Allegra: Litigation & Risk
Business Services · FDD Items 3, 4 & 5
Moderate: Review
3 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 3
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 56 / 100
- FranchiseVerdict composite · higher is better
- Rating
- B
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 98
- Government-backed loans issued
- Charge-off rate
- 16.1%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 10 loans
- Loans charged off or defaulted
- Total loan volume
- $44.4M
- Avg loan size
- $453K
- Participating lenders
- 47
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
- Michigan
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Item 3 discloses 3 concluded matters: (1) Signs by Tomorrow of Siouxland, Inc. et al. v. Sign & Graphics Operations LLC (Iowa) - franchisee breach-of-contract suit against former affiliate SGO, settled March 2018; (2) Allegra Network LLC v. United Sign Ventures, LLC (AAA arbitration) - franchisor demand for unpaid amounts/post-termination obligations; counterclaims alleging fraud and Michigan Franchise Investment Law violations; settled April 2018 with respondents paying franchisor $100,000; (3) In re: Alliance Franchise Brands LLC (Washington DFI consent order, 2025) - DFI found imposing the $50/month Technology Services Fee on five pre-2019 Washington franchisees violated the WA Franchise Investment Protection Act; franchisor entered Consent Order July 2025 to refund TSF payments and pay $4,000 toward DFI costs.
What drove the 56/100 verdict
Risk Score Breakdown
- 01MINORUnit count declining 5.1% YoY (167 units) signals system contraction and potential market saturation or performance issues
- 02MINORNo Item 19 financial performance representation limits transparency; average net income of $250,967 cannot be independently verified or benchmarked
- 03HIGHMultiple litigation cases including breach of contract, non-payment arbitration, and state consent order indicate franchisor-franchisee relationship strain and regulatory scrutiny
- 04MINORTiered royalty structure (6% → 4% → 1.5%) suggests franchisor heavily depends on volume; lower-performing units may struggle with 6% royalty rate on $1.08M average revenue
- 05MINORHigh investment range ceiling ($698,040) with 20-year term creates extended capital commitment in declining system
- 06MINORConsent order with Washington State regarding technology fees raises questions about franchisor practices and transparency
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.