FDD Items 3 & 4 · 2024 filing

Mochinut litigation history

What Mochinut disclosed about lawsuits, arbitrations and bankruptcy in the 2024 Franchise Disclosure Document. Item 3 lists the material legal actions a franchisor must report; Item 4 covers bankruptcy. This is the franchisor's own disclosure, not a court record, and not legal advice.

Items 3 (litigation) & 4 (bankruptcy) at a glance

What the filing discloses

Cases disclosed: 6; Item 3, as counted in the filing

Largest settlement, franchisor's own cases: None stated

Bankruptcy (Item 4): None; Franchisor, parent, predecessor or officer

Filing year: 2024; Disclosures cover the prior ten years

Extracted from the 2024 Franchise Disclosure Document

Item 3: litigation

Franchisor's affiliate Salt & Light/CEO Tang entered a WA DFI consent order for unregistered franchise sales. Predecessor entities (MFI, MI) and their principal Jaewook Ha faced 6 franchisee-initiated lawsuits (mostly in CA and WA) alleging unregistered franchise sales, breach of contract, and misrepresentation; several were settled ($160,000, $75,000, $68,000) and two remain pending. Separately, MI/MFI entered into 6 state administrative consent orders/settlements (CA, IL, MD, MN, VA, WA) for offering/selling franchises without registration, paying penalties ranging from $1,000 to $50,000.

Item 3 (litigation) · 6 matters disclosed

Litigation cases

The franchisor

Concluded (2)

Illinois: Assurance of Voluntary Consent with the Attorney General of the State of Illinois
concluded
Attorney General of the State of Illinois
“Illinois: In April 2023, we entered into an Assurance of Voluntary Consent with the Attorney General of the State of Illinois.”Page 10 of the 2024 FDD, Item 3
Outcome: “We agreed to the Assurance of Voluntary Consent to (i) refrain from offering and selling franchises in Illinois without being properly registered; (ii) offer rescission to any current Illinois franchisees; (iii) pay $8,000 to the State of Illinois”
Washington: Consent Order S-22-3490-24-CO01 with the Department of Financial Institutions, Securities Division
concluded
Government or regulatory action · State of Washington, Department of Financial Institutions, Securities Division · S-22-3490-24-CO01
“Washington: In April 2024, Mochinut Franchise, Inc., Mochinut, Inc., Chungchun Hotdog USA, Inc. and Jae Wook Ha entered into a Consent Order S-22-3490-24-CO01 with the State of Washington, Department of Financial Institutions, Securities Division (the “DFI”).”Page 11 of the 2024 FDD, Item 3
Outcome: “the parties agreed in the Consent Order to (i) cease and desist from any violations of RCW 19.100.020, the registration section of the Franchise Investment Protection Act of Washington; (ii) cease and desist from any violation of RCW 19.100.080, the violations section of the Franchise Investment Protection Act of Washington; and (iii) pay investigative costs of $9,737.”

Parent, affiliates, master franchisor and subfranchisor

Concluded (4)

California: In the Matter of Mochinut, Inc. - Consent Order with the Department of Financial Protection and Innovation
concluded
Government or regulatory action · Mochinut, Inc. · State of California, Department of Financial Protection and Innovation
“California: On May 10, 2023, our affiliate Mochinut, Inc. entered into a Consent Order with the State of California, the Department of Financial Protection and Innovation (the “Department”).”Page 10 of the 2024 FDD, Item 3
Outcome: “Mochinut agreed to the Consent Order to (i) desist and refrain from the violations; (ii) pay $50,000 in penalties; (iii) all officers, directors and individuals having management and sales responsibility attend remedial education; (iv) send rescission offers and a copy of the Consent Order to franchisees.”
Maryland: In the Matter of Mochinut, Inc. and Skyism, LLC - Consent Order with the Securities Commissioner of Maryland
concluded
Government or regulatory action · Mochinut, Inc. · Securities Commissioner of Maryland
“Maryland: On February 21, 2024, Mochinut, Inc. and Skyism, LLC entered into a Consent Order with the Securities Commissioner of Maryland.”Page 11 of the 2024 FDD, Item 3
Outcome: “Mochinut agreed to the Consent Order to (i) cease and desist from the offer and sale of franchises in violation of the Maryland Franchise Law, (ii) offer rescission to the Maryland licensees, (iii) pay $15,000 in penalties”
Minnesota: Civil Penalty Agreement with the Minnesota Commerce Department
concluded
Government or regulatory action · Mochinut, Inc. · Minnesota Commerce Department
“Minnesota: On May 26, 2023, our affiliate Mochinut, Inc. entered into a Civil Penalty Agreement (“Agreement”) with the Minnesota Commerce Department (the “Department”).”Page 11 of the 2024 FDD, Item 3
Outcome: “We agreed to the Agreement, among other things, to (i) refrain from offering or selling until being properly registered, (ii) offer rescission and submit the evidence to the Department, (iii) pay $1,000 to the Department”
Virginia: Settlement Order SEC-2022-00009 with the State Corporation Commission's Division of Securities and Retail Franchising
concluded
Mochinut, Inc. · State of Virginia, State Corporation Commission's Division of Securities and Retail Franchising · SEC-2022-00009
“Virginia: On December 1, 2022, our affiliate Mochinut, Inc. entered into a Settlement Order SEC-2022- 00009 with the State of Virginia, State Corporation Commission’s Division of Securities and Retail Franchising (“Division”).”Page 11 of the 2024 FDD, Item 3
Outcome: “Mochinut agreed in the Settlement Order to (i) send a copy of the Order to all franchisees in Virginia; (ii) (ii) pay $32,500 in penalties; and (iii) not violate the Act in the future.”

Item 3 lists the litigation the franchisor must disclose; a matter against a parent, an affiliate or a named officer is not a matter against the franchisor, and pending claims are allegations, not findings.

Before you weigh a lawsuit

How to read Item 3

A franchisor must disclose pending actions and any material civil action involving the franchise relationship, plus convictions or civil judgments for fraud, unfair or deceptive practices, or franchise-law violations, going back ten years. A case the franchisor brought against a franchisee counts too. Item 3 does not include every dispute: settled claims below the materiality line and matters resolved in private arbitration can be absent.

Questions worth asking current and former franchisees, using the contact list in Item 20:

Were you, or anyone you know in the system, party to a dispute with the franchisor?
Was it resolved by settlement, arbitration or a court, and on what terms?
Has the number of disputes gone up or down since you signed?

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