B62/100FDD 2024
iCode — Litigation & Risk
Education - Tutoring & Test Prep · FDD Items 3, 4 & 5
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
62 / 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
33
Government-backed loans issued
Default rate
22.2%
vs <3% typical · system-wide
5-yr default rate
33.3%
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$9.3M
Avg loan size
$280K
Participating lenders
14
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
Texas
State whose law governs disputes — relevant if you're not based there
What drove the 62/100 rating
Risk Score Breakdown
- 01MINORNo average net income disclosure despite $401,554 average revenue—prevents ROI validation and suggests profitability concerns
- 02HIGH2022 litigation alleging deceptive trade practices and misrepresentation of construction costs indicates potential disclosure issues in FDD
- 03MEDHigh royalty burden (8-12% of gross sales plus $250-$800 monthly minimums) creates thin margin vulnerability, especially if net income is undisclosed for a reason
- 04MEDStrong YoY growth (51.7%) is positive but unit base remains small (46 units)—limited scale and potential survival risk if growth stalls
- 05MINORDual program structure (School vs. Reach) with different royalty rates suggests complexity that may not be clearly explained to new franchisees
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.