Best Western: Litigation & Risk
Lodging · FDD Items 3, 4 & 5
Elevated Risk
25 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 25
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 61 / 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
- 418
- Government-backed loans issued
- Charge-off rate
- 8.8%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 34 loans
- Loans charged off or defaulted
- Total loan volume
- $710.6M
- Avg loan size
- $1.7M
- Participating lenders
- 147
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
- Not waived
- Franchisor can compete
- Yes
- Franchisor can open competing locations in or near your territory
- Right of first refusal
- No
- Franchisor can match any purchase offer when you try to sell
- Governing law
- AZ
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Most cases involve franchisor suing former members for unpaid fees and dues following termination or self-termination, with counterclaims by former members for wrongful termination. Several regulatory actions by state securities/franchise regulators alleging membership agreements constitute franchises requiring registration. 8 new actions filed in 2025 fiscal year for unpaid fees and/or trademark infringement.
What drove the 61/100 verdict
Risk Score Breakdown
- 01MINORDeclining unit count of -1.1% YoY indicates shrinking system despite 1,748 locations
- 02HIGHMultiple active litigation cases across 4+ states challenging franchise classification and membership structure suggests regulatory and structural vulnerability
- 03MINORFranchisor initiated numerous collection actions for unpaid fees during last fiscal year, signaling cash flow stress among franchisees and potential systemic profitability issues
- 04MEDWide investment range ($581K-$32.5M) with no disclosed average revenue or net income makes ROI analysis impossible and suggests inconsistent unit performance
- 05MINORRoyalty structure tied to 'Property Room Revenue' is non-standard and unclear, creating potential disputes over revenue calculation and fee obligations
- 06HIGHHigh franchise fee ($45,000) combined with declining units and litigation creates unfavorable risk-reward profile
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.