Carstar: Litigation & Risk
Automotive · FDD Items 3, 4 & 5
Elevated Risk
8 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 8
- 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
- 40
- Government-backed loans issued
- Charge-off rate
- 0.0%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 0 loans
- Loans charged off or defaulted
- Total loan volume
- $44.2M
- Avg loan size
- $1.1M
- Participating lenders
- 26
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
- Waived
- You give up the right to a jury trial
- Non-compete
- 1 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
- NC
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
3 CARSTAR-initiated breach/noncompete actions; 3 pending parent (Driven Brands Holdings) securities and derivative actions; 2 concluded actions (Gabbay settlement $10K paid; Canada affiliate CAN$438K settlement). Affiliate actions for Arby's and Dunkin' no-poaching settlements also disclosed.
What drove the 95/100 verdict
Risk Score Breakdown
- 01HIGHParent company involved in multiple pending litigation matters including putative class action securities fraud and five derivative complaints against officers/board members, indicating governance and disclosure concerns
- 02MINORNo Item 19 (Average Unit Volume) disclosure despite $3.2M average revenue, preventing transparent ROI assessment and suggesting franchisor may be hiding profitability data
- 03MINORTiered royalty structure (1.5% base + 4% growth fee) creates escalating costs as sales increase, potentially capping franchisee profitability and creating misaligned incentives
- 04MINORFlat unit growth of only 3.5% YoY in a mature auto body repair market suggests market saturation or franchisee dissatisfaction
- 05MINORThree franchisor-initiated breach of contract and non-compete lawsuits indicate aggressive enforcement and potential disputes over territory/operational control
- 06MINORAffiliate settlements (Arby's, Dunkin') on no-poaching and data privacy suggest systemic corporate compliance issues that may extend to CARSTAR operations
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.