Elevated Risk
20 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 20
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 58 / 100
- FranchiseVerdict composite · higher is better
- Rating
- B
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 1,098
- Government-backed loans issued
- Charge-off rate
- 10.2%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 84 loans
- Loans charged off or defaulted
- Total loan volume
- $1.8B
- Avg loan size
- $1.7M
- Participating lenders
- 228
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
- Not waived
- 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
- NJ
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Pending cases include class actions against franchisor and WHR affiliates involving Canadian Destination Marketing Fees (Knuth), hotel algorithmic price-fixing conspiracy (Benoit, Jantunen, Proulx, In Re Extended Stay, Hanson Dai), breach of franchise agreement (Beard Real Estate, Tumas Raju Patel), and franchisor breach claims (WHG v. LuxUrban). Resolved cases include several franchisee breach-of-contract suits (Niazi, Tan, Jariwala/Lancs, Patel Hospitality), a guest resort-fee class action (Luca), keyword advertising restraint (Brodsky), call recording privacy (Roberts), and FTC cybersecurity action (settled). Recent franchisee suits for non-payment and indemnification also disclosed.
What drove the 58/100 verdict
Risk Score Breakdown
- 01MINORDeclining unit count (-2.8% YoY) signals weakening franchisee performance and system contraction
- 02MINORMultiple class action lawsuits regarding marketing fees, price fixing, and consumer protection violations indicate regulatory and legal exposure
- 03MEDNo disclosed average revenue or net income (Item 19 absence) prevents ROI validation and suggests franchisor may be hiding underperformance data
- 04MINORWide investment range ($248K–$10.1M) with vague guidance creates opacity around capital requirements and scalability
- 05HIGHLitigation between franchisor and franchisees over breach of contract indicates franchise relationship deterioration and enforcement disputes
- 06MINORHigh royalty rate (5.5% of gross room revenue) on a declining brand reduces franchisee profitability in competitive budget hotel segment
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.