Verified — real FDD extraction
Not found in the SBA Franchise Directory under this name — though SBA loans to its franchisees exist; verify eligibility with your lender
KUNG FU TEA
Food & Dining · independent · est. —
Kung Fu Tea is a bubble tea (boba) chain serving milk teas, fruit teas, slushes, and other customizable drinks with toppings like tapioca pearls. A franchisee operates a tea café, preparing drinks to order and managing a small storefront.
KUNG FU TEA net unit count grew +32.4% from 2021–2023 per its FDD Item 20.
New to franchising? Start here
A franchise is a business where you (the franchisee) pay a company (the franchisor) for the right to open and run a location using their brand and system — think a local Anytime Fitness or Taco John's owned by a small-business owner, not the corporation.
Before you can buy in, U.S. law requires the franchisor to give you a Franchise Disclosure Document (FDD) — a long legal filing covering its fees, finances, and history. The numbers on this page come straight from that document:
- Franchise fee — the one-time cost to buy in.
- Royalty — the ongoing cut of your sales you pay the franchisor.
- Item 20 — how many locations opened and closed, the basis for our verdict (from Proven & strong down to Distressed — or Too new to judge).
The verdict
Proven & strong
Distress
Enough units and history to judge, and the record is good: growing or stable units with clean exits by the standards of its disclosed record. The standout in the record: the system is growing.
Exit rate · latest year
5.9%
vs 8.2% across 146 food & dining systems
Cost to open
$169K–$378K
Item 7 total investment range
SBA loan defaults
Too few resolved
24 loans exist; too few resolved to rate
Behind the verdict
the record, factor by factor · Item 20
3-yr trend · Item 20 Table 1
terminations + ceased-ops vs. all exits · Table 3
transfers vs. base · Table 3
actual vs. projected openings · Table 5
Item 19 disclosure + completeness
Systemwide units
2021–2023
Survival record
FDD Item 20 · outlet status by year
In fiscal 2023, 20 of 339 franchised outlets left the system — a 5.9% annualized exit rate, vs 8.2% across 146 food & dining systems. Not every exit is a failure — but this is the measurable floor.
Show the outlet tables ↓Hide the evidence ↑
| Status (FTC) | 2021 | 2022 | 2023 |
|---|---|---|---|
| Outlets at start | 245 | 287 | 341 |
| Opened | 46 | 63 | 59 |
| Transfers | 13 | 11 | 17 |
| Terminations | 3 | 9 | 2 |
| Non-renewals | 0 | 0 | 0 |
| Reacquired by franchisor | 0 | 0 | 0 |
| Ceased — other reasons | 0 | 0 | 18 |
| Outlets at end | 287 | 341 | 380 |
| Net change | +42 | +54 | +39 |
The lender's view
SBA 7(a)/504 loan performance · FY1991–present
Banks have made 24 SBA-backed loans to KUNG FU TEA franchisees since 2016. Most are still open, so there is not yet a resolved cohort large enough to rate.
—
6 resolved · too thin to rate
—
avg. charged-off $ ÷ approved $
—
default rate × loss severity
$268,771
what recent franchisees borrowed
—
approval → charge-off, defaulted loans
13 vs 3
distinct banks still lending
Charge-off rate by loan approval year (%)
SOURCE: SBA 7(a)/504 FOIA LOAN DATA (DATA.SBA.GOV), FY1991–PRESENT · MATCHED TO KUNG FU TEA BY FRANCHISE NAME · RESOLVED = CHARGED-OFF + PAID-IN-FULL
The owner's side of the deal
FDD × federal loan record
Who finances it
the Huntington National Bank
29.2% of this brand's loans
That lender charges off 10.1% of its loans to other franchise brands, vs 14.8% nationally.
Who buys it
Too few identified operators
Does experience help here?
Not enough resolved loans to split
Computed from 24 SBA 7(a)/504 loans to KUNG FU TEA franchisees joined to the brand's own FDD. Debt service assumes level amortization at the average disclosed term and rate. A lender's rate excludes its loans to this brand, so it reads the lender, not the brand.
What it costs — and what it drags
FDD Items 5–7 · fees, investment, royalty
Buying in means a $37K franchise fee (Item 5) and a total investment of $169K–$378K (Item 7). The franchisor publishes no earnings claim (Item 19) — ask current and former franchisees for real numbers.
To open (Item 7)
$169K–$378K
all-in investment range
Franchise fee (Item 5)
$37K
upfront, one-time
Royalty (Item 6)
4%
of sales, ongoing
Your figure — this brand discloses no Item 19 earnings; validate with current & former owners.
Royalty you'd pay / yr
$40K
4% of sales, before profit
Over a 10-yr term
$400K
royalties alone, excl. ad fund
This is not profit. It's the only money the FDD actually pins down — what you put in, and the royalty you owe on every dollar of sales. Your real take-home depends on labor, rent, food cost, and ramp-to-breakeven, none of which any FDD discloses.
Build a real pro-forma for KUNG FU TEA with an independent CPALabor record
US Dept. of Labor enforcement · franchisee-level · FY2005–present
Federal investigators have concluded 4 wage cases against operators of this system, recovering $37K in back wages for 83 workers. Some of these cases are recent, not ancient history. These cases name franchisee-owned locations, not the franchisor itself.
Concluded cases
4
Back wages owed
$37K
Employees affected
83
Since 2020
3
Read this carefully. The employers in these cases are individual KUNG FU TEA franchisees — separately owned businesses operating under the brand name — not KUNG FU TEA itself. The franchisor is not the respondent and in most cases is not a party. What the record shows is how this system's operators run their payrolls, which is worth knowing before you become one of them. Counts rise with system size and with age: a 20-year-old, 10,000-unit system will out-count a young one regardless of conduct. Source: DOL Wage and Hour Division concluded compliance actions, FY2005–present, most recent finding 2024.
Modeled risk
FDD Risk Score · modeled from the public record
The public record puts this brand toward the safer end of the systems we score — but the evidence is thin, so treat it as a range, not a number.
Risk percentile (range)
11–35 / 100
Directional
Modeled SBA charge-off
9.1%
Observed SBA charge-off
0.0%
Top drivers: Share financed by high-loss lenders (lowers) · System size (log units) (lowers) · Net unit growth (lowers) · Investment ceiling (log) (raises). Thin loan history — treat this as a range, not a number. A linear scorecard built from this brand's own disclosure figures plus the federal loan record behind its franchisees; full spec and cross-validated accuracy on the methodology page. A score is context, not a verdict.
Distress signals
news-sourced · bankruptcies, closures, lawsuits
Kung Fu Tea in Providence to close for good
news:WPRI.com · 4mo ago
Kung Fu Tea in Providence closing after 10 years
news:WJAR · 4mo ago
Kung Fu Tea closes Dulles Landing location
news:The Burn · 6mo ago
9 questions to ask a KUNG FU TEA franchisee
Built from this brand's own disclosures · take it to your validation calls
The franchisor will give you a list of owners to call. Most buyers ask whether they like it. These are the questions built from what KUNG FU TEA has actually disclosed — each one carries the number it came from, so you can tell whether the answer squares with the record.
- 01
KUNG FU TEA’s own Item 20 shows 20 of 339 franchised outlets left the system in fiscal 2023 — about 5.9%. Do you know any of those owners, and do you know why they left?
A franchisor will call these “transitions.” An owner three doors down usually knows whether they sold at a profit or handed the keys back.
FDD Item 20 · FY2023
- 02
17 units transferred to new owners in fiscal 2023. When you look at those, were they people cashing out a good business — or getting out of a bad one?
Transfers count as neutral in every ranking. They are the single easiest place to hide distress.
FDD Item 20 · FY2023
- 03
Item 7 says the low end to open is $169K, but the average recent SBA loan to a KUNG FU TEA franchisee was $269K. What did you actually spend to open, all in?
Lenders size loans to real project costs. A large gap between the disclosed floor and what banks actually fund is the most common way buyers get underfunded.
FDD Item 7 vs SBA approvals FY2020+
- 04
You pay 4.0% royalty on gross sales, plus the ad fund, before any of your own costs. On your actual revenue last year, what did you take home as the owner — not revenue, take-home?
Royalty is charged on sales, not profit. This is the number the brochure never shows and the one your life actually runs on.
FDD Item 6
- 05
KUNG FU TEA’s FDD makes no financial performance representation at all — legally, they've told buyers nothing about earnings. What did your first 24 months actually look like, month by month?
When a franchisor won't publish numbers, existing owners are the only source. Silence in Item 19 is a choice, not a requirement.
FDD Item 19 · 2024
- 06
How many months did it take to cover your own costs, and how much cash did you burn getting there?
Ramp-to-breakeven working capital is the most underestimated line in any franchise purchase, and the most common reason otherwise-good units fail.
Not disclosed in any FDD — ask an owner
- 07
What does the franchisor charge for that you didn't expect — required tech fees, mandatory remodels, approved-supplier pricing?
Required spending appears across Items 6, 8 and 11 rather than in one place, so buyers routinely miss the total.
FDD Items 6, 8, 11
- 08
If your agreement came up for renewal tomorrow at current terms, would you sign again?
The single most predictive question you can ask. A hesitation is the answer.
Ask every owner you speak to
- 09
Who else should I call — including someone who left?
The franchisor's list is curated by definition. Former franchisees are where the unflattering truth lives, and current owners usually know how to reach them.
Ask every owner you speak to
Want this as a checklist you can take to the calls?
I'll email you the printable version, and tell you if KUNG FU TEA’s numbers move — a new filing, a rising exit rate, a distress signal. Unsubscribe in one click.
A broker is paid by the franchisor to place you. I'm paid by you — and the job is pressure-testing KUNG FU TEA's numbers, including talking you out of a bad deal.
This page is what buyers see before they call you for validation. If the record above is wrong — or right in a way the numbers can't show — say so. Corrections are checked against the filings; nothing you write is published with your name unless you agree to it.
KUNG FU TEA franchise questions, answered from the filings
What percentage of KUNG FU TEA franchises closed last year?
In KUNG FU TEA's latest FDD Item 20 (fiscal 2023), 20 of 339 franchised outlets left the system — an annualized exit rate of 5.9% — compared with 8.2% across 146 food & dining systems tracked here. That counts terminations, non-renewals, and "ceased operations — other reasons." There is no official failure rate, and not every exit is a failure, but this is the measurable floor.
How much does a KUNG FU TEA franchise cost?
Per KUNG FU TEA's 2024 FDD, buying in requires an initial franchise fee of $37K (Item 5) and a total initial investment of $169K–$378K (Item 7).
What royalty does KUNG FU TEA charge?
KUNG FU TEA charges an ongoing royalty of 4.0% of gross sales, per Item 6 of its 2024 FDD.
Does KUNG FU TEA disclose earnings (Item 19)?
No — KUNG FU TEA's 2024 FDD makes no financial performance representation in Item 19. That is legal and common, but it means the franchisor publishes no earnings claim; ask current franchisees for real numbers.