B62/100FDD 2026
KidzArt — Litigation & Risk
Home Services - Other · FDD Items 3, 4 & 5
Lower Risk
No litigation cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
0
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
4
Government-backed loans issued
Default rate
50.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$148K
Avg loan size
$37K
Participating lenders
4
FDD Items 5, 6 & 17 — what you give up
Contract Risk Indicators
Mandatory arbitration
Not required
You retain the right to sue in court
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
Mississippi
State whose law governs disputes — relevant if you're not based there
What drove the 62/100 rating
Risk Score Breakdown
- 01MEDSystem contracting sharply: 15.4% unit decline YoY (12 units) indicates franchisee attrition and potential model stress
- 02HIGHGoing Concern status is FALSE — franchisor may face existential financial or operational challenges
- 03MEDNet Income not disclosed in Item 19 — impossible to assess actual franchisee profitability; $305k avg revenue is meaningless without expense data
- 04MINORHigh franchise fee ($49,500) relative to system size (12 units) suggests weak recruitment momentum and potential franchisor cash flow dependency
- 05MINOR8% royalty on gross revenue is punitive if net margins are thin — high leverage to royalty burden without profitability transparency
- 06MINORTiny, shrinking franchise system (12 units) lacks scale, peer support network, and vendor leverage; high franchise failure risk
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.