Farmer Boys: Litigation & Risk
Full-Service Restaurants · FDD Items 3, 4 & 5
Moderate: Review
1 case disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 1
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 65 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- 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
- 20
- Government-backed loans issued
- Charge-off rate
- 10.0%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 1 loans
- Loans charged off or defaulted
- Total loan volume
- $21.4M
- Avg loan size
- $1.1M
- Participating lenders
- 6
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
- CA
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Farmer Boys as plaintiff in arbitration against 3 franchisee entities and principal Michael Ledbetter for abandonment of Restaurants and breach of franchise agreements; Final Award issued Nov 15 2024 in favor of Farmer Boys ($903,549.70 damages plus $89,017.05 costs); Judgment confirmed April 24 2025
What drove the 65/100 verdict
Risk Score Breakdown
- 01MINORStagnant unit growth at 1.4% YoY indicates system maturation or contraction pressure with only 102 units
- 02MEDNet income not disclosed in Item 19 prevents accurate ROI analysis and profit transparency
- 03HIGHRecent litigation ($903k+ awarded against franchisees) suggests franchise relationship tensions and enforcement issues
- 04MEDHigh initial investment ($1.6M-$3.2M) paired with undisclosed profitability creates significant capital-at-risk exposure
- 05HIGHNo going concern statement raises questions about franchisor financial stability and long-term viability
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.