Coffee Beanery: Litigation & Risk
Quick-Service Restaurants · FDD Items 3, 4 & 5
Moderate: Review
2 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 2
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 46 / 100
- FranchiseVerdict composite · higher is better
- Rating
- C
- 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
- 73
- Government-backed loans issued
- Charge-off rate
- 19.2%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 14 loans
- Loans charged off or defaulted
- Total loan volume
- $14.5M
- Avg loan size
- $199K
- Participating lenders
- 36
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
- Not waived
- Non-compete
- 1 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
- No
- Franchisor can match any purchase offer when you try to sell
- Governing law
- MI
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Administrative proceeding before the Illinois Attorney General (2007-2008, $2,500 fine); Administrative proceeding before the Maryland Securities Commissioner (2005-2006, Consent Order requiring rescission offers).
What drove the 46/100 verdict
Risk Score Breakdown
- 01MINORNo Item 19 financial disclosure (average revenue and net income) prevents ROI validation; high investment ($143k-$417k) without transparent earnings data
- 02MINORStagnant unit count at 28 with unknown growth trajectory suggests mature or declining system; no expansion momentum in competitive coffee sector
- 03HIGHMaterial litigation history: 2007 Illinois AG investigation into unlicensed brokers and disclosure violations, plus 2006 Maryland Securities Commissioner consent order for registration and antifraud violations—indicates past compliance and sales practice failures
- 04MINORUnprotected territory creates direct competition risk; multiple franchisees can operate in same area, diluting individual unit economics
- 05HIGH4% royalty is low (suggests weak franchisor revenue model), combined with no going concern statement and financial opacity raises sustainability questions
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.