B65/100FDD 2025
Closets By Design — Litigation & Risk
Home Services - Other · FDD Items 3, 4 & 5
Moderate — Review
5 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
5
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
65 / 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
45
Government-backed loans issued
Default rate
17.1%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
6 loans
Loans charged off or defaulted
Total loan volume
$16.6M
Avg loan size
$369K
Participating lenders
26
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 65/100 rating
Risk Score Breakdown
- 01HIGHGoing Concern designation indicates franchisor financial distress and potential inability to support franchisees
- 02HIGHMultiple active litigations including consumer class action, RICO allegations, and non-compete disputes signal systemic operational/compliance issues
- 03MINORStagnant unit growth (3.9% YoY) with only 85 units suggests market saturation or franchisee dissatisfaction
- 04MEDNo disclosed net income data prevents ROI validation; high royalty floor ($3,000/month = $36,000/year minimum) on undisclosed profitability is concerning
- 05HIGHHistory of concluded litigation over unpaid royalties and abandonment indicates franchisor-franchisee relationship breakdown
- 06MEDInvestment range ($154K–$511K) is substantial relative to disclosed unit economics and franchisor stability
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.