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AStrongest tier70/100FDD 2023

Berkshire Hathaway HomeServices: Litigation & Risk

Real Estate · FDD Items 3, 4 & 5

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Moderate: Review

4 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
4
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
None
Franchisor or officer bankruptcy
Verdict score
70 / 100
FranchiseVerdict composite · higher is better
Rating
A
A / B / C / D / F verdict grade

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
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
DE
State whose law governs disputes. Relevant if you're not based there

Extracted from FDD Item 3

Litigation Detail

Four putative class action lawsuits challenging the practice of requiring selling brokers to offer uniform compensation to buyer brokers (Moehrl, Burnett/Sitzer, Nosalek, and Leeder/Batton cases)

What drove the 70/100 verdict

Risk Score Breakdown

  1. 01MINORFour active putative class action lawsuits challenging core business model (buyer broker compensation practices) create existential regulatory risk
  2. 02MINORNo Item 19 financial disclosure means prospective franchisees cannot verify claimed profitability or validate $45k-$90k investment ROI
  3. 03MINORSlow unit growth (3.0% YoY) with 293 total units suggests mature/declining system; minimal franchisee recruitment confidence
  4. 04MINORUnprotected territory creates direct competition risk from other BHHS franchisees and company-owned offices
  5. 05MINORDeclining royalty floor ($15k minimum) despite low unit growth indicates potential cash flow stress at corporate level

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.