Moderate: Review
3 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 3
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 60 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 80
- Government-backed loans issued
- Charge-off rate
- 6.7%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 3 loans
- Loans charged off or defaulted
- Total loan volume
- $110.2M
- Avg loan size
- $1.4M
- Participating lenders
- 27
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
- 10 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
- AZ
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
TMC as plaintiff: 2 cases (v. Broadway Restaurants re post-termination obligations, settled $30,722 paid to TMC; v. Golen et al. re liquidated damages, settled with payment to TMC). TMC as defendant/cross-defendant: Universal Property Services v. Lehigh Gas et al. added TMC as defendant re misrepresentations in sale of 17 stores, settled 7/2024 with TMC paying $180,000. FTC order involving affiliate ACT and CrossAmerica re divestiture timing, $3.5M civil penalty paid.
What drove the 60/100 verdict
Risk Score Breakdown
- 01MINORSystem declining 8.3% YoY with 6,063 units down from ~6,615 last year, indicating contraction and potential market saturation or franchisee dissatisfaction
- 02MEDNo average net income disclosed in Item 19 prevents assessment of actual profitability; disclosed $1.39M revenue doesn't guarantee positive returns after $25K-$55K annual royalties plus operating costs
- 03MINORUnprotected territory creates direct cannibalization risk; franchisees compete with corporate-owned and other franchised Circle K locations in same market
- 04HIGHMultiple active litigation cases (TMC v. Broadway, Universal Property Services v. Lehigh Gas, TMC v. Golen) suggest operational disputes and potential franchisor relationship issues
- 05MINORHigh upfront investment ($1.46M–$2.74M) combined with 10-year commitment and declining unit count increases difficulty recovering capital
- 06HIGHGoing Concern status is FALSE, but system decline warrants clarification on franchisor financial stability and long-term viability
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.