Elevated Risk
9 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
9
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
53 / 100
FranchiseVerdict composite
Rating
STRONG
STRONG / MODERATE / CAUTION / AVOID
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Default rate is the share of loans that were charged off or settled for less than the full balance.
Total 7(a) loans
14
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$8.8M
Avg loan size
$630K
Participating lenders
12
FDD Items 5, 6 & 17 — what you give up
Contract Risk Indicators
Mandatory arbitration
Required
Disputes resolved outside court — limits your legal options
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
California
State whose law governs disputes — relevant if you're not based there
What drove the 53/100 rating
Risk Score Breakdown
- 01MINORUnit count declining (-0.5% YoY) suggests system contraction or saturation despite 194-unit base
- 02MINORMultiple pending class action and derivative lawsuits at parent level indicate potential governance/securities issues affecting franchisor stability
- 03MINORNo protected territory creates direct competition risk—franchisees can cannibalize each other's revenue
- 04MINORNet income of $167K on $1.9M revenue (~8.8% margin) is thin after 8% royalty, leaving minimal cushion for owner salary and reinvestment
- 05MINORHigh investment ceiling ($1.3M) with declining unit base raises ROI recovery concerns
- 06MINORData breach and regulatory settlements (no-poaching) suggest compliance/operational vulnerabilities at corporate level
Severity inferred from FDD text — not a regulatory or legal classification
Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice — consult a franchise attorney before signing any franchise agreement.