The state last week issued a preliminary cease-and-desist order to Teapresso Bar LLC, alleging violations of state franchise laws.
State officials, however, say that only applies to the company as a franchisor and does not apply to Teapresso franchisees.
“In other words, the preliminary order to cease and desist does not require any Teapresso franchisee to close its business or stop services," says Ty Nohara, commissioner of securities at the state Department of Commerce and Consumer Affairs.
Teapresso Bars specialize in coffee and boba tea.
The preliminary cease-and-desist order, issued by Nohara on Oct. 14, alleges that between December 2016 and July 2021, Teapresso, whose sole managing member was Thanh “Steve” Nguyen, granted 26 Teapresso Bar franchises in Hawai‘i in violation of franchise laws.
The state alleges that Teapresso Bar LLC failed to provide an “offering circular” to prospective franchisees before franchises were sold and also failed to file required documents with the commissioner, as required by state law. Teapresso has been ordered to stop offering or selling franchises in the state and pay a civil penalty of $100,000.
Nohara told Aloha State Daily via email that an offering circular is now more commonly known as a franchise disclosure document — a comprehensive document that the law requires a franchisor, or seller of the franchise, provide to franchisee, or the buyer of a franchise, at least seven days before any contract is signed or money is paid to the franchisor.
“The purpose of an offering circular is to ensure that potential franchisees receive certain key information about the franchisor’s business operations to help them make informed decisions before investing in the franchise,” Nohara says, adding that state laws outline specific information that must be provided in the document, “including, but not limited to, detailed information about the franchisor's affiliates, business history, financial condition and regulatory history, if any, as well as any other known risks associated with the franchise.”
“The offering circular must also include detailed information pertaining to the franchisee’s obligations, including payment of initial fees, operational standards, requirements, and limitations and future financial obligations, such as payment of royalties or other fees, as well as the franchisee’s rights of sale, transfer or assignment of the franchise.”
And to allow for state oversight, franchisors must also file with the commissioner a copy of the same document provided to franchisees at least seven days before the sale of any franchise in the state, she explained.
The Teapresso Bar corporate team addressed the matter on social media and reiterated that all stores will remain open.
“Each Teapresso location is independently owned and operated under an individual licensing agreement that allows local business owners to use the Teapresso brand,” an Instagram post reads. “This is the matter of administrative compliance with the state — not a shutdown order. All Teapresso stores will continue to operate as usual. We remain committed to ensuring all locations continue to provide the same great drinks, service and experience that our customers love. Thank you for your continued support and understanding.”
The state says that anyone who purchased a Teapresso Bar franchise, or who may have information about this matter, should contact the DCCA’s Securities Enforcement Branch at 808-586-2740 or seb@dcca.hawaii.gov.
According to a DCCA spokesperson, the last franchise preliminary cease and desist was issued by against Shannon Fuller and E-Z Roadside on May 13, 2013.
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Stephanie Salmons can be reached at stephanie@alohastatedaily.com.
