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A35/100FDD 2025

Closet Factory — Litigation & Risk

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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
35 / 100
FranchiseVerdict composite
Rating
STRONG
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
25
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$19.1M
Avg loan size
$763K
Participating lenders
13

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

What drove the 35/100 rating

Risk Score Breakdown

  1. 01MEDNet income not disclosed in Item 19 — unable to verify actual profitability despite $609k avg revenue
  2. 02MINORHigh minimum investment ($392.5k) with dual royalty structure (6.75% or $975/week minimum) creates fixed cost burden
  3. 03MINORModest unit growth (10.3% YoY) with only 92 locations suggests slower expansion and market saturation concerns
  4. 04MINOR5-year term is shorter than industry standard (10 years), requiring earlier renewal negotiation and uncertainty
  5. 05HIGHGoing Concern status is 'False' — potential financial instability or accounting irregularities 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.