Item 10 Analysis for Pilar Coffee Bar Franchise

When it comes to franchising, nothing makes my radar go off faster than the words “we do not offer direct or indirect financing,” especially when they’re quickly followed by fine print and hidden exceptions.

Pilar Coffee Bar & Iced Treats is no different.

Their 2025 Franchise Disclosure Document (FDD) Item 10 proclaims:

“We do not offer direct or indirect financing, but we reserve the right to do so in the future. We do not guarantee your note, lease or other obligation.”

Sounds straightforward, right?

Not so fast.

While Pilar’s FDD disclosures are significantly more transparent than the shell games I’ve documented with I Heart Mac & Cheese, the real story, as always, lies beyond the binder.

The Development Fee Financing Loophole

Unlike I Heart Mac & Cheese, which repeatedly claimed no financing in Item 10 while quietly orchestrating seller-financed deals behind the scenes, Pilar at least admits one significant exception: Development Fee financing.

Pilar’s 2025 FDD states:

“We may approve financing up to 50% of the Development Fee; however, we are not required to do so. We will require you and any other person you are representing as providing financial support to personally guaranty this financing.”

Translation:

✅ Pilar Operations, LLC can finance up to half of the multi-unit Development Fee.
✅ Franchisees must personally guarantee the debt.
✅ The disclosed interest rate is 7%.
✅ Defaults allow the franchisor to accelerate the debt and demand immediate repayment of the entire balance.
✅ Nonpayment can result in Pilar terminating your Development Agreement, and potentially your Franchise Agreements.

The Fine Print: Promissory Note Red Flags

Digging into the actual Promissory Note attached to Pilar’s 2025 FDD reveals more detail than the high-level disclosure suggests:

• The default interest rate leaps to a staggering 18%, matching some of the worst hidden rates I’ve documented in the I Heart Mac & Cheese network.

• The entire debt becomes immediately due and payable upon default, no matter how small the breach.

• Pilar can collect the debt by:

  • Automatically withdrawing funds from the franchisee’s bank account via EFT.

  • Offsetting debt against any franchise royalties, commissions, or other sums owed back to the franchisee.

• The note contains cross-default clauses, meaning a default under any other agreement with Pilar can trigger default under the financing note as well.

• Franchisees are responsible for all attorneys’ fees and collection costs.

This matters because while Pilar is at least disclosing that financing may exist, the terms themselves introduce significant risk. One missed payment could spiral into immediate acceleration, massive interest accrual, and potential termination of multiple agreements.

The Development Agreement: Cross-Defaults and Liquidated Damages

Pilar’s Development Agreement further exposes the reality behind this financing arrangement:

• Pilar reserves the right to terminate your development rights, and potentially your franchise agreements, for any default, including defaults under the Promissory Note.

• If the Development Agreement terminates early, franchisees owe liquidated damages equal to:

  • Three times the average 12 months of commissions owed to Pilar, or

  • At least $100,000 minimum.

• Like the note, the Development Agreement is packed with cross-default provisions. Breach of the Development Agreement could wipe out your individual franchise agreements, and vice versa.

These clauses effectively give Pilar a kill switch to terminate your entire franchise network, even if your stores are otherwise running successfully.

No Stores Open… Yet Fees Possibly Collected

While Pilar is building its brand from scratch, there’s another critical point to highlight:

• According to Item 20 in the 2025 FDD, Pilar had no open franchise units as of the end of 2024.

• The first (and only) Pilar Coffee Bar store, corporate-owned, opened in Deerfield Beach, FL, in February 2025.

• Yet the FDD projects two franchised outlets opening in Florida in 2025, despite:

  • No Florida developers or franchisees listed in Exhibit I.

  • No indication that those locations exist beyond projections.

This discrepancy raises several red flags:

• Are those two Florida outlets genuinely spoken for; or are they simply placeholders to project growth and brand momentum?

• Could the corporate-owned Deerfield Beach store eventually be sold off to franchisees via a seller-financed deal, echoing the asset-sale schemes seen in I Heart Mac & Cheese?

• The absence of Florida franchisees in Exhibit I suggests the Florida expansion is either speculative or being held back for internal corporate-to-franchise deals.

Developer Disclosure Discrepancies

Pilar’s Exhibit I, which lists all current multi-unit developers, also contains curious details:

• HartWitt, LLC (Colorado) and Walter Ray Whitaker III (Michigan) are listed as separate developers, but share the same phone number.

  • This strongly suggests they are either:

    • The same developer using different entities for different territories, or

    • Affiliated parties splitting deals under separate names.

  • Further research indicates the following additional entity owned by Walter Ray Whitaker III:

    • WRW Log Works, LLC (CO)

    • Several other expired or inactive entities listed on the CO Secretary of State website

  • Walter Ray Whitaker III appears to have no franchise or food service experience

  • Why this matters:

    • Awarding large development territories in two non-contiguous states to an individual with no apparent franchise or food service experience raises serious questions about Pilar’s vetting process. Walter Ray Whitaker III’s background in non-food ventures like WRW Log Works, LLC, and a trail of other inactive or expired companies, suggests he may lack the operational expertise and resources required to successfully develop multiple Pilar Coffee Bar locations. This pattern hints that Pilar might be signing development agreements primarily to show growth on paper and collect fees, rather than securing qualified operators likely to build sustainable stores, a risk strikingly similar to the franchise sales strategies that collapsed under brands like I Heart Mac & Cheese.

• Legado Development, LLC, listed as developer for the Northeast U.S., is reportedly operated by Dennis Sosa, who:

  • Is also a franchisee of Playa Bowls, Crumbl, and The Picklr; and

  • Also owns/manages 18 other LLC’s according to the MA Secretary of State.

  • Why this matters:

    • While Dennis Sosa’s experience with brands like Playa Bowls, Crumbl, and The Picklr might suggest he’s well-equipped to handle Pilar’s development, managing a multi-state territory and multiple franchisees under his Area Development Agreement for an entirely new concept brings unique challenges, especially when the franchisor has only one open unit an entire region away and limited infrastructure to support franchisees. Adding complexity, Pilar Coffee Bar shares deep operational and ownership ties with I Heart Mac & Cheese, a brand marred by legal disputes, financial struggles, and an approximate 83% failure rate. For Sosa, balancing multiple brands, ensuring adequate oversight across states, and navigating potential reputational risks from Pilar’s affiliations could strain even the most seasoned operator, and leaves significant questions about whether the brand has the capacity to deliver the support a multi-state rollout demands.

Here’s why all this matters:

• Concentration risk: One developer behind multiple deals means fewer independent franchisees are truly invested in Pilar, despite how many “units” are projected.

• Disclosure risk: If these developers are the same individuals operating under different names, Pilar should disclose those affiliations clearly.

• Potential conflicts: Multi-brand operators like Dennis Sosa could face competing priorities, especially if brands overlap in product categories or customer demographics.

Digging Deeper: Pilar’s Financials Raise More Questions

A review of Pilar Coffee Bar’s 2025 financial statements further underscores the risks lurking beneath its seemingly straightforward Item 10 disclosure.

One glaring figure leaps off the Balance Sheet: $274,000 in Deferred Franchise Fees. That means Pilar has already collected significant money upfront from franchisees for stores that haven’t yet opened. Yet as of the end of 2024, Pilar reports no revenue from operations and only a modest cash balance, raising serious questions about whether they have the financial capacity to launch, support, or refund franchisees if things go sideways.

But perhaps the most concerning line in Pilar’s financials is this: Member’s Equity Contributions (Distributions): ($196,523). In plain English, that means Stephen Giordanella, or a Giordanella-controlled entity, pulled nearly $200,000 out of Pilar Coffee Bar during 2024.

Here’s why this matters:

• Deferred Franchise Fees: The brand has booked $274,000 for stores that exist only on paper. If those stores don’t open, Pilar could face refund obligations it may not be financially equipped to meet; especially if cash has already been withdrawn by ownership.

• Owner Withdrawals vs. Brand Development: In an emerging brand with no operating stores until February 2025, removing nearly $200,000 from the business is a significant red flag. Franchisees paying upfront fees rightly expect that money to fund:

  • Training programs.

  • Marketing development.

  • Operational support infrastructure.

  • Brand growth.

Instead, funds appear to have gone into the owner’s pocket, rather than building a viable brand foundation.

• Low Cash Position: Pilar’s limited cash raises doubts about their ability to:

  • Support franchisees operationally.

  • Cover legal costs if stores fail.

  • Refund fees if franchisees walk away or default.

• No Operating Revenue: Pilar’s financials show no royalties or sales income, only fees. Franchisees are paying upfront for a system that doesn’t yet exist in practice.

• No Significant Debt: Pilar’s simple capital structure suggests they’re not leveraged, which is positive; but also signals a lack of financial depth to absorb losses or help struggling franchisees.

The Bottom Line

While Pilar Coffee Bar & Iced Treats is far more transparent in its FDD than brands like I Heart Mac & Cheese, significant risks remain:

• Financing may be limited to the Development Fee, but the default consequences are severe:

  • 18% default interest.

  • Immediate acceleration of debt.

  • Cross-default clauses that can wipe out an entire franchise network.

• Discrepancies exist between projected growth in Florida and actual franchisee listings, hinting at possible corporate-to-franchise asset sales down the road.

• Developer disclosures show potential entity overlap and insider concentration, reducing the appearance of widespread brand adoption.

The Pilar Item 10 disclosure might appear innocuous at first glance, but the deeper you dig, the more you find familiar warning signs: hidden financial entanglements, potential affiliate games, and significant consequences for any franchisee who stumbles.

And here’s the critical lesson: what started as a simple review of Pilar’s Item 10 turned into a fact-seeking mission across multiple FDD Items and Exhibits; and extensive internet research into individuals and entities involved. This is exactly the kind of deep due diligence every prospective franchisee must do to truly understand the business they’re buying into. It’s never enough to read just one Item in isolation.

If you’re considering Pilar Coffee Bar & Iced Treats, or any franchise, don’t stop reading at “no financing.” Dig deeper, ask every question, and scrutinize every piece of fine print.

Because beyond the binder, there’s reality. And reality always demands you follow the money.

👉 Want to see how another brand concealed massive financing? Read our exposé on I Heart Mac & Cheese’s hidden loans here.

This report is based on publicly available documents, court filings, and the franchisor’s Franchise Disclosure Document (FDD) as filed with the State of Illinois. Interpretations, observations, and conclusions drawn herein represent the informed opinions of Franchise Reality Check™and are intended to encourage deeper due diligence by prospective franchisees. This content should not be construed as legal, financial, or investment advice. Prospective investors should consult with a qualified franchise attorney and CPA before making any franchise purchase decisions.