FranchiseVerdict
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D75/100FDD 2024

Compass by Margaritaville — Litigation & Risk

Lodging - Hotels & Motels · FDD Items 3, 4 & 5

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Moderate — Review

3 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
3
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
75 / 100
FranchiseVerdict composite
Rating
CAUTION
STRONG / MODERATE / CAUTION / AVOID

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

What drove the 75/100 rating

Risk Score Breakdown

  1. 01MEDExtremely high investment range ($10.2M–$37.4M) with zero disclosed average unit economics (no Item 19 revenue/income data)
  2. 02MINOROnly 2 operating units with unknown growth trajectory suggests failed or stalled system expansion
  3. 03HIGHGoing Concern = False indicates potential financial viability questions at franchisor level
  4. 04HIGHMultiple litigation cases including trademark disputes, deceptive practices lawsuits, and regulatory compliance failures (California administrative consent order 2020)
  5. 05MINORNo protected territory means franchisees face direct competition from other Compass locations
  6. 06MINORMargaritaville brand association carries reputational risk given parent company's past financial troubles and casual dining market headwinds

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.