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D69/100FDD 2024

MainStay Suites — Litigation & Risk

Lodging - Hotels & Motels · FDD Items 3, 4 & 5

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Elevated Risk

90 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
90
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
69 / 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
9
Government-backed loans issued
Default rate
22.2%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$15.7M
Avg loan size
$1.7M
Participating lenders
9

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

What drove the 69/100 rating

Risk Score Breakdown

  1. 01HIGHAggressive litigation pattern: 71 royalty recovery actions in one fiscal year suggests systemic collection issues or franchisee financial distress
  2. 02MEDHigh investment threshold ($8.7M–$15.8M) with undisclosed net income creates opacity on actual profitability and ROI
  3. 03MEDModest unit growth (9.6% YoY) with 126 units is underwhelming for a branded economy hotel chain; limited scale advantages
  4. 04MINORSignificant post-termination IP enforcement actions (12 cases) indicate compliance/brand protection problems among departed franchisees
  5. 05MEDRevenue-to-investment ratio concern: $2.1M average revenue against $8.7M–$15.8M investment suggests 5–8 year payback at best, before accounting for undisclosed expenses

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.