FranchiseVerdict
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D72/100FDD 2026

Charles Schwab — Litigation & Risk

Other · FDD Items 3, 4 & 5

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Elevated Risk

10 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
10
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

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
2
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$770K
Avg loan size
$385K
Participating lenders
1

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
1.5 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
The state in which you operate your Franchise Branch
State whose law governs disputes — relevant if you're not based there

What drove the 72/100 rating

Risk Score Breakdown

  1. 01MINORRoyalty structure of 50% of Asset-Based Revenue is extremely high and creates severe profit margin compression for franchisees
  2. 02MINORFranchise system contracted 3.3% YoY despite parent company stability, indicating franchisee dissatisfaction or unsustainable unit economics
  3. 03HIGHMultiple regulatory settlements (SEC, FINRA, state securities boards) and class action litigation signal compliance and operational risks that franchisees inherit
  4. 04MINORNo financial disclosure (Avg Revenue, Avg Net Income, Item 19) prevents transparency and makes ROI projections impossible to validate
  5. 05MINORUnprotected territory means franchisees compete directly with other Schwab franchisees and the parent company's direct operations
  6. 06MINORDocumented arbitrations with former franchisees regarding termination/non-renewal suggest contentious franchisor-franchisee relationships
  7. 07MINOR7-year term with no territory protection creates exit risk and customer acquisition competition

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.