Rakkan Ramen
Initial Investment Range
$379,500 to $885,000
Franchise Fee
$32,000 to $54,000
As a RAKKAN Ramen franchisee you will operate a quick serve restaurant outlet providing a variety of ramen (Japanese style noodle) dishes with various types of broth, Japanese appetizers, specified condiments and ingredients, and other food, beverages and related products.
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Rakkan Ramen March 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.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
The franchisor’s 2024 financial statements reveal significant weakness. Net income dropped from over $200,000 in 2023 to just $6,153 in 2024, accompanied by a large increase in operating expenses. The balance sheet shows a new $40,000 allowance for credit losses and significant cash loans made to an affiliate. These factors may indicate a risk to the franchisor's ability to support its franchisees and grow the brand, as financial resources appear strained.
Potential Mitigations
- Engage an accountant to conduct a deep analysis of the financial statements, focusing on the cause of the drastic income drop and the implications of the affiliate loans.
- Your business advisor should help you assess whether the franchisor has sufficient capital to fund its support obligations without relying on new franchise fees.
- It is crucial for your attorney to review any state-mandated financial assurances, such as bonds or escrow, which may be required due to this financial weakness.
High Franchisee Turnover
Medium Risk
Explanation
Item 20 data shows that one franchised outlet ceased operations in 2024. While the total number of terminations and non-renewals is zero, this closure represents an 8.3% churn rate based on the 12 outlets operating at the start of the year. While not alarmingly high, any closure in a young system is a point of concern that could indicate potential challenges with the business model or franchisee support that warrant further investigation.
Potential Mitigations
- A business advisor can help you analyze the turnover data in Item 20 over the full three-year period to identify any developing trends.
- You should contact the former franchisee listed in Exhibit E to understand the specific reasons why their location ceased operations.
- In discussions with current franchisees, it would be prudent to ask about their profitability and the operational challenges they face.
Rapid System Growth
High Risk
Explanation
The system has experienced very rapid growth, doubling its number of franchised units from 6 to 12 in 2023. While growth can be positive, such a fast pace, especially when combined with the financial weaknesses seen in the 2024 statements, presents a risk. The franchisor’s support infrastructure for training, site selection, and ongoing assistance may become strained, potentially diminishing the quality of support you receive despite paying royalties.
Potential Mitigations
- With your business advisor, you should question the franchisor about their specific plans to scale their support staff and infrastructure to match unit growth.
- It is important to speak with a range of franchisees, particularly those who opened recently, to gauge the current quality and responsiveness of franchisor support.
- An accountant's review of the franchisor's budget can help assess if adequate funds are allocated to support functions versus expansion.
New/Unproven Franchise System
High Risk
Explanation
The franchisor began franchising in April 2019 and explicitly discloses in its 'Special Risks' section that it is an early-stage company with a limited operating history. Investing in a newer system carries inherent risks, including an unproven long-term business model, underdeveloped support systems, and minimal brand recognition. The success of your franchise is more closely tied to the franchisor's ability to overcome these early-stage challenges.
Potential Mitigations
- Thoroughly investigate the prior business and franchising experience of the management team listed in Item 2 with the help of your business advisor.
- Speaking with the earliest franchisees in the system is critical to understanding the evolution of the business model and support.
- Your attorney may be able to negotiate more favorable terms, such as enhanced support or territorial rights, to compensate for the higher risk of a new system.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. The business operates in the ramen restaurant industry, which is a well-established and durable segment of the restaurant market rather than a concept based on a short-term trend. Nevertheless, any business concept can face shifts in consumer preferences over the long term, and it is important to consider the brand's ability to adapt and innovate over the course of your 10-year agreement.
Potential Mitigations
- A business advisor can help you conduct independent market research to assess the long-term consumer demand for this specific restaurant concept in your local area.
- When speaking with the franchisor, you should inquire about their long-term plans for menu innovation, marketing, and brand evolution.
- It is wise to evaluate with your financial advisor how the business might perform during different economic cycles.
Inexperienced Management
Medium Risk
Explanation
The founder, Ryohei Ito, has restaurant experience dating back to 2011 in Japan and 2017 in the U.S. However, the franchisor entity, RAKKAN USA Franchise, LLC (RAKKAN), was formed in January 2019 and began franchising in April 2019. This indicates that while the operational experience is present, the company's experience specifically in managing a franchise system, providing support, and growing a national brand is relatively limited, which could pose a risk to new franchisees.
Potential Mitigations
- Speaking with current franchisees about the quality of the training and ongoing support they receive is essential to gauge the management's effectiveness as a franchisor.
- Your business advisor can help you assess whether the management team has hired experienced personnel to handle the specific demands of franchise system management.
- During your validation calls, ask franchisees about the franchisor's responsiveness and problem-solving capabilities.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. The ownership appears to be held by the founder. Therefore, the specific risks associated with a PE firm's potentially short-term investment horizon, such as pressure for rapid growth or cuts in franchisee support to maximize returns for investors, do not appear to be present in this context.
Potential Mitigations
- It is still prudent to have your attorney confirm the ownership structure of the franchisor and identify any majority stakeholders.
- Your business advisor can help you research the background of the principal owners to understand their long-term vision for the brand.
- When speaking with franchisees, ask about their perception of the franchisor's commitment to the long-term health of the system.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 does not disclose any parent company for RAKKAN USA Franchise, LLC. The franchisor entity appears to be the primary operator of the franchise system. Thus, concerns about the financial stability or operational influence of an undisclosed parent company are not applicable based on the information provided.
Potential Mitigations
- Your attorney should verify the corporate structure to confirm that there are no undisclosed parent or holding companies that could materially impact the franchise.
- Your accountant should focus their analysis on the financial statements of the franchisor entity itself as provided in Item 21.
- It is a good practice to ask the franchisor directly to confirm its corporate structure and the absence of any parent entities.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 of the FDD does not disclose any predecessors for the franchisor, RAKKAN. This indicates that the franchisor did not acquire the business or its assets from another company but rather developed the franchise system itself. Therefore, there are no hidden risks associated with a predecessor's negative history, such as past litigation, bankruptcy, or high franchisee turnover.
Potential Mitigations
- Your attorney can perform a public records search to confirm the franchisor's corporate history and the absence of any predecessors.
- You should focus your due diligence on the operating history of the current franchisor entity.
- Asking early franchisees about the history of the company can provide additional comfort regarding its origins.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 explicitly states, 'There is no litigation that must be disclosed in this Item.' This indicates the franchisor, its predecessors, and management have not been involved in the types of litigation that the FTC requires to be disclosed, such as lawsuits alleging fraud, misrepresentation, or violation of franchise laws. This lack of disclosed litigation is a positive indicator.
Potential Mitigations
- It is still a good practice to have your attorney conduct an independent public records search for litigation involving the franchisor and its principals.
- When speaking with current and former franchisees, you can inquire about any disputes they may have had with the franchisor, even if they didn't result in litigation.
- Always ensure you receive the most current FDD, as a material lawsuit could be a recent development.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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