Great Steak Franchise

Financing Details

Great Steak generally does not offer direct or indirect financing arrangements, nor does it typically guarantee a franchisee's obligations for notes or other debts. However, there are two specific exceptions where financing assistance may be provided at Kahala Franchising's sole discretion. Firstly, if a landlord requires a lease guarantee for the franchisee's site, and Kahala Franchising or one of its affiliates agrees to act as guarantor, the franchisee will pay a lease guarantee fee equal to 10% of the total guaranteed rental obligations, up to a maximum of $10,000. Secondly, for franchisees purchasing an existing corporate-owned Great Steak restaurant from an affiliate, the affiliate may finance up to 100% of the purchase price. The interest rate for such financing would range from 0% to 12%, determined by the franchisee's creditworthiness and upfront payment. Repayment terms typically involve equal monthly installments over a period of 12 to 60 months, with a first lien on all equipment serving as security. Great Steak does not arrange financing from external sources and does not receive payments for placing financing.

Litigation Summary

Kahala Franchising, L.L.C., the franchisor for Great Steak, and its affiliates have been involved in various legal proceedings, including both litigations and state administrative actions. In the most recent fiscal year (December 1, 2023, through November 30, 2024), Kahala Franchising, L.L.C. filed a breach of contract lawsuit against a franchisee in Illinois, and an affiliate (Cold Stone Creamery Leasing Company, Inc.) filed a forcible entry and detainer suit in Iowa. Historically, Great Steak, through its predecessors and affiliates, has faced a range of legal issues. For example, a predecessor of an affiliate, The Extreme Pita, was sued in 2015 for Franchise Investment Protection Act violations and misrepresentation, settling for $20,000. Kahala Franchising, L.L.C. itself was involved in a breach of contract and fraud lawsuit with an area representative from 2015 to 2017, which was resolved by repurchasing the territory and forgiving damages. Another franchisee sued Kahala Franchising, L.L.C. in Texas in 2014 for deceptive trade practices and breach of contract, resulting in a $35,000 settlement. Affiliates have also been involved in significant litigation. SFF, L.L.C. (SweetFrog) settled an arbitration for $300,000 in 2015 related to fraud and unfair practices, and resolved a lawsuit in 2016 concerning a franchisee's unauthorized closure. Fresh Enterprises, L.L.C. (Baja Fresh affiliate) settled a breach of contract and misrepresentation case for $585,000 in 2015. Famous Dave's of America, Inc. settled a 2016 arbitration with franchisees alleging violations of franchise law and breach of contract, and resolved a 2015 lawsuit against former franchisees for continued operation after termination. The CEO and Chief Concept Officer of an affiliate (VI BrandCo, L.L.C.) settled a 2015 Chapter 7 bankruptcy proceeding for $150,000 each. Wetzel's Pretzels, L.L.C. settled a 2019 franchisee lawsuit for rescission due to misrepresentation for $125,000 in 2021. Papa Murphy's International, L.L.C. faced consolidated lawsuits in 2014 from franchisee groups over alleged misrepresentations in financial performance, leading to various settlements ranging up to $4 million and store purchases. State administrative actions against affiliates include: SweetFrog in Maryland (2012) for offering unregistered franchises; Blimpie Associates, Ltd. in New York (1992) for an unupdated prospectus resulting in an $18,000 payment; Maui Wowi Franchising, Inc. in Maryland (2005 and 2007) for unregistered sales and disclosure issues; and Triune, LLC (a Baja Fresh predecessor) in Maryland (2012) and Virginia (2012) for registration and disclosure violations, resulting in penalties.

Renewal Conditions

To renew their Great Steak franchise, franchisees must provide at least 120 days' notice before their agreement expires. They need to be in good standing, which means they are not in default of the franchise agreement or operations manual and have not received more than three default notices during the term of the agreement (or more than two in the five years immediately preceding the proposed renewal date). Franchisees must have an existing or suitable new location, sign the then-current form of franchise agreement (which may have different terms, including higher royalty and advertising fees), pay a renewal franchise fee, complete any necessary remodeling or refurbishment to meet current brand standards, and be current on all financial obligations. Additionally, a general release must be signed as part of the renewal process.

Staffing Notes

Great Steak franchisees are required to employ at least one full-time, on-premises supervisor (manager) for their restaurant. This manager must dedicate their entire time during normal business hours to the management, operation, and development of the Great Steak business, even if they do not hold an equity interest. The manager is also responsible for maintaining confidentiality of trade secrets, proper use of proprietary marks, adhering to non-competition covenants, and complying with all operating standards. They are required to sign a Confidentiality Agreement. Franchisees are solely responsible for hiring, firing, training, supervising, and compensating their employees. All employees whose duties involve customer service must be able to speak and read English (or the primary language of the market) to effectively serve the public, and all personnel must adhere to established standards for sanitation, cleanliness, demeanor, and wear approved uniforms.