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B62/100FDD 2025

Corner Bakery Cafe — Litigation & Risk

Food & Beverage - Full Service · 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
62 / 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
7
Government-backed loans issued
Default rate
14.3%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$8.3M
Avg loan size
$1.2M
Participating lenders
7

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

What drove the 62/100 rating

Risk Score Breakdown

  1. 01MEDSystem contracting sharply: 13.5% unit decline YoY indicates deteriorating franchisee performance and franchisor support capacity
  2. 02HIGHPending litigation against VP of Franchise Development involving fraud allegations raises concerns about sales practices and disclosed financial projections to prospective franchisees
  3. 03MEDNo Item 19 financial performance representations disclosed — prevents validation of franchise profitability claims and suggests franchisor cannot substantiate unit economics
  4. 04HIGHTwo prior settled litigations involving gift card reporting and unauthorized financial performance representations indicate pattern of regulatory/disclosure issues
  5. 05MEDHigh capital requirement ($1.09M–$2.34M) combined with undisclosed average net income creates significant downside risk without transparency on returns
  6. 06MINOR5% royalty on gross sales (not net) reduces margins further and creates franchisor incentive misalignment during low-margin periods

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.