Gong cha: Litigation & Risk
Quick-Service Restaurants · FDD Items 3, 4 & 5
Moderate: Review
4 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 4
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 60 / 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
- 15
- Government-backed loans issued
- Charge-off rate
- 0.0%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 0 loans
- Loans charged off or defaulted
- Total loan volume
- $3.8M
- Avg loan size
- $251K
- Participating lenders
- 12
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
- Massachusetts
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Four Item 3 matters, all involving franchise registration/disclosure violations by predecessor GCI (and in some cases the franchisor itself): (1) California DBO citation against GCI for offering an unregistered master franchise, settled via consent order (civil penalties of $2,500 x3); (2) civil suit/arbitration between GCI and its former CA master franchisee GCCA over renewal rights, settled with no monetary payment; (3) Maryland Securities Commissioner administrative proceeding against GCI, franchisor, and GCDMV for unregistered franchise sales, settled via consent order ($30,000 penalty plus $10,000 to GCDMV for rescinding licensees); (4) Virginia State Corporation Commission proceeding against GCI and franchisor for unregistered master franchise sale, settled with a $3,000 penalty.
What drove the 60/100 verdict
Risk Score Breakdown
- 01MINOROnly 6 operating units indicates a micro-franchise system with minimal scale and unclear growth trajectory
- 02MINORMultiple regulatory violations across three states (CA, MD, VA) suggest systemic compliance and disclosure issues
- 03HIGHMaster franchise renewal dispute with court litigation and arbitration indicates franchisor-franchisee relationship deterioration and territorial instability
- 04MEDNet income not disclosed despite $439,522 average revenue, making true profitability assessment impossible
- 05MEDHigh initial investment ($184,500–$627,060) relative to system size creates significant capital risk with limited track record
- 06HIGHGoing Concern status is FALSE, indicating potential financial viability concerns at corporate level
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.