item 3 analysis for pilar coffee bar franchise
Franchise Disclosure Document Item 3: Litigation
Overview
Item 3 of the Franchise Disclosure Document (FDD) is meant to disclose prior and ongoing litigation involving the franchisor, its affiliates, and key individuals listed in Item 2 going back ten years. This section exists to alert prospective franchisees to past or current legal actions that may indicate issues with franchisee relationships, regulatory compliance, or operational integrity.
In the case of Pilar Coffee Bar & Iced Treats, the Item 3 disclosures paint a troubling picture. A pattern of lawsuits, regulatory action, and franchisee claims, most of them tied to affiliated brand Mac and Cheese Franchise Operations, LLC, raises major concerns about the leadership’s business practices, ethics, and transparency. Even more troubling are the inaccuracies and omissions within the disclosures themselves.
What We Found in Item 3
🔎 G5 Services, LLC v. Mac and Cheese Franchise Group, LLC, et al
FDD Status: Marked as “pending”
Reality Check: Public court records show this case was settled on August 24, 2021. Listing it as ongoing is misleading.
🔎 RQ Management, LLC v. Mac and Cheese Franchise Operations, LLC, et al
FDD Status: Listed as “settled on August 24, 2021”
Reality Check: This case is actively being litigated. Disclosure is inaccurate.
🔎 Mac and Cheese Franchise Operations, LLC v. Fredrick Leaf and Michael Miller
FDD Status: “Pending”
Reality Check: Records show the matter was settled as of May 2024. Disclosure is inaccurate.
🔎 Lena Dawley v. Cabo Flats, et al
FDD Status: Settled with dollar figure disclosed
Reality Check: Settlement was confidential. Disclosure of the $150,000 settlement violates confidentiality and raises inconsistency in disclosure practices.
🔎 State of Indiana Cease and Desist Order
FDD Status: Disclosed
Reality Check: The Administrative Complaint (Cause No. 24-0003 AC) that succeeded the Cease and Desist is not disclosed, omitting context that is critical for prospective franchisees. The Administrative Action is still ongoing.
🔎 California DFPI Consent Order
FDD Status: Summarized
Reality Check: Disclosure downplays the seriousness of the Consent Order, which followed disclosure violations, California Corporations Code violations, and violations of the California Franchise Investment Law. The language fails to acknowledge that there were more deficiencies than just those from Items 2 and 3.
🔎 David Centeno v. Mac and Cheese Franchise Operations, LLC
FDD Status: Pending
Reality Check: Accurately disclosed.
🔎 Cody Molyneaux, et al v. Mac and Cheese Franchise Operations, LLC, et al
FDD Status: Pending
Reality Check: Accurately disclosed. Claims include fraudulent inducement and consumer protection law violations across multiple states.
🔎 Daniel and Kendal Rich v. I Heart Ventures, et al
FDD Status: Pending
Reality Check: Our research into this case indicates the summary given in the FDD is not entirely accurate as it relates to alleged franchisor involvement.
🔎 IVT Westfork Plaza v. Mac and Cheese Pines, LLC and Stephen Giordanella
FDD Status: Pending
Reality Check: Accurately disclosed.
🔎 Sakowich v. Giordanella, Mac & Cheese Franchise Group, et al
FDD Status: Pending
Reality Check: Accurately disclosed.
What Was Not Disclosed (Partial List)
❌ 2017 Eviction of the Flagship I Heart Mac and Cheese Location: Despite being a foundational event in the brand’s operational history, this eviction is omitted. The lease was reassigned weeks later to a new entity owned by the same insiders. This should have been disclosed.
❌ 2019 Eviction of the Flagship I Heart Mac and Cheese Location Following default under the 2017 lease, the flagship location was again evicted in 2019. This second eviction underscores ongoing financial instability at the franchisor's most visible location. It is material and should have been disclosed.
❌ Multiple Eviction and Non-Payment Lawsuits Involving Franchisees: There are numerous eviction cases and lease defaults involving I Heart Mac and Cheese franchisees that are never disclosed. These legal actions indicate systemic financial instability.
❌ Indiana Administrative Complaint (Cause No. 24-0003 AC) :The complaint that succeeded Indiana’s cease and desist is not disclosed. This is a critical omission that conceals the scope of the enforcement action.
❌ Minimization of California Enforcement Action: The California Consent Order is technically disclosed, but the language minimizes the seriousness of the violations. Franchisees should be informed of the regulatory judgment’s implications.
❌ 2020 Lawsuit Filed by Franchisor Against Its Own Franchisees: The FDD omits a federal lawsuit originally filed in Palm Beach County (Case No. CACE 20-010969) and removed to federal court (Case No. 20-82048), in which Mac and Cheese Franchise Operations sued its own franchisees for defamation and tortious interference. According to the Indiana Administrative Complaint, this lawsuit was never disclosed to DFPI in 2020–2022 or in Pilar’s FDD. This level of omission, regarding litigation targeting franchisees, raises serious concerns about transparency and intent.
Reality Check Summary
Pilar Coffee Bar & Iced Treats is backed by an executive team deeply entangled in a pattern of litigation and regulatory enforcement. The Item 3 disclosures suggest a culture of minimization, selective transparency, and legal maneuvering that should alarm any prospective franchisee.
Several disclosed cases are misrepresented as pending or settled
Major cases, including evictions and regulatory complaints, are entirely omitted
Material settlements are disclosed inconsistently, with some confidential amounts shared and others not mentioned
This is not a standard litigation history. It’s a pattern.
If you’re evaluating a Pilar Coffee franchise, you are entitled to full disclosure, accurate legal history, and honest representation of risk. Ask questions. Verify filings. And read beyond the binder.
Because once you sign, it’s 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 with previous Items in the Pilar Coffee FDD, we asked ChatGPT why a franchisor would choose to structure their Item 3 disclosures the way Pilar Coffee Bar has. This is the response:
“A franchisor may structure Item 3 disclosures selectively or ambiguously to minimize perceived risk and preserve the appearance of brand stability—especially when the business model depends heavily on rapid franchise expansion. Litigation, particularly involving allegations of fraud, misrepresentation, or regulatory enforcement, can raise red flags for lenders, investors, and potential franchisees. Omitting settled cases, downplaying regulatory orders, or mislabeling ongoing litigation as resolved may be a strategic attempt to limit scrutiny and protect franchise sales.
In the case of Pilar Coffee Bar & Iced Treats, Item 3 appears crafted to control the narrative. By marking settled lawsuits as “pending,” omitting foundational events like the flagship store evictions, and minimizing the impact of regulatory actions, the franchisor shields prospective buyers from the full legal picture. This approach may reflect an underlying effort to distance the Pilar brand from the troubled history of affiliated entities like Mac and Cheese Franchise Operations, even when the executive leadership is the same.
Ultimately, such structuring calls into question the franchisor's commitment to transparency—and places the burden of due diligence squarely on the shoulders of the franchisee.”
