Kona Ice Franchise

Financing Details

Kona Ice does not offer direct financing but facilitates indirect financing for its franchisees through several third-party lenders. Franchisees may obtain financing for the purchase of their KEV (Kona Entertainment Vehicle) or KEV 2.0 Truck, kiosk, mini, trailer, and/or initial inventory through lenders such as Eagle Financial Services, Inc., a hybrid program from Ally Financial, Inc. and Eagle, Auxilior Capital Partners, and Osgood Bank. Eagle Financial Services, Inc. may offer financing for KEVs, KEV 2.0 Trucks, kiosks, minis, or trailers. Loans are paid in 36 equal monthly installments with an interest rate of 10.99%. No prepayment penalty is incurred. Loans are secured by a personal guarantee from partners/shareholders and a pledge of the franchise. In case of default, late penalties apply, and all amounts due may accelerate. Borrowers waive the right to a jury trial and certain defenses. The Ally-Eagle program may finance KEVs or KEV 2.0 Trucks and an initial inventory pack. The KEV's chassis and hard components may be financed by Ally over 60 months with interest rates based on credit application results (historically around 10%). The remaining portion of the KEV/truck and inventory pack is financed by Eagle over 60 months at a 10.99% interest rate. No prepayment penalty is incurred, and similar personal guarantees and waivers apply, including individual arbitration. Auxilior Capital Partners may finance KEVs, KEV 2.0 Trucks, and initial inventory, along with optional equipment. Loan terms range from 36 to 66 months, including up to six months of payment deferments structured to reflect the seasonal nature of the business (e.g., $100/month during off-season). Interest rates vary based on credit (e.g., 8.99% for A Credit, 10.99% for B Credit). A prepayment penalty of 1% applies for each year or partial year remaining on the loan. Kona Ice may receive sales and marketing support and sponsorship fees from Auxilior for facilitating these loans. Osgood Bank may offer financing for KEVs or KEV 2.0 Trucks and initial inventory. Loan terms range from 60 to 72 months, with seasonal payment adjustments similar to Auxilior. Fixed interest rates vary based on personal credit scores (e.g., WSJ Prime + 3.50% for 680-750 score, WSJ Prime + 2.75% for 750+ score). A 2% prepayment penalty applies if the loan is paid in full during the first two years. A $250 documentation fee is charged, which can be financed. Similar personal guarantees, pledge of the franchise, and waivers of jury trial and certain defenses apply.

Litigation Summary

Kona Ice has no litigation to report. The FDD states that no litigation is required to be disclosed in this Item.

Renewal Conditions

To renew their Kona Ice franchise agreement, franchisees must provide written notice to Kona Ice between 6 and 12 months before their current term expires. They must be in good standing, meaning they are not in default of their franchise agreement or any other agreement with Kona Ice or its affiliates, and they should not have received more than three separate written default notices during the previous term. Franchisees must also ensure their KEV (Kona Entertainment Vehicle) and any Additional Equipment are compliant with Kona Ice's current standards, which may require replacement, remodeling, repair, or upgrades at the franchisee's expense. The franchisee must sign Kona Ice's then-current successor franchise agreement and any related documents, which may include materially different terms and conditions such as higher royalty and advertising contributions. Additionally, franchisees and their owners must sign a general release of all claims against Kona Ice and its affiliates, and pay a non-refundable renewal fee of $7,500. They must also take any other actions Kona Ice reasonably requires.

Staffing Notes

Kona Ice franchisees are responsible for determining appropriate staffing levels, and hiring, training, and supervising their own employees or independent contractors to operate the business in compliance with System standards. Franchisees are solely responsible for all employment-related decisions and costs, including wages, commissions, benefits, workers' compensation, and payroll taxes. Employees and contractors are considered the franchisee's own, not Kona Ice's. Employees must wear clean uniforms approved by Kona Ice. A Managing Owner, who holds at least a 51% ownership interest, must directly supervise and participate in day-to-day operations. After the initial 60 days, a Kona Ice-approved Designated Manager, who must complete Kona Kollege training, may take over daily operations. Any officer not owning equity and any employee with access to confidential information must sign a System Protection Agreement or Confidentiality Agreement, respectively.