Elevated Risk
12 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
12
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
123
Government-backed loans issued
Default rate
11.0%
vs <3% typical · system-wide
5-yr default rate
33.3%
Defaults
9 loans
Loans charged off or defaulted
Total loan volume
$57.1M
Avg loan size
$464K
Participating lenders
45
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
California
State whose law governs disputes — relevant if you're not based there
What drove the 75/100 rating
Risk Score Breakdown
- 01MINORDeclining unit count of 12.5% YoY indicates system contraction and potential franchisee dissatisfaction
- 02HIGHMultiple pending and completed litigation actions involving franchisor, including pre-sale disclosure violations and securities claims, suggesting compliance issues
- 03MEDNo average net income disclosed despite $425k average revenue — lack of transparency on actual profitability
- 04MINORHigh initial investment ($410k-$1.1M) with 7% royalty on gross sales creates significant financial risk in contracting system
- 05MINORCalifornia Consent Order and administrative penalty indicates regulatory enforcement action by state authorities
- 06HIGHGoing Concern status = False suggests potential financial instability at franchisor level
- 07MED10-year term commitment in declining market segment (indoor cycling) with limited exit clarity
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.