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B61/100FDD 2024

Knockout Beauty — Litigation & Risk

Personal Services - Beauty & Salon · FDD Items 3, 4 & 5

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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
61 / 100
FranchiseVerdict composite
Rating
MODERATE
STRONG / MODERATE / CAUTION / AVOID

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
Delaware
State whose law governs disputes — relevant if you're not based there

What drove the 61/100 rating

Risk Score Breakdown

  1. 01MINORNo net income disclosure despite $689K average revenue — unable to verify profitability claims or validate ROI
  2. 02MINOROnly 5 units in system with 100% YoY growth — extremely small franchise base makes financial projections unreliable and indicates early-stage/unproven model
  3. 03MEDHigh investment range ($181K-$438K) against undisclosed profitability creates significant risk of negative cash flow or extended breakeven periods
  4. 04MINOR8% royalty on gross sales is aggressive when net profitability is unknown — could consume 20-40%+ of actual net profit if margins are thin
  5. 05HIGHGoing Concern flagged as False — suggests financial instability or operational concerns at franchisor 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.