Arthur Murray Dance Studio: Litigation & Risk
Education · FDD Items 3, 4 & 5
Moderate: Review
1 case disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 1
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 95 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- 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
- 17
- Government-backed loans issued
- Charge-off rate
- 5.9%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 1 loans
- Loans charged off or defaulted
- Total loan volume
- $2.2M
- Avg loan size
- $128K
- Participating lenders
- 14
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
- FL
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Arthur Murray International v. Gisella West et al. (AAA Case No. 01-24-0004-5787): demand for arbitration filed April 2024 against former franchisee for unpaid royalties and injunctive relief; consent award entered September 2024. FTC Consent Decree (Docket 7845, amended 1980) requires specific student cancellation rights and disclosures.
What drove the 95/100 verdict
Risk Score Breakdown
- 01MINOR1980 FTC Consent Decree still active — indicates ongoing regulatory scrutiny for unfair/deceptive practices in sales and contracts
- 02MEDNo Item 19 (Average Net Income) disclosed — cannot verify profitability claims; $715K avg revenue without net income transparency is concerning
- 03MEDDeclining unit count (237 units, only 3.0% YoY growth) — suggests market saturation, franchisee struggles, or brand decline
- 04MINORRecent 2024 arbitration filing against Honolulu franchisee for unpaid royalties — signals enforcement issues and potential franchisee financial distress
- 05MINORHigh royalty burden (5-10% of weekly gross) on dance studio margins — may compress profitability significantly
- 06MED5-year term with no disclosed renewal rates or franchise failure data — unclear exit strategy for underperforming locations
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.