D72/100FDD 2022
DQ Treat — Litigation & Risk
Food & Beverage - Quick Service · FDD Items 3, 4 & 5
Elevated Risk
14 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
14
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
72 / 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
25
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$14.6M
Avg loan size
$586K
Participating lenders
15
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
1 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
What drove the 72/100 rating
Risk Score Breakdown
- 01MINORDeclining unit count (-3.5% YoY) indicates system contraction and reduced franchisee success
- 02MINORNo average revenue or net income disclosure (Item 19) prevents ROI validation and hides performance reality
- 03HIGHMultiple litigation cases involving subcontractor disputes, encroachment conflicts, and contract termination suggest franchisor operational/payment issues
- 04MINORUnprotected territory creates direct competition risk between franchisees and potential encroachment by franchisor
- 05MEDHigh investment range ($363K-$1.2M) combined with undisclosed profitability creates severe ROI uncertainty
- 06HIGHGoing Concern = False is ambiguous; if this means financial distress, it signals franchisor viability risk
- 07MINORSubcontractor payment disputes (Denney Mechanical, Beristain Roofing) suggest franchisor cash flow or vendor management problems
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.