The Counter
Initial Investment Range
$711,133 to $1,983,750
Franchise Fee
$25,000 to $47,500
We offer The Counter® franchises. As a franchisee, you will operate a restaurant called The Counter, preparing and featuring build-your-own burgers, signature burger, side dishes, sandwiches, salads, desserts, ice-cream shakes, non-alcoholic beverages and certain alcoholic beverages, including, at a minimum, beer and wine.
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The Counter March 28, 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 audited financials show a significant net loss of over $12.5 million, compared to a profit in 2023. This is primarily due to large impairment charges on its assets, suggesting a decline in the value of its brands. While the company appears solvent, this recent significant loss could indicate financial pressures that may impact its ability to support franchisees, invest in the brand, and grow the system effectively. You should evaluate this financial performance carefully.
Potential Mitigations
- Your accountant should thoroughly analyze the franchisor's financial statements, including the detailed notes, to assess the reasons for the recent loss and its potential impact on long-term stability.
- Discuss the franchisor's financial health and their strategies for returning to profitability with a qualified business advisor.
- It is wise to have your franchise attorney confirm if any financial performance bonds or escrow accounts are required by state regulators due to these financials.
High Franchisee Turnover
High Risk
Explanation
Item 20 data reveals a catastrophic decline in the number of franchised units, from 23 at the start of 2022 to only 8 by the end of 2024, a 65% reduction in three years. This is an extremely high rate of turnover. The data shows a consistent pattern of units ceasing operations, not renewing, and being reacquired by the franchisor. This trend is a major red flag, indicating potentially severe systemic problems, franchisee dissatisfaction, or lack of profitability.
Potential Mitigations
- Your business advisor should help you perform extensive due diligence by contacting a significant number of the former franchisees listed in Item 20 to understand why they left the system.
- Ask your franchise attorney to help you frame precise questions for the franchisor regarding the reasons for this dramatic system decline.
- Treat this data as a critical indicator of potential systemic failure and weigh this risk heavily in your investment decision, with guidance from your accountant.
Rapid System Growth
Low Risk
Explanation
This risk was not identified in the FDD package. Rapid growth can strain a franchisor's resources, potentially leading to inadequate support for new and existing franchisees. Monitoring Item 20 for a sudden, large increase in outlets without a corresponding investment in support staff or infrastructure is a key part of due diligence. In this case, the opposite trend is observed, with the system shrinking significantly.
Potential Mitigations
- An experienced business advisor can help you analyze system growth trends in any franchise you consider, comparing unit growth to the franchisor’s support capabilities.
- It is always prudent to ask existing franchisees about their perception of the franchisor's support quality and responsiveness.
- Your accountant should review the franchisor’s financials to assess whether they have the resources to support their stated growth plans.
New/Unproven Franchise System
Low Risk
Explanation
This specific risk was not identified. The Counter brand has been franchising since 2006, and the current franchisor, MTY Franchising USA, Inc. (MTY USA), acquired the system in 2017. While not an unproven system in terms of age, its severe decline in unit count, as shown in Item 20, presents a different and more significant set of risks related to its current viability and performance rather than its newness.
Potential Mitigations
- Your business advisor should help you investigate the history and performance of any franchise system, particularly one that has undergone recent ownership changes.
- Speaking with franchisees who have been in the system for a long time can provide insight into its evolution and current challenges.
- An accountant can help you analyze how a system's maturity or decline might affect your potential for success and return on investment.
Possible Fad Business
Low Risk
Explanation
This specific risk was not identified in the FDD package. The Counter concept, centered on customizable burgers, has been in operation since 2006 and is part of a large, established food service company. However, you should always consider long-term consumer trends and market saturation for any restaurant concept. A business tied to a fleeting trend can face declining sales after initial excitement fades, leaving you with long-term obligations.
Potential Mitigations
- Engaging a business advisor to research long-term consumer dining trends can help you evaluate the sustainability of any food-based franchise concept.
- It is wise to assess a franchisor's plans for menu innovation and brand evolution to stay relevant in a competitive market.
- Your accountant can help you model different sales scenarios to understand the financial impact if initial demand proves to be temporary.
Inexperienced Management
Medium Risk
Explanation
Item 2 shows that the management team of MTY USA and its affiliates generally consists of individuals with extensive experience in the restaurant and franchise industries. However, Item 4 discloses that the Co-COO, Adam Lehr, had a personal bankruptcy proceeding related to prior restaurant ownership, which was discharged in 2021. While this involves personal and past business matters, you should consider it when evaluating the overall experience and track record of the leadership team.
Potential Mitigations
- A thorough review of the backgrounds of all key executives in Item 2 with your business advisor is a critical due diligence step.
- You may wish to discuss any disclosed bankruptcies of management personnel with your franchise attorney to understand any potential implications.
- Contacting current franchisees can provide insight into their perception of the management team's competence and support.
Private Equity Ownership
Medium Risk
Explanation
MTY USA is a subsidiary of MTY Food Group, Inc., a publicly traded company. Such ownership structures can prioritize shareholder returns, potentially leading to decisions that favor short-term profits over the long-term health of franchisees. This may manifest as increased fees, reduced support, or a focus on selling new franchises rather than supporting existing ones. The franchisor also retains the right to sell the system, which could change the operating philosophy you sign up for.
Potential Mitigations
- Your business advisor should research the parent company's history and reputation in the franchise industry.
- It is wise to speak with current franchisees about any changes in support, fees, or overall strategy they have experienced under the current ownership.
- Your attorney can explain the implications of the 'Assignment by Franchisor' clause, which allows the company to be sold without your consent.
Non-Disclosure of Parent Company
Low Risk
Explanation
This risk was not identified in the FDD package. Item 1 and Item 21 provide extensive information on MTY Franchising USA, Inc. and its parent and affiliate companies. The document includes audited consolidated financial statements for the franchisor as required. It is important in any FDD that if the franchisor is a subsidiary, the parent company's financial information is also disclosed if the parent's stability is critical to supporting the franchisor, which has been done here.
Potential Mitigations
- When evaluating a franchise that is part of a larger corporate structure, your accountant should review the financial statements for both the franchisor entity and any parent company, if provided.
- It is prudent to have your attorney clarify the legal relationship and any financial guarantees between the parent and the franchisor subsidiary.
- A business advisor can help you understand how the parent company's overall strategy might affect your specific franchise brand.
Predecessor History Issues
High Risk
Explanation
Item 1 discloses a complex history of acquisitions and predecessors. Item 3 details a significant amount of litigation involving these predecessors, including lawsuits from franchisees and regulatory actions for selling franchises improperly. This history suggests that the system you are buying into may have inherited unresolved issues or a culture of conflict, which presents a risk to you as a new franchisee entering the system.
Potential Mitigations
- Your franchise attorney should carefully review the disclosed history of all predecessors and the nature of the litigation in Item 3.
- In your discussions with former franchisees, it would be beneficial to ask about their experiences under any previous ownership.
- A business advisor can help you assess whether the current franchisor has successfully resolved the inherited issues from its predecessors.
Pattern of Litigation
High Risk
Explanation
Item 3 discloses numerous lawsuits and arbitrations involving the franchisor's affiliates and predecessors. Multiple cases were brought by franchisees alleging fraud, misrepresentation, and breach of contract, with some resulting in settlements paid to the franchisees. Additionally, there are several concluded administrative actions by state regulators for violations of franchise law, such as selling franchises without being registered. This pattern suggests a significant level of conflict and potential compliance issues within the broader organization, which is a major risk.
Potential Mitigations
- A detailed review of every piece of litigation disclosed in Item 3 with your franchise attorney is crucial to understanding the nature and frequency of disputes.
- This pattern of litigation should be a key topic of discussion with current and former franchisees to gauge the franchisor's relationship with its network.
- Given the history, your attorney might advise seeking stronger contractual protections or considering this a significant red flag.
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
Unlock Full Risk Analysis
Purchase the complete risk review to see all 102 risks across all 10 categories.
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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