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B63/100FDD 2024

Lee's Sandwiches — Litigation & Risk

Food & Beverage - Quick Service · 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
63 / 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
6
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$4.4M
Avg loan size
$739K
Participating lenders
5

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

What drove the 63/100 rating

Risk Score Breakdown

  1. 01HIGHGoing Concern status is False — franchisor financial viability is questionable
  2. 02MEDSystem shrinking: only 52 units with 2.2% YoY growth indicates stagnation or decline
  3. 03MEDNo Item 19 (financial performance) disclosed — inability or unwillingness to provide revenue/profit data
  4. 04HIGHLitigation history shows franchisee payment defaults and franchisor had to pursue collection through arbitration and bankruptcy
  5. 05MINORHigh unit investment range ($209K-$1.68M) creates significant exposure with no performance benchmarks to justify costs
  6. 06MED6.9% royalty on undisclosed revenues makes ROI calculation impossible for prospective franchisees

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.