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B67/100FDD 2025

Baja Fresh — Litigation & Risk

Food & Beverage - Quick Service · FDD Items 3, 4 & 5

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Elevated Risk

20 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
20
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
67 / 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
15
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
$11.5M
Avg loan size
$766K
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
Arizona
State whose law governs disputes — relevant if you're not based there

What drove the 67/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count (73 units with unknown/likely negative growth trajectory) suggests system contraction and franchisee struggles
  2. 02HIGHExtensive litigation history across parent company's portfolio (Kahala Franchising) involving breach of contract, financial misrepresentation, and state actions indicates systemic corporate governance issues
  3. 03MINORNo Item 19 (average net income) disclosure despite $868,755 average revenue is a major red flag—franchisor hiding profitability data suggests franchisees are underperforming or unprofitable
  4. 04HIGHGoing Concern status is False, indicating potential financial instability at corporate level that could affect franchisee support
  5. 05MEDNo territory protection combined with 73-unit system in decline creates cannibalization risk and no defensible market position
  6. 06MINORHigh investment-to-revenue ratio: $428k-$1M investment against $868k average revenue means ROI breakeven could take 1-2+ years with no margin for error

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.