FranchiseVerdict
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D73/100FDD 2022

Defy — Litigation & Risk

Other · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
73 / 100
FranchiseVerdict composite
Rating
CAUTION
STRONG / MODERATE / CAUTION / AVOID

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

What drove the 73/100 rating

Risk Score Breakdown

  1. 01MINORNo net income disclosure (Item 19) prevents ROI validation; only $2.65M-$4.2M investment with unknown profitability
  2. 02MINORPatent infringement lawsuit settled for $1M in 2020 with 8-mile non-compete radius suggests IP vulnerability and operational restrictions
  3. 03MINORStagnant unit growth (61 locations) with unknown trajectory indicates market saturation or franchisee churn
  4. 04MINORHigh investment-to-revenue ratio (1.3x-1.9x) suggests extended payback period and cash flow risk
  5. 05MINOR6% royalty on $2.02M average revenue = ~$121K annual fee burden on already-thin margins

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.