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F80/100FDD 2021

Loyalty Business Services — Litigation & Risk

Business Services - Tax & Financial · FDD Items 3, 4 & 5

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Elevated Risk

10 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
10
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
80 / 100
FranchiseVerdict composite
Rating
AVOID
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
Virginia
State whose law governs disputes — relevant if you're not based there

What drove the 80/100 rating

Risk Score Breakdown

  1. 01MEDOnly 2 units in entire system indicates extremely limited scale and unproven model
  2. 02MED14% royalty is high relative to undisclosed average revenues—profitability unclear
  3. 03MEDNo Item 19 financial performance disclosure (Avg Revenue and Net Income not disclosed) prevents ROI validation
  4. 04HIGHExtensive litigation history including pending trade dress/tortious interference claims and 9 concluded actions suggests operational and legal instability
  5. 05MINORChairman's previous tenure at Liberty Tax involved securities class actions and derivative suits—significant reputational and governance risk
  6. 06MINOR10-year term with $40,000 franchise fee locks capital into unproven 2-unit franchise with no growth trajectory
  7. 07MINORUnknown unit growth rate suggests stagnation or inability to attract franchisees despite being established

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.