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D72/100FDD 2024

CBD American Shaman — Litigation & Risk

Retail · FDD Items 3, 4 & 5

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Moderate — Review

5 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
5
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
72 / 100
FranchiseVerdict composite
Rating
CAUTION
STRONG / MODERATE / CAUTION / AVOID

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
Missouri
State whose law governs disputes — relevant if you're not based there

What drove the 72/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 18.4% year-over-year (212 units), indicating franchisee attrition and contraction
  2. 02MEDNo disclosed average revenue or net income data (Item 19) prevents validation of ROI claims and profitability assessment
  3. 03MINORMultiple regulatory actions: FDA warning letter on CBD edibles, state consent orders in Wisconsin, Washington, and California for disclosure/registration failures
  4. 04MINORArbitration demand from former franchisees (Johancsik case) suggests operational or contractual disputes affecting unit viability
  5. 05MINORUnprotected territory creates direct competition risk and cannibalization within franchise network
  6. 06HIGHGoing concern status indicates potential financial distress at corporate level, threatening support and franchisor stability
  7. 07MED6% royalty on undisclosed revenue with $88K–$184K upfront investment presents unclear payback timeline and profitability floor

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.