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B65/100FDD 2025

AR Homes — Litigation & Risk

Other · FDD Items 3, 4 & 5

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Moderate — Review

2 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
65 / 100
FranchiseVerdict composite
Rating
MODERATE
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
3
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
$762K
Avg loan size
$254K
Participating lenders
2

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Not required
You retain the right to sue in court
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
3 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
Florida
State whose law governs disputes — relevant if you're not based there

What drove the 65/100 rating

Risk Score Breakdown

  1. 01HIGHPending litigation (Scott Tate) involving 'aiding and abetting' claims suggests potential franchisor accountability issues beyond standard disputes
  2. 02MINORNo protected territory in real estate/home building sector creates direct competition risk between franchisees in same market
  3. 03MINORUnknown unit growth trajectory with only 42 units is concerning—no clarity on system expansion or contraction over past 3-5 years
  4. 04MINORHigh initial investment range ($535K-$2.19M) paired with undefined Minimum Annual Royalty creates unpredictable cost structure
  5. 05MINORItem 19 (Financial Performance) absent from disclosure—average revenue ($14.7M) and net income ($1.2M) figures cannot be verified as franchisor-provided
  6. 06HIGHPrevious litigation settlement (F&S Frame and Trim, 2015) indicates history of contractor/vendor payment disputes, a red flag in construction franchises
  7. 07MINORRoyalty structure (3.5%-4.25% + undefined minimum) on Adjusted Sales Price creates ambiguity—'adjusted' definition critical to profitability

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.