Grabbagreen Franchise

Financing Details

Grabbagreen generally does not offer direct or indirect financing for its franchises. However, if a franchisee decides to purchase a corporate-owned Grabbagreen restaurant from one of its affiliates, the franchisor's affiliate may, at its discretion, finance up to 100% of the purchase price. This financing for corporate store purchases can include the initial franchise fee, transferable furniture, fixtures, and equipment, leasehold improvements, and inventory. The annual interest rate charged for such financing ranges from 0% to 12%, depending on the franchisee's creditworthiness and the upfront payment amount. Repayment periods typically range from 12 months to 60 months, with a first lien position on all equipment required as security. Personal guarantees from the franchisee (and their spouse, if applicable) or the principals of the franchisee entity are also required. Grabbagreen does not arrange financing from other sources or receive payments for placing financing.

Litigation Summary

Grabbagreen, through its parent company MTY Franchising USA, Inc. and its affiliates, has a history of various litigation and administrative actions. Historically, predecessor company The Extreme Pita Franchising USA, Inc. faced a FIPA violation and misrepresentation lawsuit in Washington in 2015, settling for $20,000. Kahala Franchising, L.L.C. was involved in a breach of contract, fraud, and unjust enrichment case in California in 2015, which settled for Kahala repurchasing a territory and forgiving $130,000 in damages. Another case in Texas in 2014, alleging Texas Business Opportunities Act violations and breach of contract, settled for $35,000 paid by Kahala. SFF, L.L.C. (SweetFrog) had an arbitration for fraud and unfair practices in 2014, settling for $300,000 paid by SFF. A 2016 lawsuit over unauthorized closure of franchised shops was dismissed after a settlement where SFF paid $25,000 and reinstated some agreements. Fresh Enterprises, L.L.C. faced a breach of contract and misrepresentation lawsuit in California in 2013, settling for $585,000 paid by the counter defendants. Famous Dave's of America, Inc. had an arbitration in 2016 regarding Minnesota Franchise Act violations and breach of contract, which settled confidentially, including territorial rights modifications and consulting fees. A 2015 lawsuit in California against former franchisees for continued operation after termination was settled in 2018. VI BrandCo, L.L.C. had a bankruptcy proceeding in 2015 where its executives settled with a trustee for $300,000 in total. Wetzel's Pretzels, L.L.C. had an arbitration in 2019 for rescission and misrepresentation, settling with a $125,000 payment. Papa Murphy's International, L.L.C. faced two consolidated class-action lawsuits in 2014 from franchisees alleging misrepresentations regarding financial performance and marketing obligations. Settlements included some plaintiffs dismissing claims for no consideration, others paying Papa Murphy's, Papa Murphy's covering advertising costs, extending terms, or purchasing stores, with individual settlements ranging from $10,000 to $4 million. Another case related to default notices was dismissed as part of a settlement in the larger LMP case. Public agency actions include SweetFrog Enterprises, L.L.C. entering a consent order with Maryland in 2012 for violating registration and disclosure provisions. Blimpie Associates, Ltd. consented to an order in New York in 1992 for selling franchises without an updated prospectus, paying $18,000. Maui Wowi Franchising, Inc. entered two consent orders with Maryland in 2005 and 2007 for selling unregistered franchises and delivering incorrect disclosure documents, involving cease and desist orders and reimbursements. BF Acquisition Holdings, L.L.C. and its predecessor Triune, LLC entered consent orders with Maryland (2012) and Virginia (2012) for franchise law violations, paying civil penalties and offering rescission. More recently, between December 1, 2023, and November 30, 2024, Kahala Franchising, L.L.C. (an affiliate) filed two lawsuits against franchisees: one for breach of contract in Illinois in 2024 and another for forcible entry and detainer in Iowa. Overall, Grabbagreen, through its parent company and affiliates, has a significant legal history, primarily involving breaches of franchise agreements, alleged misrepresentations, and regulatory compliance issues. While many past cases have been concluded and settled, two new lawsuits were filed by an affiliate in the last fiscal year, indicating ongoing enforcement activities.

Renewal Conditions

To renew their Grabbagreen franchise agreement, franchisees must provide at least 120 days' notice before the current term expires. Grabbagreen requires franchisees to be in full compliance with all terms of their franchise agreement and Confidential Manual, with a limit on not having received more than 3 notices of default or breach during its term, nor more than 2 during the 5 years immediately before the proposed renewal date. Franchisees must also have an approved premises, sign the then-current form of franchise agreement (which may have materially different terms and conditions, including higher royalty and advertising fees), pay a renewal franchise fee, undertake any required remodeling or refurbishments to meet current system standards, and ensure all financial obligations to Grabbagreen and its affiliates are current. Additionally, franchisees must sign a general release provided by Grabbagreen.

Staffing Notes

Grabbagreen franchisees are solely responsible for hiring and training their employees. Each Grabbagreen restaurant must employ at least one full-time, on-premises supervisor, referred to as a "Manager." This Manager must be a qualified restaurant operator who devotes their entire working time to managing, operating, and developing the business. It is also required that a Manager capable of reading English and communicating effectively with employees and customers is present on every shift. All personnel employed by Grabbagreen franchisees must maintain standards of sanitation, cleanliness, and demeanor as established by Grabbagreen, and wear approved uniforms. Customer service employees must also have sufficient literacy and fluency in English (or the primary local language) to adequately serve the public.