Hot Head Burrito Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$55,000 - $216,500
Franchise Fee
$18,750
Total US Locations
20
Business Summary
Hot Head Franchising, LLC offers area developer franchises for its Hot Head Burritos® restaurant concept. An area developer franchisee acts as a special agent within a specific geographic area, primarily to solicit prospective franchisees for Hot Head Burritos® restaurants, assist with site selection and development for these new restaurants, and provide ongoing support services to the restaurant franchisees in their territory. The area developer franchisee also needs to establish and operate at least one Hot Head Burritos® restaurant themselves, and may operate a food truck. In exchange for their services, area developer franchisees earn commissions from the initial franchise fees and royalty fees collected by Hot Head Franchising, LLC from restaurants in their assigned territory.
Corporate History
Hot Head Franchising, LLC was formed as an Ohio limited liability company on August 17, 2009. The company offers area developer franchises to support the growth of its Hot Head Burritos® restaurant system, a concept created in December 2006 by Ray and Cynthia Wiley. The first Hot Head Burritos® restaurant opened in March 2007. Hot Head Franchising, LLC began offering franchises for its restaurants in November 2009 and started offering area developer franchises in June 2011. Ray Wiley, the current CEO and President, controls companies that own 12 Hot Head Burritos® restaurants in the greater Dayton, Ohio area.
Financial Overview
Investment Range
$55,000 - $216,500
Franchise Fee (Low)
$18,750
Franchise Fee (High)
$105,000
Equipment Costs (Low)
$16,500
Equipment Costs (High)
$58,000
Working Capital
$30,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
Hot Head Franchising, LLC's financial statements show strong income from operations, with $1,653,439 in 2023 and $1,668,835 in 2022. The company's cash balance significantly increased from $30,085 at the end of 2022 to $120,663 at the end of 2023. The independent auditor has issued an unqualified opinion on Hot Head Franchising, LLC's financial statements for the years ending December 31, 2023, and 2022, indicating that the statements are presented fairly in all material respects, and there are no substantial doubts about the company's ability to continue as a going concern.
Financing Details
Hot Head Franchising, LLC does not offer any direct or indirect financing to its area developer franchisees. The company also does not guarantee any notes, leases, or other financial obligations for its franchisees.
Performance Metrics
Total US Locations
20
Franchised Units
14
Corporate Units
6
Franchising Since
2011
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
1
Litigation Summary
Hot Head Franchising, LLC has one recent litigation case to report. In July 2023, Hot Head Franchising, LLC filed a lawsuit against a former franchisee in Ohio who failed to pay outstanding fees as per a mutual termination agreement and other credit card charges. In February 2024, the Municipal Court of Kettering, Ohio, ruled in favor of Hot Head Franchising, LLC, awarding the company $5,652.42 plus interest.
Bankruptcy History
Hot Head Franchising, LLC has no bankruptcy history to report for itself or its executive officers, and no bankruptcy information is required to be disclosed in this Item.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew their area developer franchise, Hot Head Franchising, LLC franchisees must provide written notice of their intent to renew between 180 and 360 days before the initial term ends. They must have complied with all provisions of the Area Developer Agreement, meaning they haven't received more than three written breach notifications they failed to cure. Franchisees must not be in default at the time of renewal notice, and the managing owner must complete any new or refresher training required by Hot Head Franchising, LLC. A renewal fee of $5,000 is due at least 60 days before the term expires, and franchisees must sign Hot Head Franchising, LLC's then-current area developer agreement, which may have materially different terms. Additionally, the franchisee and each principal owner must sign a general release of claims against Hot Head Franchising, LLC, and agree upon a new development quota.
Training & Support Program
Franchisor Assistance
Hot Head Franchising, LLC provides its area developer franchisees with an initial training program for the managing owner and an optional operating manager, covering product marketing, franchise sales, franchise law compliance, site selection, and restaurant operations. This training is conducted at Hot Head Franchising, LLC's corporate training center. Franchisees also receive access to a confidential Area Developer Manual, which is updated periodically. Ongoing assistance includes making the initial training program available for replacement or additional operating managers, periodic seminars, conventions, or continuing education, and advisory services related to franchise sales, support, and assistance. Hot Head Franchising, LLC also provides access to franchise sales, advertising, and promotional materials at the franchisee's cost, and handles fee collection and commission remittance.
Initial Training Hours
156
Training Location
Corporate training center in Kettering, Ohio
Ongoing Support
Hot Head Franchising, LLC provides its area developer franchisees with various ongoing support services. This includes making the initial training program available for any replacement or additional operating managers and other management personnel. Hot Head Franchising, LLC may also provide periodic seminars, conventions, or continuing education at its discretion, as well as updated and revised materials for the Area Developer Manual. Advisory services related to franchise sales, support, and assistance are offered, and franchisees have access to franchise sales, advertising, and promotional materials, though they may incur costs for these. Franchisees are required to participate in designated electronic communications, including email and texting, and must actively maintain and check their Hot Head Burritos® email address daily. Hot Head Franchising, LLC also hosts periodic calls and virtual meetings, with no limit on the obligation to attend. Area developer franchisees are responsible for conducting monthly (or weekly, if non-compliant) quality assurance inspections of each Hot Head Burritos® restaurant in their territory, submitting written reports, and assisting restaurant franchisees with operational improvements and communication of updates.
Franchise Requirements
Ideal Candidate Profile
Hot Head Franchising, LLC seeks area developer franchisees who are capable of developing, supporting, and providing services to Hot Head Burritos® restaurants in a specific geographic area. Ideal candidates, or their principal owners, must be of good character and possess adequate financial resources. If the franchisee is an entity, they must designate an approved managing owner who holds at least a 25% ownership interest, is responsible for day-to-day operations of the area developer business on a full-time basis, and will not engage in conflicting business activities. The area developer franchisee is also required to establish a separate entity to own and operate at least one Hot Head Burritos® restaurant in their territory. Veterans who are honorably discharged and meet the qualifications are eligible for a 25% discount on the initial territory fee. The candidate must be able to meet an agreed-upon development quota for new restaurants in their territory.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Home-Based
Owner Participation
Hands-On
Territory Type
Non-Exclusive
Territory Size Requirements
Hot Head Franchising, LLC defines its area developer territories based primarily on population size, which will vary from one area developer to the next. For instance, a territory with an initial fee of $25,000 would typically have a population ranging from 250,000 to 500,000 people. A higher fee of $100,000 would correspond to a larger territory with approximately 1,000,000 to 4,000,000 people. The specific boundaries of each territory are identified in an exhibit to the Area Developer Agreement.
Staffing Notes
For the area developer business, Hot Head Franchising, LLC does not impose specifications for a minimum number of employees. However, if the franchisee is an entity, it must designate an approved Managing Owner who owns at least 25% of the entity and is responsible for the full-time, day-to-day operations of the area developer business. An Operating Manager can also be designated. Additionally, the franchisee is required to provide at least two 'Opening Team Workers' for each new franchised Hot Head Burritos® restaurant opening in their territory. These workers must be employees of the franchisee or their operating company, successfully certified by Hot Head Franchising, LLC, and all employment matters related to these workers, including compensation and compliance with labor laws, are the sole responsibility of the franchisee.