Who is the parent company of Ding Tea?
Ding_Tea Franchise · 2024 FDDAnswer from 2024 FDD Document
For your information, our parent company, Chu Yu Hsiang, are approved suppliers, but we are not the only approved suppliers for the products and equipment you will need to operate the Tea Shop.
In the last twelve (12) months, excepted as disclosed below, neither we nor any of our affiliates derived revenue, rebates, or other material consideration because of required purchases or leases. However, our parent company ("Chu Yu Hsiang Co., Ltd.") will derive revenue from required purchases or leases by Ding Tea subfranchisors. In 2023, Chu Yu Hsiang Co., Ltd. generated a revenue of $6,842,462, out of which $5,353,212 was derived from the mandatory purchases and leases made by franchisees. This accounted for 78.2% of Chu Yu Hsiang Co., Ltd.'s total revenue, highlighting the significant contribution of required purchases and leases to the company's overall earnings. For the purchase of raw materials, machinery, and supplies, Chu Yu Hsiang Co., Ltd. will earn approximately 17.5% of all order you placed. The exact profit may change slightly based on the fluctuation of shipment fee, taxes, currency exchange rate, and increase or decrease of the cost to obtain secured raw materials. However, the revenue derived from your purchase by Chu Yu Hsiang Co., Ltd. will not exceed 21% under any circumstances.
The estimated proportion of these required purchases and leases by the franchisee to all purchases and leases by the franchisee of goods and services in establishing and operating the franchised business ranges from 22%-28% of franchisee's total investment.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 18–22)
What This Means (2024 FDD)
According to Ding Tea's 2024 Franchise Disclosure Document, the parent company of Ding Tea is Chu Yu Hsiang Co., Ltd. This entity also functions as an approved supplier for Ding Tea franchisees.
Chu Yu Hsiang Co., Ltd. generates revenue from mandatory purchases and leases made by Ding Tea subfranchisors. In 2023, the company's revenue was $6,842,462, with $5,353,212 derived from these mandatory purchases and leases, which accounted for 78.2% of their total revenue. For the purchase of raw materials, machinery, and supplies, Chu Yu Hsiang Co., Ltd. will earn approximately 17.5% of all order you placed. The exact profit may change slightly based on the fluctuation of shipment fee, taxes, currency exchange rate, and increase or decrease of the cost to obtain secured raw materials. However, the revenue derived from your purchase by Chu Yu Hsiang Co., Ltd. will not exceed 21% under any circumstances.
This arrangement means that a significant portion of Chu Yu Hsiang Co.'s income is directly tied to the success and purchasing activities of Ding Tea franchisees. As a franchisee, you are contributing to the revenue stream of Ding Tea's parent company through your required purchases. The estimated proportion of these required purchases and leases by the franchisee to all purchases and leases by the franchisee of goods and services in establishing and operating the franchised business ranges from 22%-28% of franchisee's total investment.
Prospective franchisees should be aware of this financial relationship and factor it into their business planning. Understanding the costs associated with required purchases and how they impact both the franchisor's parent company and the franchisee's profitability is crucial for making an informed investment decision.