Ding Tea Franchise

Financing Details

Ding Tea Corporation does not offer any direct or indirect financing to its franchisees. This includes not providing financing for initial investment costs, equipment, or any other obligations. Ding Tea Corporation also does not guarantee any franchisee notes, leases, or other financial obligations, nor does it intend to sell, assign, or discount any franchisee financing arrangements to third parties. Franchisees are solely responsible for obtaining their own financing, which will depend on their individual financial strength.

Litigation Summary

Ding Tea Corporation has been involved in several legal and governmental actions. In 2022, Ding Tea reported to the state of Hawaii that it had sold two franchises without prior state registration, and this matter is currently awaiting further investigation. In 2020, Ding Tea faced a lawsuit in California alleging its website violated the Unruh Civil Rights Act, which has since been settled. Also in 2020, a cross-complaint was filed against Ding Tea, claiming intentional interference with contractual relations and unfair competition, but this case was dismissed by the plaintiff. Regarding governmental actions, Ding Tea's parent company, Chu Yu Hsiang Co., Ltd., was investigated by the State of Washington's Department of Financial Institutions Securities Division in 2021 for offering and selling Ding Tea franchises without proper registration. This resulted in a Consent Order in August 2021, and the parent company paid $3,500 in investigative costs. In Minnesota, Ding Tea Corporation offered and sold a franchise without valid registration, leading to a cease and desist order and a requirement to offer rescission to the franchisee, with a $1,000 civil penalty imposed in January 2023. Additionally, Ding Tea's parent company sold a franchise in Virginia in 2020 without registration, which was settled with a $25,000 franchise fee refund to the franchisee in December 2022. The State of California Department of Financial Protection and Innovation began an investigation into Ding Tea Corporation in January 2021 concerning franchise law violations. This investigation concluded with a Consent Order in October 2021 (amended February 2022), requiring penalties of $397,500 (reducible by refunds to California franchisees), a $5,000 administrative payment, offers of cancellation and refunds to affected franchisees, and attendance at remedial education.

Renewal Conditions

To renew their franchise agreement, Ding Tea franchisees must provide written notice at least 180 calendar days before their current term expires. Franchisees must be solvent, must not have abandoned their outlet, must not be operating in a manner that endangers public health or safety or materially harms the Ding Tea brand, and must not have knowingly submitted false or incomplete reports. As a condition of renewal, Ding Tea Corporation may require franchisees to sign their then-current standard Franchise Agreement or an addendum, which may contain terms substantially different from the original agreement. Franchisees are also required to have satisfied all monetary and other material obligations to Ding Tea Corporation and its affiliates. Additionally, Ding Tea Corporation may require franchisees to update the Trade Dress of their outlet to meet current brand standards, which could involve installing new color schemes, logos, or signage, and bringing equipment and materials into compliance. A Renewal Fee equivalent to 50% of the Initial Franchise Fee is also required.

Staffing Notes

Ding Tea requires that the franchisee or a designated Principal Operator must be actively involved in the day-to-day management and operation of the tea shop, particularly if neither the General Manager nor the Assistant Manager is an equity owner. Franchisees must ensure that at least two personnel, which can include the franchisee, General Manager, Assistant Manager, or a Principal Equity Owner, complete a mandatory initial training program. This program involves a minimum of seven calendar days of instruction, typically conducted in Taiwan and through on-site pre-opening training. All tea shop managers are expected to be literate and fluent in English to facilitate communication with employees, customers, and suppliers. Ding Tea franchisees are solely responsible for hiring, supervising, training, and evaluating their employees to provide competent and efficient service. The General Manager's primary role is to ensure timely and professional customer service and is prohibited from actively participating in other businesses during normal operating hours. An Assistant Manager may be designated to assist the General Manager. Franchisees are also responsible for securing confidentiality and non-compete agreements from their managers and staff. Additionally, Ding Tea may mandate attendance at further training courses, seminars, conferences, or system-wide meetings for designated personnel.