Kung Fu Tea
Kung Fu Tea offers franchises for retail shops selling tea, bubble tea, coffee, and juices. Known for its variety of hot and cold drinks, it operates in the quick-service restaurant sector.
About Kung Fu Tea
Kung Fu Tea is an American bubble tea franchise headquartered in New York City. The company was founded on April 30, 2010, in Queens, NY. It is the largest American bubble tea company, with over 350+ locations across the United States. On April 30, 2018, Kung Fu Tea founded the world's first National Bubble Tea Day.
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Kung Fu Tea franchise FAQ
How much does it cost to open one — the total initial investment?
The total initial investment to open a Kung Fu Tea franchise ranges from $169,000 to $378,000 for a standard unit and from $184,000 to $269,500 for a non-traditional unit. [p.1]
What is the initial franchise fee?
The initial franchise fee is $37,000 for a single location. However, if the franchisee operates multiple locations or has a non-traditional unit, the initial franchise fee is $25,000 [p.93]. This fee is not refundable under any circumstances [p.11].
What are the ongoing royalty and advertising fees?
Ongoing royalty and marketing fees are typically based on a franchisee's gross sales and are billed monthly, being recognized as revenue when earned. These payments are usually due within 30 days of billing [p.93]. The company uses these fees to cover various advertising and promotional activities, including video, audio, and written materials, website development, toll-free telephone costs, and more, administered by the company without external audit [p.30, p.95].
How long is the initial franchise agreement, and can I renew it?
The duration of the initial franchise agreement isn't specified in these excerpts. Regarding renewal, you agree to pay a renewal fee upon exercising your right to renew the franchise, which will not exceed the greater of $10,000 or 25% of the current initial franchise fee [p.130].
Can I sell or transfer my franchise, and what does that require?
You cannot sell or transfer your franchise without the franchisor's prior written approval. The franchisor may refuse such a transfer for good cause, which includes but is not limited to unspecified reasons [p.204]. Additionally, if you wish to transfer your rights and obligations under the agreement, at least 50% of the total number of Kung Fu Tea shops must be open and operating at the time of the proposed transfer, and other specific conditions apply [p.178; p.3].
On what grounds can the franchisor terminate the agreement?
The franchisor can terminate the agreement on any grounds available by law [p.210]. Additionally, the franchisor has the right to terminate if you do not open the shop within nine months after the date of your franchise agreement [p.31 and p.32], or if you fail to comply with lawful provisions in the franchise agreement and do not cure such failure within a reasonable time, which cannot exceed 30 days [p.204].
What financial requirements — net worth and liquid capital — do I need to qualify?
This isn't specified in the excerpts. The FDD does not detail specific net worth or liquid capital requirements for franchisees to qualify financially. However, it mentions that the franchisor may request unaudited financial statements showing a net worth of at least $100,000 [p.205], and there are general financial qualification requirements mentioned in [p.141] but no specific amounts are provided.
Do I get an exclusive or protected territory?
No, you do not receive an exclusive territory. Your standard unit franchise will not have an exclusive territory because the franchisor has the right to establish Kung Fu Tea shops in non-traditional venues such as airports and hotels within or outside your designated area [p.35]. This means you may face competition from other franchisees, outlets owned by the franchisor, or other channels of distribution controlled by the company [p.36].
What training and ongoing support does the franchisor provide?
The franchisor provides initial training for the Managing Owner and Operating Manager, consisting of approximately 120 hours at their headquarters in New York City. This training is required only for the first franchise location and must be completed to the franchisor's satisfaction before opening. For additional personnel, training can be requested and provided at the franchisor’s then-current rate, though you are responsible for all related travel and living expenses. Ongoing support includes regular operational reviews, advice on compliance with system standards, and recommendations for improvements [p.121]. Other assistance may include newsletters or internet postings through a franchisee website [p.29].
How many franchised outlets are there, and how many have closed or been terminated?
This isn't specified in the excerpts.
Does the franchisor share any financial performance or earnings information?
The franchisor may provide actual records of an existing outlet if you are purchasing one, but they do not make representations about future financial performance or past financial performance of company-owned or franchised outlets. Any other financial performance information should be reported to the franchisor and relevant regulatory bodies as specified [p.48].
What am I restricted to selling, and where must I buy supplies?
You are not specifically restricted to selling certain items, but you must adhere to the franchisor's guidelines as outlined in Item 16 [p.25]. Regarding supply purchases, you may buy most perishables from local suppliers of your choice, except for milk and fruit which must be purchased from specified suppliers to maintain uniform quality and taste [p.118, p.23]. Additionally, you are required to purchase tea, coffee, concentrates, flavoring ingredients, packaging materials, cups, menu boards, signs, and other logoed merchandise from Arms Global Inc., an affiliate of the franchisor [p.23]. This isn't specified in the excerpts for all supplies, but you may participate in purchasing or distribution cooperatives established by the franchisor [p.118].