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D75/100FDD 2026

Cornwell Quality Tools — Litigation & Risk

Other · FDD Items 3, 4 & 5

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Elevated Risk

38 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
38
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

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
14
Government-backed loans issued
Default rate
40.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$1.5M
Avg loan size
$105K
Participating lenders
10

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
No
Franchisor can match any purchase offer when you try to sell
Governing law
Ohio
State whose law governs disputes — relevant if you're not based there

What drove the 75/100 rating

Risk Score Breakdown

  1. 01MINORShrinking franchise system with only 2.3% YoY growth and 811 units suggests mature/declining network
  2. 02MINOR23 collection suits by franchisor against former franchisees indicates systemic cash flow problems and potential predatory inventory practices
  3. 03MINORMultiple class action lawsuits regarding dealer misclassification under labor laws create legal exposure and suggest franchisor control disputes
  4. 04MEDNo disclosed average net income despite $625K average revenue makes ROI impossible to validate
  5. 05MINORZero franchise fee raises questions about franchisor's revenue model and financial sustainability
  6. 06MINORUnprotected territory with no mention of exclusivity creates direct competition risk from other franchisees
  7. 07MINORRegulatory actions in Maryland and Minnesota regarding franchise registration renewals suggest compliance violations
  8. 08HIGHData breach litigation indicates inadequate cybersecurity and potential customer/franchisee exposure
  9. 09MINORUnknown franchise term creates uncertainty around long-term investment protection
  10. 10MINORDeclining or stagnant unit growth combined with collection actions suggests franchisees are struggling

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.