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How much does De Jeng cost?
Initial Investment Range
$146,000 to $176,000
Franchise Fee
$110,000
The franchise offered is to sub-franchise De Jeng food service establishments offering gourmet teas, caffeinated beverages, bubble tea, compatible food products, coffee and tea makers and related supplies, accessories and gifts within a specific territory.
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De Jeng March 3, 2025 FDD Risk Analysis
Free FDD Library AI Analysis Date: August 19, 2025
DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.
Franchisor Stability Risks
Start HereDisclosure of Franchisor's Financial Instability
High Risk
Explanation
Yung De Jeng Inc. (De Jeng) was formed in February 2024 and its financial statements show it is a pre-revenue startup with zero operating income and a net loss for 2024. While it has a positive net worth from an initial capital injection, its ability to support you relies entirely on this initial funding and future franchise sales, not on a proven, profitable business operation in the U.S. There is also a noted risk of uninsured cash deposits.
Potential Mitigations
- An experienced franchise accountant should thoroughly review the franchisor's financial statements, including all footnotes and cash flow.
- Discuss the franchisor's capitalization and future funding plans with your financial advisor to assess their long-term viability.
- Your attorney can help you understand the risks associated with investing in a pre-revenue franchisor.
High Franchisee Turnover
High Risk
Explanation
As De Jeng is new to the U.S. market, the tables in Item 20 show zero franchised or company-owned outlets for the last three years. Consequently, there is no data on franchisee turnover, terminations, or closures. This lack of history means you are investing in a system without any track record of franchisee success or failure in your country, which represents a significant unknown.
Potential Mitigations
- Given the lack of U.S. data, your business advisor should help you perform enhanced due diligence on the parent company's international operations.
- Ask your attorney to explore negotiating stronger contractual protections or a more favorable exit strategy due to the unproven nature of the system.
- Discuss the franchisor's strategy for supporting its first U.S. master franchisee with your business advisor.
Rapid System Growth
High Risk
Explanation
The franchisor has no operating history in the United States and is planning its initial expansion. While this presents an opportunity to be an early entrant, it also carries the risk that support systems, supply chains, and brand recognition are underdeveloped for the U.S. market. Rapid growth from a zero base could strain the franchisor's ability to provide adequate support to you as a master franchisee.
Potential Mitigations
- Question the franchisor directly about their specific plans and resources allocated for supporting the initial U.S. expansion.
- Engaging a business advisor to assess the scalability of the franchisor's support systems is highly recommended.
- Your accountant should review the financials to determine if the franchisor is sufficiently capitalized to support its growth plans.
New/Unproven Franchise System
High Risk
Explanation
De Jeng is a new, unproven franchise system in the United States, formed in 2024 with no operational U.S. outlets. Its business model, support structure, and brand recognition are not yet tested in your market. While the parent company has experience in Taiwan, success there does not guarantee success in the U.S. This represents a higher level of risk compared to investing in an established franchise system.
Potential Mitigations
- Conduct extensive due diligence on the parent company's track record in Taiwan with the help of a business advisor.
- Your attorney should help you understand the specific risks highlighted by the franchisor regarding its limited operating history.
- Develop conservative financial projections with your accountant, factoring in the risks of an unproven brand.
Possible Fad Business
Medium Risk
Explanation
The business centers on bubble tea and related tea beverages. While popular, the bubble tea market is highly competitive and subject to changing consumer tastes. You should assess whether the concept has long-term appeal and can adapt to market shifts, or if it is tied to a trend with limited staying power. Your long-term franchise agreement will outlast any short-term fad, so evaluating the business's sustainability is critical.
Potential Mitigations
- A business advisor can help you research the long-term market trends for bubble tea and specialty beverages in your specific territory.
- Evaluate the franchisor's plans for product innovation and menu development to stay relevant beyond current trends.
- Assess the brand's competitive differentiators against the many other tea shops in the market.
Inexperienced Management
High Risk
Explanation
The management team's business experience described in Item 2 is primarily with the parent company based in Taiwan, beginning in 2019. While this shows industry experience, it indicates limited direct experience in managing a franchise system specifically within the complex legal and competitive landscape of the United States. This lack of U.S. franchise management experience could impact the quality of support and strategic guidance you receive.
Potential Mitigations
- Thoroughly question management on their strategy for adapting their systems and support for the U.S. market.
- A discussion with your business advisor about the challenges of international brands entering the U.S. franchise market would be prudent.
- Your attorney can help assess if the franchisor has engaged experienced U.S.-based franchise consultants to bridge this experience gap.
Private Equity Ownership
Low Risk
Explanation
This risk was not identified in the FDD Package. This risk concerns a franchise system owned by a private equity firm, which can lead to a focus on short-term profits over the long-term health of the brand and its franchisees. Ownership is a critical factor to review, as it can influence every aspect of the franchisee-franchisor relationship.
Potential Mitigations
- Your attorney should always verify the ownership structure detailed in Item 1 of the FDD to identify any private equity involvement.
- If private equity ownership is present, consulting with a business advisor to research the firm's track record with other franchise brands is crucial.
- Questioning existing franchisees about any changes in the system since a private equity acquisition can provide valuable insight.
Non-Disclosure of Parent Company
Medium Risk
Explanation
The FDD discloses that De Jeng has a parent company, Yung De Jeng Culture Co., Ltd, based in Taiwan. However, the parent company's financial statements are not included. While not always required, their absence makes it difficult to assess the overall financial strength and stability of the entire enterprise supporting your franchise. You are relying solely on the financials of the newly formed, pre-revenue U.S. entity.
Potential Mitigations
- Your accountant should analyze the U.S. entity's financials with the understanding that they are not supported by parent company statements.
- Ask your attorney whether, given the circumstances, financial statements from the parent company should have been provided.
- Discuss with a financial advisor the risks of investing in a subsidiary when the parent's financial health is unknown.
Predecessor History Issues
Low Risk
Explanation
This risk was not identified in the FDD Package. The franchisor states in Item 1 that it has no predecessors. A predecessor is a company from which the franchisor acquired the business concept. The history of a predecessor, including any litigation or bankruptcy, can be a critical indicator of the historical health and potential inherited problems of the franchise system.
Potential Mitigations
- Your attorney should always carefully review Item 1 for any mention of predecessors.
- If a predecessor exists, it is important to have your attorney review their litigation and bankruptcy history in Items 3 and 4.
- A business advisor can help you research a predecessor's historical performance and reputation.
Pattern of Litigation
Low Risk
Explanation
This risk was not identified in the FDD Package. Item 3 discloses no litigation history. A pattern of lawsuits, especially those initiated by franchisees alleging fraud, misrepresentation, or breach of contract, can be a major red flag indicating systemic problems. Similarly, a high number of lawsuits initiated by the franchisor against franchisees might suggest an overly aggressive or litigious relationship.
Potential Mitigations
- It is crucial to have your attorney carefully review the nature, frequency, and outcomes of any lawsuits disclosed in Item 3.
- Even with no disclosed litigation, discussing the franchisor's dispute resolution philosophy with current franchisees is a wise step.
- A business advisor can help you research public records for any litigation that may not have been required to be disclosed.
Disclosure & Representation Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Financial & Fee Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Legal & Contract Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Territory & Competition Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Regulatory & Compliance Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Franchisor Support Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Operational Control Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Term & Exit Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems
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Miscellaneous Risks
Example Risk: Franchisee Financial Obligations
Blue Risk
Explanation
This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.
Potential Mitigations
- Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
- Conduct regular risk assessments
- Implement monitoring and reporting systems