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F82/100FDD 2024

Chronic Tacos — Litigation & Risk

Food & Beverage - Full Service · FDD Items 3, 4 & 5

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Lower Risk

No litigation cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
0
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
82 / 100
FranchiseVerdict composite
Rating
AVOID
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
11
Government-backed loans issued
Default rate
25.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$4.1M
Avg loan size
$377K
Participating lenders
8

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

What drove the 82/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 19.4% YoY (31 units) indicating system contraction and potential franchisee dissatisfaction
  2. 02MEDNet income not disclosed in Item 19 prevents ROI analysis and suggests franchisor may be hiding unfavorable profitability data
  3. 03MEDHigh investment range ($284K-$884K) combined with undisclosed net income creates unclear payback period and return visibility
  4. 04MINORRoyalty structure with $600 monthly minimum may be burdensome for underperforming locations, especially given average revenue of $858K
  5. 05MINOR10-year term is lengthy given system instability; difficult to exit if brand continues declining
  6. 06HIGHGoing Concern status is FALSE, which may indicate financial viability concerns at franchisor level

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.