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B65/100FDD 2024

Color Glo — Litigation & Risk

Other · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
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
4
Government-backed loans issued
Default rate
—
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$606K
Avg loan size
$152K
Participating lenders
3

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Not required
You retain the right to sue in court
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
Minnesota
State whose law governs disputes — relevant if you're not based there

What drove the 65/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count (-4.4% YoY) suggests system contraction and potential franchisee dissatisfaction
  2. 02HIGHGoing Concern status is FALSE, indicating serious financial viability questions about franchisor
  3. 03HIGHLitigation history (2012-2014 product performance lawsuit settled for $70,000) raises product liability and misrepresentation concerns
  4. 04MINORNo Item 19 (Average Net Income) disclosure prevents assessment of actual franchisee profitability
  5. 05MINORAverage revenue of $63,233 is only marginally above total investment ($63,300-$68,375), making ROI timeline unclear and risky
  6. 06MINORRoyalty structure ($150/month minimum) creates fixed cost burden even during low-revenue months

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.