Franchise Due Diligence: European Brand Café Franchise

Franchise Due Diligence: European Brand Café Franchise

Introduction

Individuals from around the world interested in moving to the U.S. through an investor visa rely on Visa Franchise for our expertise in finding a franchise business investment that not only meets their goals but also fits their unique individual profile. We at Visa Franchise are always researching and looking to find the best investments that will qualify for an E-2, L-1 or EB-5 investor visa. To date we have analyzed over 1,200 different franchise businesses in a wide variety of industries. We use very strict criteria before deciding what might be a good business or franchise that fits the needs and expectations of our clients. We typically focus on franchises and business opportunities that offer strong ongoing support, thereby reducing the risk for the foreign national investor. Visa Franchise analyses the potential businesses by always looking for these principal characteristics: high margins, recurring revenues, solid business case, strong management team, brand and industry growth, territory availability, and potentially eligible for investor visas.

In addition to reviewing the in’s and out’s of the business, we also review the franchise disclosure document whenever possible before presenting the opportunity to our clients. In this article we highlight a major reason why this type of analysis is important. In this particular case, a very significant lawsuit has the potential to significantly devalue the value of the franchise’s brand.

European Brand Franchise Opportunity

On occasion, our clients will come to us inquiring about a specific franchise or company that they are familiar with in order to get our opinion. Recently a number of Visa Franchise clients and potential investors have inquired us about a franchise that leverages a popular European brand as part of its name. As they are a global brand, we understand why visa candidates would be interested in this franchise concept. The U.S. franchise system approached the European brand about opening a dessert-themed café franchise featuring one of their products. After one year and a half of negotiations and agreements, they were able to finalize the deal and open their first location. They oversee developing the franchise across the U.S. to compete with the industry leader for that product.

The European brand is a premier dessert and bakery café, having a menu that includes cookies, ice cream, milkshakes, smoothies, and hot/frozen coffee beverages. Its management team, has opened more than 150 units in 24 states. Clients like the concept due to the food and drink offerings as well as the perceived simplicity to operate. However, during our research and due diligence of the franchise opportunity we found a number of red flags that should deter any potential franchisee.

The Problem

In 2016, the famous food company based in Europe that supplies the product to the franchise, filed a federal trademark infringement suit against the master franchisor alleging that they broke their agreement through misuse of the brand’s trademarks and brand. Much of this stems from the time that the master franchisor had one of their executives pretend to be a team member of the European brand working in various parts of the retail and distribution of the business in an episode of popular CBS TV show “Undercover Boss”. The show has a high-level executive of the company spend a number of days “undercover” with the employees to find out how things really work and what employees truly think of the corporation. After the master franchisor failed to allege any of its 30 defenses in this case, the European brand has asked a California Federal Court to disregard any more defenses raised by them in this infringement suit since they consider it would be a waste of time to litigate defenses that are legally insufficient and implausible.

What Does This Mean for the Potential Franchisees?

Visa Franchise always reviews litigations listed in the franchise disclosure document before showing a client a potential business; it is important to know the risks and if the company has any complications or lawsuits before presenting it as an opportunity to a client. In this specific case, it is very risky for a client to invest in this European brand because there is potential for the franchise as a whole to lose the brand’s trademark which is a major part of the brand for the franchise as well as what draws individuals to become franchisees and customers to the stores. Franchisees sell brand products and have the brand name in front of all 150 units around the world. Therefore, Visa Franchise would not recommend any of our clients to invest in this European brand Café until this litigation issue is resolved. It is not worth it to invest in a business that can lose the rights to use the brand’s trademarks, have their doors closed, and even go bankrupt. This is a prime example for why we at Visa Franchise always analyze franchise business investments before presenting the opportunity to our clients as an option for their E-2, L-1, or EB-5 investor visa.     

Other Great Coffee Options

Individuals who are interested in cafés, bakeries or cookie store franchises should not be discouraged by the situation with this European Café. We at Visa Franchise have identified several great options available that support their franchisees, and are great opportunities not only to grow and produce income but will also qualify for an investor visa. Our focus at Visa Franchise is to continuously research and find the best investment opportunities for our clients. An example of an interesting opportunity in the same sector is Hero Coffee. They were founded in Chicago in 2012, they only sell high quality beans, specialty blends and a rotating cast of in-season, single-origin selections from around the world. They not only sell brewing supplies but are able to ship fresh beans them to their customers the next day. In addition to their high-quality coffee, Hero offers a range of food products, including sandwiches, salads, and more. Hero has 9 locations mostly in the Chicago area and are in the process of opening throughout the U.S. As they are new to franchising, the brand and their management team are flexible to working with franchisees that would like to have in their stores additional products or services according to their interests. Regardless of what industry our clients have interest in, we always try to find the best franchise investments that fit their criteria.

If you are interested in owning a franchise please reach out to info@visafranchise.com or call us at +1-888-550-7556

Note: Visa Franchise does not make any financial performance representations other than provided by franchisors

 

About us


Visa Franchise guides investors in identifying and analyzing the best investment opportunities tailored to their specific objectives.

We are the trusted advisor for foreign nationals who qualify for the E-2, L-1 or EB-5 visa and would like to own a U.S. franchise, with a minimum investment amount of $150,000.

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