Risk Score
Pending analysis
Investment Range
$169,000 - $428,000
Franchise Fee
$25,000
Total US Locations
387
Business Summary
Kung Fu Tea shops are retail locations that sell a wide variety of brew tea, bubble tea, coffee, juices, smoothies, and other hot and cold beverages. These drinks are made using specific recipes and ingredients. Kung Fu Tea shops also offer take-out and delivery services.
Corporate History
Kung Fu Tea Franchising LLC was formed in 2013 in Delaware. The Kung Fu Tea concept itself began operations in New York City in May 2010 through its affiliate and predecessor, KF Tea USA Inc., which was formed in January 2010. KF Tea USA Inc. owns the Kung Fu Tea trademarks and licenses them to Kung Fu Tea Franchising LLC for its U.S. and international franchise system. Between 2011 and 2013, a former affiliate, Mars Holding Group Inc., granted some Kung Fu Tea franchises, which were later assigned to Kung Fu Tea Franchising LLC in 2014. The company has since expanded to include affiliates operating TKK Fried Chicken and Yasubee Ramen.
Financial Overview
Investment Range
$169,000 - $428,000
Franchise Fee (Low)
$25,000
Franchise Fee (High)
$37,000
Royalty %
4%
Marketing %
2%
Equipment Costs (Low)
$82,500
Equipment Costs (High)
$207,500
Working Capital
$15,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial condition of Kung Fu Tea Franchising LLC, as shown in its financial statements, raises questions about its ability to provide services and support to its franchisees. Although Kung Fu Tea Franchising LLC reported positive net income of over $825,000 in 2024 and over $1.2 million in 2023, the company has a significant accumulated members' deficit of over $3.8 million in 2024. Its operating cash decreased from over $2.4 million in 2023 to approximately $1.1 million in 2024. The company also experienced negative net cash from operating activities in 2024, at over $633,000, which is a reversal from previous years. Additionally, a notable portion of its cash balances, approximately $600,000 in 2024, is uninsured.
Financing Details
Kung Fu Tea Franchising LLC does not offer any direct or indirect financing to its franchisees. Franchisees are responsible for securing their own financing for the investment, and Kung Fu Tea Franchising LLC does not assist in obtaining financing, nor does it guarantee or co-sign any notes, leases, or other obligations.
Performance Metrics
Total US Locations
387
Franchised Units
385
Corporate Units
2
Avg Square Footage
1,000
Franchising Since
2011
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
1
Litigation Summary
Kung Fu Tea Franchising LLC and its affiliate, KF Tea USA Inc., were involved in a trademark infringement lawsuit that began on December 27, 2023. They sued Tea N' Boba Enterprises LLC and two individuals for using the KUNG FU TEA trademark and a similar mark, KUNG FU BOBA, for a competing store. The defendants had previously operated a franchised Kung Fu Tea store at the same location. On January 19, 2024, a permanent injunction was granted against the defendants. The case was dismissed on March 4, 2024, following a favorable settlement for Kung Fu Tea Franchising LLC and KF Tea USA Inc. Kung Fu Tea Franchising LLC has no other litigation to report in this item.
Bankruptcy History
Kung Fu Tea Franchising LLC has no bankruptcy history to report in this FDD document.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew their franchise, Kung Fu Tea franchisees must notify Kung Fu Tea Franchising LLC between 12 and 18 months before the current agreement ends. They need to update and repair their equipment and premises to meet current standards, and sign a new franchise agreement that may have significantly different terms and conditions. Kung Fu Tea Franchising LLC may also require franchisees to sign a general release and pay a renewal fee of up to $10,000 or 25% of the current initial franchise fee, whichever is greater.
Training & Support Program
Franchisor Assistance
Kung Fu Tea Franchising LLC offers extensive support to its franchisees. Before opening, Kung Fu Tea provides assistance with site selection and approval, outlines site development requirements including design and equipment, provides a confidential operations manual, and shares lists of approved products, equipment, and suppliers. It also conducts a three-week initial training program for the managing owner and one other person, followed by two weeks (80 hours) of on-site training and assistance at the new shop, along with guidance on advertising and promotional materials. After opening, Kung Fu Tea Franchising LLC continuously updates its operations manual and offers refresher training courses, for which franchisees cover travel and living expenses. The company also performs operational reviews, updates supplier lists, develops and manages national and regional advertising through the Marketing Fund, maintains a system website, and provides telephone consultation for all operational aspects. Additional on-site assistance is available upon request for a fee.
Initial Training Hours
120
Training Location
New York City area
Ongoing Support
After opening, Kung Fu Tea Franchising LLC provides ongoing support to franchisees by periodically amending and revising the operations manual. It offers refresher courses for which franchisees cover their personnel's travel, lodging, and meal expenses. The company conducts regular operational reviews and quality control measures to ensure compliance with standards and recommend improvements. Franchisees receive updated lists of approved suppliers and distributors. Kung Fu Tea Franchising LLC also creates and manages advertising and promotional programs through the Marketing Fund, maintains a system website listing shop locations, and offers telephone consultation for operational issues. Additionally, it may provide advice and guidance through newsletters, internet postings, and other written materials. On-site assistance is available at the franchisee's request for a fee.
Franchise Requirements
Ideal Candidate Profile
Kung Fu Tea seeks franchisees who are individuals of good character, possessing sufficient business experience, aptitude, and financial resources. An approved equity owner of the business must serve as the "Managing Owner," responsible for overseeing and supervising the franchised operation. Additionally, an "Operating Manager" (who can be the same person as the Managing Owner) is required to dedicate full-time effort to the direct, day-to-day supervision of the business. Both the Managing Owner and the Operating Manager must attend and satisfactorily complete Kung Fu Tea's initial three-week training program. All owners of the franchisee entity are required to sign personal guarantees, and any manager or individual with access to confidential information must sign a confidentiality agreement.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Hands-On
Territory Type
Limited
Territory Size Requirements
Kung Fu Tea Franchising LLC defines a standard Kung Fu Tea shop's territory as a radius of 5 city blocks or one-half mile in urban areas (whichever is smaller), and a one-mile radius in suburban areas. The territory is specifically defined by geographical boundaries such as counties, zip codes, streets, or highways.
Staffing Notes
Kung Fu Tea Franchising LLC requires its franchisees to maintain a sufficient number of competent, trained staff to provide prompt customer service in line with brand standards. Franchisees are responsible for ensuring all staff complete required training and certifications. The Operating Manager, who can also be the owner, must work full-time, dedicating all attention and effort to the daily operations and supervision of the Kung Fu Tea shop. Franchisees have complete authority and control over all employment aspects, including recruiting, hiring, training, wages, benefits, schedules, and discipline, and must adhere to all applicable workplace laws.