F91/100FDD 2023
Management Recruiters — Litigation & Risk
Business Services - Staffing · FDD Items 3, 4 & 5
Moderate — Review
3 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
3
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
91 / 100
FranchiseVerdict composite
Rating
AVOID
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
72
Government-backed loans issued
Default rate
11.3%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
8 loans
Loans charged off or defaulted
Total loan volume
$14.2M
Avg loan size
$197K
Participating lenders
38
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
South Carolina
State whose law governs disputes — relevant if you're not based there
What drove the 91/100 rating
Risk Score Breakdown
- 01MEDUnit count declined 17.5% YoY (203 units) indicating system contraction and franchisee viability concerns
- 02MINORAverage revenue of $28,940.86 is extremely low for a staffing/recruitment franchise and suggests most units are underperforming
- 03MINORNo Item 19 (Net Income) disclosure prevents accurate ROI assessment and raises transparency concerns
- 04HIGHPredecessor franchisor litigation history includes $300,000 settlement for encroachment and fund mismanagement—material governance red flag
- 05MINORNo territory protection creates direct competition risk and race-to-bottom pricing dynamics among franchisees
- 06HIGHGoing Concern status of 'False' suggests franchisor financial instability or restructuring concerns
- 07MEDRoyalty structure on disclosed average revenue ($28,940) yields only $2,604 in annual royalties—unit economics appear unsustainable
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.