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B55/100FDD 2025

Atax — Litigation & Risk

Business Services - Tax & Financial · FDD Items 3, 4 & 5

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Elevated Risk

11 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
11
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
55 / 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
6
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$265K
Avg loan size
$44K
Participating lenders
5

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

What drove the 55/100 rating

Risk Score Breakdown

  1. 01MINORAggressive 14% royalty rate on gross revenues (industry standard 5-8%) creates high breakeven threshold given $110,515 avg revenue
  2. 02MINORSlow unit growth (4.5% YoY) and stagnant system size (116 units) suggests market saturation or franchisee dissatisfaction
  3. 03HIGHMultiple concurrent litigation categories including investor claims, IP disputes with Liberty Tax Service, shareholder derivative suits, and governmental consent orders indicate systemic governance and compliance failures
  4. 04HIGHGoing concern status combined with pending litigation regarding financial controls and opportunity zone claims raises franchisor operational stability concerns
  5. 05MEDNo disclosed average net income despite disclosing gross revenue — suggests marginal or negative profitability for typical franchisees after 14% royalty
  6. 06HIGHHistorical litigation with former CEO John Hewitt and governmental consent orders indicate past compliance/transparency violations that may recur

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.