Maui Wowi Franchise

Financing Details

Maui Wowi does not generally offer direct or indirect financing to its franchisees. However, there are two specific exceptions where financing or guarantees might be provided, at the franchisor's sole discretion. First, if a landlord requires a third-party lease guarantee for a franchise location, Maui Wowi or an affiliate may agree to serve as guarantor. In this scenario, the franchisee would pay a non-refundable lease guarantee fee equal to 10% of the total guaranteed rental obligations, up to a maximum of $10,000. This fee is due upon the execution of the lease guarantee agreement. The franchisee (and their spouse, if applicable) or the principals of the franchisee entity (and their spouses) must personally guarantee the debt. Second, if a franchisee purchases an 'as-is' corporate-owned restaurant from a Maui Wowi affiliate, the franchisor may, at its sole discretion, finance up to 100% of the purchase price. The lending affiliate (either Kahala Holdings, LLC or Kahala Restaurants) will charge an annual interest rate between 0% and 12%, depending on the franchisee's creditworthiness, the amount financed, and the upfront payment. Repayment is structured in equal monthly installments over 12 to 60 months. This financing requires a first-position lien on all equipment as security, and the franchisee (or their principals/spouses) must personally guarantee the debt. Default on such financing can lead to accelerated payment obligations at an 18% interest rate, collection costs, attorney fees, franchise termination, cross-defaults, and the franchisor's right to repossess the restaurant. Franchisees waive certain legal rights, including contesting the take-back rights. If the corporate unit is leased, the franchisee will also enter into a sublease with the affiliate, with terms substantially similar to the master lease.

Litigation Summary

Maui Wowi and its affiliates have been involved in several legal matters. Kahala Franchising, L.L.C., the franchisor, was a party to two concluded cases between 2015 and 2017 involving breach of contract and Texas Business Opportunities Act claims, with settlements of $75,000 plus forgiveness of $130,000 in damages in one case, and $35,000 in another. More recently, in the fiscal year ending November 30, 2024, Kahala Franchising filed two new lawsuits against franchisees for breach of contract and forcible entry and detainer, which are ongoing. Other affiliates and predecessors have also had litigation, including a 2015-2019 bankruptcy proceeding involving executives of an affiliate, which settled for payments totaling $300,000 from two executives. Additionally, there were numerous concluded cases involving other affiliated brands, such as SweetFrog Enterprises (fraud, unfair practices, and a settlement of $300,000), Fresh Enterprises (Baja Fresh) (breach of contract and misrepresentation, settled for $585,000), Famous Dave's (MFA violations and continued use of marks post-termination, settled), Wetzel's Pretzels (misrepresentation, settled for $125,000), and Papa Murphy's (misrepresentations, resulting in various settlements including store purchases). State administrative actions also occurred, including two against Maui Wowi's predecessor in Maryland in 2005 and 2007 for unregistered sales and disclosure issues, leading to cease and desist orders and rescission offers. In total, Maui Wowi and its affiliates have disclosed 20 litigation cases, including those that are ongoing.

Renewal Conditions

To renew, Maui Wowi franchisees must give at least 120 days' written notice before their current agreement expires. They must not be in default under their existing franchise agreement or any other agreements with Maui Wowi or its affiliates. Franchisees must also be in full compliance with the terms of their agreement and the confidential operations manual. They should not have received more than three notices of default or breach during the entire term of the agreement, nor more than two such notices during the five years immediately preceding the proposed renewal date. Additionally, franchisees must have an existing right to maintain possession of their current location or secure a suitable new one that meets Maui Wowi's minimum site requirements. They will be required to sign a new franchise agreement, which may include different terms and conditions, such as higher advertising, snack program, and technology fees. Franchisees must also agree to remodel or refurbish their operating units and upgrade their point-of-sale system to meet current system standards. Finally, they must be current on all financial obligations to Maui Wowi and its affiliates and sign a general release.

Staffing Notes

Maui Wowi requires that the franchised business be personally managed with on-premises supervision by the franchisee, a partner, shareholder, or a manager who has successfully completed the training program. If a franchisee operates multiple units, it is recommended that an on-premises supervisor (Manager) who has completed the training program be assigned to each operating unit, dedicating substantial full-time effort to its supervision and conduct. This Manager must consistently meet the franchisor's criteria as a 'qualified restaurant operator.' All personnel employed in a Maui Wowi restaurant must maintain high standards of sanitation, cleanliness, and demeanor, and are required to wear a uniform or other approved clothing. Additionally, all employees whose duties involve customer service must demonstrate sufficient literacy and fluency in the English language (or the primary language of the local market) to effectively serve the public.