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A28/100FDD 2025

Carstar — Litigation & Risk

Automotive - Repair & Service · FDD Items 3, 4 & 5

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Elevated Risk

14 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
14
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
28 / 100
FranchiseVerdict composite
Rating
STRONG
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
40
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default 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
North Carolina
State whose law governs disputes — relevant if you're not based there

What drove the 28/100 rating

Risk Score Breakdown

  1. 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
  2. 02MINORNo Item 19 (Average Unit Volume) disclosure despite $3.2M average revenue, preventing transparent ROI assessment and suggesting franchisor may be hiding profitability data
  3. 03MINORTiered royalty structure (1.5% base + 4% growth fee) creates escalating costs as sales increase, potentially capping franchisee profitability and creating misaligned incentives
  4. 04MINORFlat unit growth of only 3.5% YoY in a mature auto body repair market suggests market saturation or franchisee dissatisfaction
  5. 05MINORThree franchisor-initiated breach of contract and non-compete lawsuits indicate aggressive enforcement and potential disputes over territory/operational control
  6. 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.