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B65/100FDD 2023

Aroma Espresso Bar — Litigation & Risk

Food & Beverage - Coffee & Tea · 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
2
Government-backed loans issued
Default rate
—
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$1.4M
Avg loan size
$687K
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
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
New York
State whose law governs disputes — relevant if you're not based there

What drove the 65/100 rating

Risk Score Breakdown

  1. 01MINOROnly 4 units in system with unknown growth trajectory suggests stagnant or declining franchise network
  2. 02MINORPending arbitration with former master franchisee (Aroma Canada) indicates serious relationship breakdown and potential systemic issues
  3. 03HIGHHistory of litigation including 2015 fraudulent inducement settlement suggests pattern of franchisor-franchisee disputes
  4. 04MEDNet income not disclosed despite $1.53M average revenue — inability or unwillingness to provide profitability data is major red flag
  5. 05MINORHigh initial investment range ($537.5K–$1.5M) with only 4 operating units limits ability to validate ROI claims
  6. 06MED7% royalty on gross sales (not net) combined with undisclosed net income makes profit modeling impossible

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.