item 1 analysis for pilar coffee bar franchise
Franchise Disclosure Document Item 1: The Franchisor, and Any Parents, Predecessors and Affiliates
Overview
Item 1 is your first opportunity to understand who is truly behind the franchise offering. It introduces the franchisor entity, when and where it was formed, whether it has predecessors or affiliates, and what related business activity exists. For a buyer, this item lays the foundation for determining credibility, experience, and transparency.
Below is a full analysis of the Item 1 disclosure for "Pilar," including key facts from the FDD and 🔎 independent findings uncovered through public records.
1. New Entity with No Operational Track Record
The franchisor, Pilar Operations, LLC, was organized in July 2023 and began offering franchises in August 2023. This short timeline signals:
No documented operating performance as a franchisor
No confirmed experience running a prototype unit before offering franchises
🔎 The entity believed to be operating the flagship location is PILAR DEERFIELD, LLC, a Florida LLC with the same principal address. Public construction records and permitting activity suggest it may operate the Deerfield Beach, FL location. This entity is not disclosed in Item 1.
Red Flag: Failing to disclose the apparent flagship operating entity (PILAR DEERFIELD, LLC) limits transparency and may mislead franchisees regarding the system's operating history.
2. Complex Entity Structure with Overlapping Ownership
The franchisor is part of a larger web of entities:
RIT Group, LLC is the immediate parent
SG GIFTS LP is the parent of RIT Group, LLC 🔎 Formerly MAC AND CHEESE RESTAURANT HOLDINGS LP
Mac and Cheese Franchise Management, LLC is the manager of both Pilar and RIT Group
🔎 Most entities list Stephen Giordanella and Delia Valles as managers, members, or authorized representatives. All are tied to the same address at 6600 N Military Trail #300, Boca Raton, FL.
Concern: This complex web of related companies, all centralized under the same individuals, closely resembles a multi-brand franchise structure that prioritizes rapid brand creation and fee collection. It may create risk exposure and limit accountability.
3. Disclosure Gaps and Omitted Affiliates
While two affiliates are disclosed (Mac and Cheese Franchise Operations, LLC and RIT Operations, LLC), 🔎 at least one operating entity—PILAR DEERFIELD, LLC—is not.
🔎 Additionally, multiple key entities are structured under foreign registrations in Florida (e.g., MAC AND CHEESE FRANCHISE OPERATIONS, LLC and MAC AND CHEESE FRANCHISE GROUP, LLC), yet one of the primary owners, SG GIFTS LP, is not registered in Florida per public records.
Red Flag: The failure to disclose relevant affiliated or predecessor entities creates an incomplete picture for prospective franchisees. A franchisor is required to disclose all affiliates that offer or have offered franchises or provide services to franchisees.
4. Questionable Trademark Protection
According to the FDD, the mark "Pilar" is not federally registered. This increases risk that franchisees may be forced to rebrand if a challenge arises.
Concern: Lack of federal trademark registration means your location may be vulnerable to legal disputes over naming rights, weakening brand consistency and value.
5. Aggressive Multi-Unit Sales Strategy Despite Limited History
Pilar offers area development agreements alongside single-unit franchises, requiring multi-store commitments and large fees.
Red Flag: Selling multi-unit franchises without evidence of success at even one location suggests revenue is being driven by franchise fees rather than royalties or long-term operations.
6. High Risk Language and One-Sided Legal Terms
Directly from the FDD:
Disputes must be resolved only in Florida
Spouses may be required to sign personal guarantees, even without ownership interest
Mandatory royalty and marketing fees must be paid regardless of business performance
The franchisor admits it may not have the financial ability to support franchisees
Concern: These terms show that the legal and financial risks rest almost entirely on the franchisee, with little safety net or flexibility.
🔎 Here is one interesting piece of information we found while researching RIT Group, LLC. A complaint made to the Better Business Bureau by an apparent “investor” in Class A shares “via subscription” in August/September 2023. Just one month after franchising launched. Here is a link to the complaint on the Better Business Bureau website.
RIT Group, LLC BBB Complaint
Conclusion: Elevated Risk and Lack of Transparency
Item 1, combined with 🔎 public findings, reveals:
A franchisor with little to no operating history
A web of related entities all tied to the same individuals
A failure to fully disclose relevant affiliates
A high-risk legal and financial model for franchisees
Reality Check: This franchise opportunity is high risk and should be approached with extreme caution. Due diligence must go beyond the FDD to uncover what is not being disclosed. Speak with current and former franchisees of affiliated brands, and investigate related litigation and operational history thoroughly.
Because once you sign, it is too late for a reality check.
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.
As a franchisee or potential franchisee you might be wondering why a franchisor would structure their franchise offering the way Stephen Giordanella has according to Item 1 of this FDD. We certainly did, and we asked ChatGPT the same question. Here was the response:
“Great question — and an important one. The legal structure described in Item 1 of the Pilar FDD appears complex and layered for several reasons, most of which serve legal, financial, and strategic purposes for the franchisor — not the franchisee.
Here’s a breakdown of why a franchisor might set it up this way:
1. Liability Containment
Reason: Each brand and franchise system is isolated into its own LLC (e.g., Pilar Operations, LLC, RIT Group, LLC, etc.)
Purpose: If one brand fails or is sued, the liability ideally does not spill over into the parent company or other affiliated brands.
This protects the principals (like Stephen Giordanella and Delia Valles) and insulates each entity from financial collapse triggered by another.
2. Fee Revenue Model
Reason: Multiple entities are layered and used to collect different revenue streams — development fees, royalties, vendor kickbacks, etc.
Purpose:
One entity owns the brand
Another operates the franchising business
Yet another might own trademarks or supply chains
This structure makes it easier to collect fees, mark up services, and reduce franchisor exposure, while maximizing revenue streams that may not be obvious to franchisees.
3. Franchise-as-a-Product Model
Reason: This structure is common among firms that develop multiple franchised concepts rapidly — often without proving operational success first.
Purpose: It allows them to launch, sell, and quietly abandon brands that fail without materially damaging the holding company or its principals.
It’s easier to “walk away” from an unprofitable concept if it’s compartmentalized legally.
4. Avoid Disclosure and Transparency
Reason: Affiliates and controlling entities that should be disclosed under FTC guidelines may be omitted or buried under vague descriptions.
Purpose:
Avoid disclosing poor performance, litigation, or failed brands tied to the same owners
Make due diligence harder for franchisees
Limit discovery of patterns in lawsuits or franchisee failure
5. Tax & Ownership Advantages
Reason: Using LPs, LLCs, and foreign registrations (Delaware, then filed as Foreign LLCs in Florida) can provide tax flexibility and obscure ownership layers.
Purpose:
Reduce personal tax exposure
Shield asset ownership
Give the appearance of arms-length operations when in fact they’re centrally controlled
What It Means for Franchisees
This structure does not automatically signal fraud, but it is a red flag when paired with:
No operational history
Rapid brand launches
Omitted affiliate disclosures
High franchisee turnover in related brands
It’s a legal fortress for the franchisor, but it may leave franchisees with limited recourse, especially if one of these LLCs is quietly dissolved or sold off.”
Next installment in the Reality Check Report will focus on Item 2 of the Pilar Coffee Bar FDD. Stay tuned!
