Ziggi's Coffee
Initial Investment Range
$581,500 to $2,093,000
Franchise Fee
$119,500 to $134,000
offering franchises for the operation of retail coffee shops that sell gourmet specialty coffee, espresso, tea, fruit smoothies, dirty soda drinks, energy drinks, fresh sandwiches and wraps, and other food and drink items, plus packaged coffee and coffee-related merchandise.
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Ziggi's Coffee March 31, 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, Ziggi's Coffee Franchise, LLC (ZCF), explicitly warns of its financial condition as a special risk. Audited financial statements in Item 21 confirm this, showing a members' deficit of over $5.1 million and a history of net losses, including a loss of over $225,000 in 2024. This financial instability could impair ZCF's ability to provide support, invest in the brand, or meet its obligations, which poses a significant risk to your investment.
Potential Mitigations
- A franchise accountant must thoroughly analyze ZCF's financial statements, including the growing deficit and consistent operating losses.
- Discuss with a business advisor the implications of a franchisor's negative net worth on its long-term ability to support its franchisees.
- Your attorney should investigate whether any financial assurances, such as a bond, are required by your state due to this condition.
High Franchisee Turnover
High Risk
Explanation
Item 20 data for 2024 shows 3 franchise terminations and 8 transfers against a starting base of 71 units, a notable turnover rate. More concerningly, Item 19 notes that two of the three closures in 2024 were locations that both opened and closed within the same year. This could indicate that the business model may be challenging for new franchisees to execute successfully, a significant risk for a new investor.
Potential Mitigations
- Engaging a business advisor to calculate and analyze the effective annual franchisee churn rate over the past three years is critical.
- It is imperative to contact former franchisees listed in Attachment I to understand their reasons for leaving the system.
- Your accountant should scrutinize the Item 20 data in conjunction with the financial performance data in Item 19.
Rapid System Growth
Medium Risk
Explanation
The franchise system is expanding very quickly, growing from 37 franchised outlets at the start of 2022 to 93 by the end of 2024. This rapid growth, especially when paired with the franchisor's disclosed financial instability, creates a risk that ZCF's support infrastructure for training, site selection, and operations may not be able to keep pace. This could lead to a decline in the quality of support you receive.
Potential Mitigations
- Asking current franchisees, particularly those who have opened recently, about the quality and timeliness of the franchisor's support is a key due diligence step.
- In discussions with the franchisor, inquire specifically about how they have scaled their support staff and systems to manage this growth.
- Your business advisor can help you assess whether the franchisor's support capabilities seem adequate for its current size and growth rate.
New/Unproven Franchise System
Medium Risk
Explanation
ZCF began franchising in 2016, making it a relatively young system. While its predecessor operated since 2004, the franchising model itself is less established. The system's rapid growth combined with its history of financial losses, as shown in Item 21, presents risks common to emerging brands, including the possibility that systems and support structures may still be developing and not fully proven at a large scale.
Potential Mitigations
- With a business advisor, thoroughly investigate the direct franchising experience of the key management personnel listed in Item 2.
- It would be wise to speak with some of the earliest franchisees to understand how the system and support have evolved over time.
- Your accountant should review the financials to assess if the company is becoming more stable as it matures.
Possible Fad Business
Low Risk
Explanation
This risk was not identified in the FDD package. A fad business is one tied to a fleeting trend, which can threaten long-term viability after public interest wanes. It is crucial to assess whether a franchise concept has sustainable, long-term consumer demand or if its appeal is based on a short-lived novelty. Your franchise agreement will outlast the trend, posing a risk to your investment.
Potential Mitigations
- A business advisor can help you research the industry to assess the long-term market demand for the products or services.
- Evaluate the franchisor's stated plans for innovation and adaptation to changing consumer tastes.
- Consider the business model's resilience to economic shifts and its core value proposition beyond current trends with a financial advisor.
Inexperienced Management
Low Risk
Explanation
This risk was not identified in the FDD package. Franchising is a distinct business model, and franchisor management without specific experience in it can be a risk. They may lack understanding of franchisee support needs, legal compliance, or how to manage a network of independent owners. This can lead to underdeveloped systems, poor strategic decisions, and inadequate support despite the fees you pay.
Potential Mitigations
- A business advisor should help you thoroughly vet the backgrounds of the key executives listed in Item 2 for specific franchising experience.
- If management is new to franchising, ask if they have engaged experienced franchise consultants or staff to guide them.
- Speaking with existing franchisees about the quality of support and system management is a practical way to gauge leadership competence.
Private Equity Ownership
Medium Risk
Explanation
ZCF is owned by two other LLCs, Round Ball Ventures LLC and Crux Investments LLC. While not explicitly identified as traditional private equity firms, this ownership structure can introduce risks. Decisions might prioritize investor returns over the long-term health of the system or franchisee profitability, and the business could be sold, potentially changing the management and philosophy you signed up for. The Franchise Agreement gives ZCF the right to assign the agreement without your consent.
Potential Mitigations
- Your attorney should review the assignment clauses in the Franchise Agreement to understand your rights if the company is sold.
- Inquire with the franchisor about the long-term goals of its parent companies.
- A business advisor can help you research the parent companies for any history with other franchise systems.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The franchisor discloses its parent companies in Item 1. However, the financials provided in Item 21 are for ZCF only, not the parent companies. Given ZCF's own weak financial position, the lack of financial statements from its owners means you have an incomplete picture of the overall financial strength and backing of the entity you are contracting with. This could obscure potential risks related to the stability of the entire enterprise.
Potential Mitigations
- Your accountant should assess the risk associated with the franchisor's standalone financials and the lack of parent financial data.
- Consulting your attorney is important to understand if the parent companies provide any guarantees for the franchisor's obligations.
- You should ask the franchisor why parent company financials are not provided and assess their response with your business advisor.
Predecessor History Issues
Low Risk
Explanation
ZCF discloses that it acquired assets and methods from a predecessor, BEC Longmont, Inc., which has operated since 2004. While this provides a longer operational history for the brand concept itself, it is important to distinguish this from ZCF's own history as a franchisor, which began in 2016. Understanding this distinction is key to properly evaluating the maturity of the franchise system versus the operating concept.
Potential Mitigations
- Your attorney can help you understand the legal distinction between the predecessor's operating history and the franchisor's franchising history.
- In discussions with long-term franchisees, inquire about their experiences under both the predecessor and the current franchisor.
- A business advisor can help you assess how effectively the predecessor's business model has been translated into a franchise system.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD package. Item 3 of the FDD requires the disclosure of certain types of current and past litigation. A pattern of lawsuits filed by franchisees against the franchisor alleging fraud, misrepresentation, or breach of contract is a significant red flag that can indicate systemic problems. Conversely, a high number of suits filed by the franchisor against franchisees might suggest an overly aggressive or litigious culture.
Potential Mitigations
- It is critical that your attorney carefully reviews the details of any disclosed litigation in Item 3.
- If litigation is present, discussing the nature of the disputes with current and former franchisees can provide valuable context.
- A business advisor can help you assess whether the litigation history suggests a higher-than-normal level of conflict within the system.
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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