is a new entity, organized in October 2024 with a net loss and a net worth under $100,000 as of year-end 2024. This financial weakness poses a significant risk to its ability to support your business as promised.

Potential Mitigations

  • A franchise accountant should meticulously analyze the franchisor's financial statements, including footnotes and the auditor's report.
  • Ask your attorney to verify if any financial assurances, like a bond or escrow as mentioned in the Michigan notice, are in place and understand the protection they offer.
  • Inquire with your business advisor about the risks of investing with a thinly capitalized startup franchisor.
Citations: Item 21, FDD page 4

High Franchisee Turnover

Low Risk

Explanation

This specific risk was not identified. Item 20 tables, which cover the operating history of an affiliate’s licensed locations, show no terminations, non-renewals, or other cessations of business in the last three years. While positive, it is important to remember the franchise system itself is new, so this historical data for affiliate licensees may not fully predict future franchisee outcomes.

Potential Mitigations

  • Your business advisor should help you analyze the Item 20 tables for any concerning trends, even if absolute numbers are low.
  • Consulting with your attorney before contacting former franchisees is a valuable step to understand the context behind any departures.
  • An accountant can help compare the system's growth and turnover rates against any available industry benchmarks.
Citations: Item 20

Rapid System Growth

High Risk

Explanation

Item 20 projects the opening of 15 new franchised outlets in the next fiscal year. This represents very rapid growth for a brand-new franchisor that was only formed in October 2024. This pace, combined with the franchisor's acknowledged weak financial condition in Item 21 and inexperienced key management in Item 2, could strain its ability to provide adequate site selection, training, and operational support to all new franchisees.

Potential Mitigations

  • Discuss with the franchisor its specific plans for scaling its support staff and infrastructure to match the projected rapid growth.
  • Engaging a business advisor to assess the franchisor’s capacity to support this expansion is a prudent step.
  • Your accountant should review the franchisor's financial statements to determine if it has the capital to fund necessary support infrastructure.
Citations: Items 2, 20, 21

New/Unproven Franchise System

High Risk

Explanation

The FDD explicitly highlights a "Short Operating History" as a special risk. Item 1 confirms Qahwah House was organized in October 2024 and is a new franchisor. Although affiliates have operated coffee shops since 2019, the franchise support system itself is new and unproven. Investing in a startup franchise system carries higher risks regarding the viability of its business model, brand recognition, and ability to provide long-term support.

Potential Mitigations

  • With your business advisor, conduct extensive due diligence on the track record of the affiliate's operating units and management's industry experience.
  • Your accountant should help you build conservative financial projections, given the lack of a long-term franchisee performance history.
  • An attorney can help you understand the heightened risks associated with an emerging franchise brand.
Citations: Items 1, 2, 20, 21, FDD page 4

Possible Fad Business

Low Risk

Explanation

This risk was not identified in the FDD package. The business model is a specialty coffee shop, which is part of a large, well-established market sector. While specific concepts within this sector can be trendy, the core offering of coffee is not generally considered a short-term fad. The operation of affiliate locations since 2019 also suggests a degree of staying power.

Potential Mitigations

  • It is wise to have a business advisor help you research the long-term consumer demand for the specific niche, in this case, Yemeni coffee.
  • Assess the concept's adaptability and potential for menu evolution with a food service consultant.
  • Review market trends with a financial advisor to gauge the business's resilience to economic shifts.
Citations: Not applicable

Inexperienced Management

High Risk

Explanation

Item 2 shows that key management lacks deep franchising experience. The Senior Director of Operations joined in October 2024 with no prior industry or franchise background. The Chief of Staff was a full-time student until early 2023. While the CEO has operated affiliate locations, the limited franchising expertise in key support roles represents a significant risk for a new franchise system's ability to provide effective guidance and build robust systems.

Potential Mitigations

  • A business advisor can help you assess whether the management team's collective skills are sufficient to support a new franchise system.
  • It is important to ask the franchisor how they plan to compensate for the lack of franchising experience in key roles.
  • Discuss with current affiliate licensees their opinion of the support and guidance provided by the management team.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk does not appear to be present. FDD Item 1 indicates ownership is held by a parent company, Qahwah House Holdings, Inc., and does not mention any ownership by a private equity firm. The structure suggests private ownership by the brand's founders rather than institutional financial investors.

Potential Mitigations

  • Your attorney can help you verify the ownership structure of the franchisor and any parent companies through public records.
  • A business advisor can explain the typical differences in operating philosophy between founder-led and private equity-owned franchise systems.
  • Even without PE ownership, it is wise to have your attorney review the assignment clauses in the Franchise Agreement to understand who could own the brand in the future.
Citations: Not applicable

Non-Disclosure of Parent Company

Low Risk

Explanation

This specific risk was not identified. FDD Item 1 discloses the existence of a parent company, Qahwah House Holdings, Inc. While the FDD does not provide the parent's financial statements or a parent guarantee, the existence of the parent entity itself is disclosed, so the risk of non-disclosure is not present.

Potential Mitigations

  • Your accountant should assess the risk presented by the franchisor's weak financials in the absence of a parent company guarantee.
  • An attorney can help you understand the legal separation between a parent and a subsidiary and its implications for you.
  • It is prudent to ask the franchisor if they would be willing to provide a parent company guarantee.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This risk was not identified. Item 1 of the FDD states that the franchisor has no predecessors. While it does disclose an affiliate that previously sold licenses for a similar concept, it did not acquire its assets from a prior franchising entity, which is the technical definition of a predecessor. The franchisor is a new entity.

Potential Mitigations

  • Your attorney can help clarify the legal distinction between a predecessor and an affiliate company.
  • A thorough review of the history of the affiliate, Qahwah Trading, with your business advisor is recommended to understand the concept's background.
  • Speaking with the affiliate's licensees is crucial for due diligence, and your attorney can help prepare questions.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

This risk does not appear to be present in the FDD. Item 3 states that no litigation is required to be disclosed. This indicates there is no current or recent history of material legal actions against the franchisor involving fraud, misrepresentation, or franchise law violations by franchisees or regulatory agencies.

Potential Mitigations

  • Your attorney can conduct an independent public records search to verify the absence of significant litigation.
  • Asking current and former franchisees about any past or pending legal disputes is a crucial part of due diligence.
  • A business advisor can help you understand what level of litigation is typical for a franchise system of a given size and age.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
4
3
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

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

3

Financial & Fee Risks

Total: 10
5
3
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
6
5
5

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
3
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.

6

Regulatory & Compliance Risks

Total: 10
3
6
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
1
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.

8

Operational Control Risks

Total: 12
6
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.

9

Term & Exit Risks

Total: 18
9
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.

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.