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D68/100FDD 2024

Kumon — Litigation & Risk

Education - Tutoring & Test Prep · 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
68 / 100
FranchiseVerdict composite
Rating
CAUTION
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
53
Government-backed loans issued
Default rate
15.4%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
4 loans
Loans charged off or defaulted
Total loan volume
$14.0M
Avg loan size
$264K
Participating lenders
32

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
No
Franchisor can match any purchase offer when you try to sell
Governing law
New Jersey
State whose law governs disputes — relevant if you're not based there

What drove the 68/100 rating

Risk Score Breakdown

  1. 01MINORFranchise system declining at 1.2% YoY with only 1,659 units—suggests market saturation or franchisee dissatisfaction
  2. 02MINORNo average revenue or net income disclosure (Item 19) prevents validation of the $73,783–$165,920 investment ROI claim
  3. 03MINORRoyalty structure based on student enrollment ($36/full-paying, $18/partial) creates unpredictable, potentially unstable cash flow with no minimum guarantees
  4. 04MINORUnprotected territory exposes franchisees to direct competition from other Kumon franchisees and company-owned centers
  5. 05MEDVery low franchise fee ($2,000) relative to total investment suggests high hidden costs or ongoing capital requirements not disclosed upfront
  6. 06MED5-year term is short; renewal risk and lack of disclosed renewal rates increase uncertainty

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.