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F82/100FDD 2025

Cost Cutters — Litigation & Risk

Personal Services - Beauty & Salon · FDD Items 3, 4 & 5

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Elevated Risk

11 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
11
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
82 / 100
FranchiseVerdict composite
Rating
AVOID
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
9
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$5.5M
Avg loan size
$613K
Participating lenders
7

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

What drove the 82/100 rating

Risk Score Breakdown

  1. 01MEDSevere unit decline of 28.9% YoY indicates systemic franchisee distress and system contraction
  2. 02HIGHMultiple fraud and misrepresentation litigation claims including build-out costs and financial performance misstatements undermine credibility
  3. 03HIGHNo average net income disclosure combined with 'Going Concern: False' suggests financial instability and profitability concerns
  4. 04MINORUnprotected territory creates direct competition risk between franchisees and cannibalization within existing market
  5. 05MINOREscalating royalty structure (4% to 6%) after year one increases burden during critical cash flow periods when franchisees are most vulnerable
  6. 06HIGHClass action litigation regarding credit card data security on receipts indicates operational/compliance failures and liability exposure
  7. 07HIGHCollections litigation against franchisees with counterclaims of fraud suggests adversarial franchisor-franchisee relationship and potential predatory practices

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.