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B65/100FDD 2025

LearningRx — Litigation & Risk

Education - Tutoring & Test Prep · FDD Items 3, 4 & 5

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Moderate — Review

2 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
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
9
Government-backed loans issued
Default rate
33.3%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$1.1M
Avg loan size
$127K
Participating lenders
7

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

What drove the 65/100 rating

Risk Score Breakdown

  1. 01MINORFTC settlement (2016) regarding unsubstantiated brain training claims creates liability and reputational risk; core marketing claims were challenged
  2. 02MEDNo Item 19 (average unit volumes) disclosed despite $148k-$220k investment requirement; impossible to validate ROI claims independently
  3. 03MINORSmall unit count (47 locations) with unknown growth trajectory suggests stagnation or contraction; minimal scale for system support
  4. 04MINORAverage revenue of $333,848 barely covers royalties (8% = $26,708/yr) plus franchise fees amortization, leaving thin margins for owner income
  5. 05MINORPrior regulatory violation (Virginia 2009) indicates compliance issues; pattern of regulatory friction (Virginia + FTC)
  6. 06MINORBrain training industry faces scientific scrutiny and declining consumer confidence post-FTC action; market headwinds beyond franchisee control

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.