Great Steak: Litigation & Risk
Quick-Service Restaurants · FDD Items 3, 4 & 5
Elevated Risk
20 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 20
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 31 / 100
- FranchiseVerdict composite · higher is better
- Rating
- D
- 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
- 75
- Government-backed loans issued
- Charge-off rate
- 28.8%
- vs 16% franchise average
- 5-yr charge-off rate
- 100.0%
- Defaults
- 19 loans
- Loans charged off or defaulted
- Total loan volume
- $13.5M
- Avg loan size
- $180K
- Participating lenders
- 33
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
- State where franchised business is located
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Item 3 discloses numerous concluded arbitrations, lawsuits, and regulatory actions involving Kahala Franchising and affiliates including Famous Dave's, Papa Murphy's, SweetFrog, Wetzel's Pretzels, and predecessors. Two active FY2024 suits filed by franchisor against franchisees for breach of contract and forcible entry.
What drove the 31/100 verdict
Risk Score Breakdown
- 01MINORSystem shrinking at -4.0% YoY (24 units) indicates declining franchisee success and potential market saturation
- 02HIGHMultiple ongoing litigations including Washington Franchise Investment Protection Act violations and misrepresentation claims suggest franchisor credibility issues
- 03MINORNo average net income disclosure (Item 19) prevents accurate ROI assessment despite $153.5K-$662.8K investment range
- 04MINORRoyalty floor of $400/week ($20,800/year) is aggressive relative to average revenue of $579,903, creating cash flow pressure in slow periods
- 05MINORUnprotected territory creates direct competition risk from other Great Steak franchisees in same market
- 06HIGHLitigation history includes state administrative consent orders, indicating regulatory enforcement actions
- 07MEDHigh investment ceiling ($662,850) with unit decline suggests franchisor pushing larger formats that underperform
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.