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B55/100FDD 2026

FranNet — Litigation & Risk

Business Services - 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
55 / 100
FranchiseVerdict composite
Rating
MODERATE
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
1
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$150K
Avg loan size
$150K
Participating lenders
1

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
No
Franchisor can match any purchase offer when you try to sell
Governing law
Pennsylvania
State whose law governs disputes — relevant if you're not based there

What drove the 55/100 rating

Risk Score Breakdown

  1. 01MINORUnit count declining 9.4% YoY (58 units) indicates system contraction and potential franchisee dissatisfaction
  2. 02MEDNo average net income disclosed in FDD — inability to validate profitability claims against $59,550–$97,527 investment
  3. 03HIGHFraud litigation in 2016 involving referral representations and Business Opportunity Statute violation, though settled
  4. 04MINORNo protected territory — franchisees compete directly with other FranNet consultants and independent competitors
  5. 05MEDTiered royalty structure heavily favors franchisor at lower revenue levels (10% up to $500k) with no disclosed breakeven threshold
  6. 06MINORAverage revenue of $291,700 suggests many franchisees fall in highest royalty bracket (10%), limiting net income potential

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.