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F92/100FDD 2024

ActionCOACH — Litigation & Risk

Business Services - Other · FDD Items 3, 4 & 5

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Moderate — Review

4 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
4
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
92 / 100
FranchiseVerdict composite
Rating
AVOID
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
16
Government-backed loans issued
Default rate
50.0%
vs <3% typical · system-wide
5-yr default rate
50.0%
Defaults
3 loans
Loans charged off or defaulted
Total loan volume
$2.5M
Avg loan size
$155K
Participating lenders
8

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
Nevada
State whose law governs disputes — relevant if you're not based there

What drove the 92/100 rating

Risk Score Breakdown

  1. 01MEDNo Item 19 (Average Unit Volume) disclosed—cannot validate $206,496 avg revenue claim or assess profitability; net income completely absent
  2. 02MINORSlow unit growth (7.2% YoY) with only 150 units suggests mature/stagnant system; growth rate below franchise industry average
  3. 03MINORHigh royalty floor ($1,950/month = $23,400 annually) creates negative cash flow risk for underperforming locations, especially in early ramp-up
  4. 04HIGHMultiple litigation matters including non-compete enforcement actions, 2002 Maryland registration violations, and 1999 California desist order indicate historical compliance/disclosure issues
  5. 05MEDSignificant upfront investment ($139,951–$368,522) combined with undisclosed net income creates ROI opacity; payback period cannot be calculated
  6. 06MED15-year term is longer than industry standard (10 years typical), locking franchisees into relationship with limited exit optionality

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.