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B65/100FDD 2026

Koala Insulation — Litigation & Risk

Home Services - Other · FDD Items 3, 4 & 5

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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
65 / 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
85
Government-backed loans issued
Default rate
23.8%
vs <3% typical · system-wide
5-yr default rate
23.8%
Defaults
5 loans
Loans charged off or defaulted
Total loan volume
$19.7M
Avg loan size
$232K
Participating lenders
25

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

What drove the 65/100 rating

Risk Score Breakdown

  1. 01MEDSystem contracting sharply with 13.5% unit decline YoY (333 units), indicating franchisee attrition or closure problems
  2. 02HIGHActive litigation with founder-level stakeholder (Salim Makhlouf/Lotus & The Rooster) alleging misrepresentation and inadequate training—suggests systemic franchisor issues
  3. 03HIGHGoing Concern status is FALSE, raising questions about franchisor financial viability and ability to support franchisees
  4. 04MINORHigh royalty burden: 3.5-6.5% of sales PLUS minimum monthly fees ($0-$1,218.75), creating dual-fee structure that could exceed 10% of net income
  5. 05MINORNo Item 19 (Financial Performance Representations) provided—unable to validate the claimed $211,897 average net income or $1,290,342 revenue figures independently
  6. 06MINORWide investment range ($194,885-$241,736) and wide royalty range (3.5-6.5%) suggests inconsistent unit economics or territorial pricing variability

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.