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How much does Rita's Ice-Custard-Happiness cost?
Initial Investment Range
$21,600 to $905,536
Franchise Fee
$10,000 to $64,500
The franchise will operate a Rita’s shop featuring a menu of Italian ice, frozen custard and other approved menu items sold under the trade name “RITA’S ICE-CUSTARD-HAPPINESS.”
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Rita's Ice-Custard-Happiness January 30, 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
A subsequent event disclosed in the financial statements indicates that on November 15, 2024, the parent company was sold and took on $41 million in new debt. While the historical financials appear profitable, this new, significant debt load could substantially alter the company's financial health and stability. This may impact its ability to support franchisees, invest in the brand, and fulfill its obligations going forward, creating significant risk for you.
Potential Mitigations
- Your accountant must analyze the impact of the newly acquired debt on the franchisor's pro-forma financial stability and cash flow.
- It is crucial for your attorney to review the parent company guarantee in light of this new debt structure.
- A business advisor can help you assess how a more leveraged franchisor might alter its support and royalty enforcement practices.
High Franchisee Turnover
High Risk
Explanation
The FDD contains conflicting information regarding unit closures. Item 19 states that 48 shops that closed or were terminated in 2024 were excluded from the financial performance data. However, Item 20 tables show only 12 total units ceased operations, were terminated, or not renewed in the same period. This significant discrepancy makes it difficult to assess the true rate of franchisee failure or distress within the system and raises concerns about the reliability of the provided data.
Potential Mitigations
- An accountant should help you reconcile the conflicting figures between Item 19 and Item 20 to attempt to understand the true attrition rate.
- Speaking with a significant number of former franchisees listed in Item 20 is critical to understanding why they left the system.
- Your franchise attorney should be asked about the legal implications of such a material inconsistency in the disclosure document.
Rapid System Growth
Low Risk
Explanation
The franchisor has demonstrated steady, but not excessively rapid, growth over the past two years, adding a net of 18 franchised units each year. While the system is large, the pace of growth does not immediately suggest that support resources are overstretched. However, you should monitor whether the quality of support remains consistent as the system continues to expand, particularly under its new ownership structure and increased debt load.
Potential Mitigations
- A business advisor can help you question the franchisor about their plans for scaling support infrastructure to match ongoing growth.
- Engaging with a broad range of existing franchisees can provide insight into the current quality and responsiveness of franchisor support.
- Your accountant should review the new debt structure's potential impact on funds available for franchisee support and system development.
New/Unproven Franchise System
Low Risk
Explanation
This risk was not identified. Rita's Franchise Company, LLC (Rita's LLC) operates a large, mature system with hundreds of outlets and a history dating back to its predecessors in 1989. The franchisor has extensive operational history. However, it is now owned by a private equity firm, which presents its own set of risks related to management philosophy and financial priorities.
Potential Mitigations
- A franchise attorney can help you understand the implications of a mature system being managed by a new private equity owner.
- It's wise to have your accountant review the provided financial statements to assess the overall health of the established system.
- Speaking with franchisees who have been in the system through the ownership change can provide valuable perspective.
Possible Fad Business
Low Risk
Explanation
This risk was not identified. The business model, focused on Italian ice and frozen custard, has a long-standing market presence since the 1980s. While consumer tastes can change, this concept has demonstrated decades of demand and is not tied to a recent or fleeting trend. It appears to be an established concept rather than a fad.
Potential Mitigations
- A business advisor can help you research the long-term consumer trends for frozen desserts in your specific local market.
- Discussing the brand's local history and consumer loyalty with long-standing franchisees can provide valuable market insight.
- An accountant can help model the financial impact of seasonality, which is a key factor for this established business type.
Inexperienced Management
Low Risk
Explanation
This risk was not identified. The executive team members listed in Item 2 have extensive experience in the food service, franchise, and business management sectors. For example, the CEO has been with the company since 2017, and other executives have relevant backgrounds with major brands like Burger King and Tide Cleaners. The management team appears to be experienced.
Potential Mitigations
- A business advisor can still help you research the specific track records and reputations of the key executives.
- Asking current franchisees about their direct experiences and the quality of support from the management team is always a prudent step.
- Your attorney can help formulate questions for the franchisor regarding management's long-term strategic vision for the brand.
Private Equity Ownership
High Risk
Explanation
The franchisor's parent company is owned by investors assembled by private equity firm Maple Park Capital. The financial statements also disclose a subsequent sale of the company on November 15, 2024, financed with $41 million in new debt. This ownership structure and recent high-leverage transaction introduce risks that decisions may prioritize short-term investor returns, potentially through higher fees or reduced franchisee support, over the system's long-term health.
Potential Mitigations
- Inquiring with your business advisor about the reputation of Maple Park Capital and its history with other franchise brands is recommended.
- It is critical to discuss with current franchisees any changes in system direction, fees, or support since the private equity involvement.
- Your accountant must model the potential impact of the franchisor's high debt on its ability to reinvest in the brand.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified. The FDD clearly discloses the parent company, RWIFC Holdings, LLC, and includes its audited consolidated financial statements in Exhibit I. The parent also provides a performance guaranty for the franchisor's obligations, which is also included as an exhibit. The ownership structure appears to be properly disclosed.
Potential Mitigations
- Your franchise attorney should still review the parent company's performance guaranty to confirm its scope and enforceability.
- An accountant should analyze the parent's consolidated financial statements, including all footnotes, to assess its ability to back the guarantee.
- Understanding the relationship and financial obligations between the parent and the franchisor is a key topic for discussion with your advisors.
Predecessor History Issues
Medium Risk
Explanation
The FDD discloses that the current franchisor acquired the system from predecessor entities in 2016. Item 3 discloses significant litigation involving these predecessors, including class action lawsuits and claims of fraud and disclosure violations by other franchisees. While the current entity is distinct, this history suggests potential inherited systemic issues or a culture that has led to franchisee disputes in the past, which could pose a risk to you.
Potential Mitigations
- Your attorney should carefully review the litigation history of the predecessor entities as disclosed in Item 3.
- It is advisable to ask long-term franchisees who operated under the predecessor about their experiences and any changes since the acquisition.
- A business advisor can help you assess whether the current management has effectively addressed any historical problems.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses multiple concluded lawsuits initiated by franchisees against the franchisor's predecessor, alleging violations of franchise law, fraud, and misrepresentation. Notably, the 'Scarpulla' case involved multiple franchisees and resulted in large settlement payments by both the predecessor ($650,000+) and the current franchisor ($450,000). This pattern of franchisee-initiated litigation regarding disclosure and fraud claims is a significant warning sign about the franchisor's historical practices and franchisee relations.
Potential Mitigations
- Your franchise attorney must conduct a detailed review of the allegations and outcomes of all cases listed in Item 3.
- It is essential to contact franchisees involved in these lawsuits, if possible, to understand the root causes of the disputes.
- Treating this history as a major red flag, your attorney can advise on the potential risks of entering a relationship with this franchisor.
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