FranchiseVerdict
Children's Music Academy logo
B63/100FDD 2024

Children's Music Academy — Litigation & Risk

Education - Children's Programs · FDD Items 3, 4 & 5

Back to overview

Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
63 / 100
FranchiseVerdict composite
Rating
MODERATE
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
1
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
$80K
Avg loan size
$80K
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
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
Colorado
State whose law governs disputes — relevant if you're not based there

What drove the 63/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count: -5.3% YoY with only 22 locations suggests system contraction and weak franchisee success/retention
  2. 02MINORNo financial disclosure: Franchisor withheld average revenue and net income data (Item 19), preventing ROI assessment on $38,670-$130,300 investment
  3. 03MINORRegulatory violation: 2013 Minnesota Consent Order for selling unregistered franchises indicates compliance issues and potential systemic problems
  4. 04MINORUnprotected territory: No territorial exclusivity creates direct competition between franchisees and limits revenue predictability
  5. 05MINORHigh royalty burden: 8% of gross sales (not net) is aggressive for a children's education business with typically thin margins
  6. 06MEDMicro-franchise system: 22 units is a very small franchise network with limited brand recognition, support infrastructure, and peer learning opportunities

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.