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D76/100FDD 2025

Sharetea — Litigation & Risk

Food & Beverage - Coffee & Tea · FDD Items 3, 4 & 5

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Elevated Risk

6 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
6
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
76 / 100
FranchiseVerdict composite
Rating
CAUTION
STRONG / MODERATE / CAUTION / AVOID

7(a) FOIA data · FY2020–present

SBA Loan Performance

Aggregated from public SBA 7(a) loan disclosures. Default rate is the share of loans that were charged off or settled for less than the full balance.

Total 7(a) loans
30
Government-backed loans issued
Default rate
9.1%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$11.9M
Avg loan size
$396K
Participating lenders
21

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Not required
You retain the right to sue in court
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
California
State whose law governs disputes — relevant if you're not based there

What drove the 76/100 rating

Risk Score Breakdown

  1. 01MINORUnit count declining 3.8% YoY (153 units) signals system contraction and potential market saturation or franchisee dissatisfaction
  2. 02HIGHMultiple active litigation cases including trademark infringement (domestic and Australia), territory violation claims, and personal injury tort create legal/financial exposure
  3. 03MINORState regulatory investigations in Minnesota and Hawaii for unregistered franchise offers suggest compliance failures and potential franchise disclosure violations
  4. 04MINORNo average revenue or net income disclosure (no Item 19) prevents validation of ROI claims and profitability benchmarks
  5. 05HIGHGoing Concern status False raises questions about franchisor financial stability and ability to support franchisees long-term
  6. 06MEDHigh investment ceiling ($648,800) paired with declining units and undisclosed earnings creates significant downside risk
  7. 07MINOR6% royalty on gross sales (not net) compounds profitability pressure in low-margin beverage retail

Severity inferred from FDD text — not a regulatory or legal classification

Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice — consult a franchise attorney before signing any franchise agreement.