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A28/100FDD 2024
McDonald’s — Litigation & Risk
Food & Beverage - Quick Service · FDD Items 3, 4 & 5
Elevated Risk
30 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
30
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
28 / 100
FranchiseVerdict composite
Rating
STRONG
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
12
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
$28.5M
Avg loan size
$2.4M
Participating lenders
7
FDD Items 5, 6 & 17 — what you give up
Contract Risk Indicators
Mandatory arbitration
Not required
You retain the right to sue in court
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
1.5 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
Illinois
State whose law governs disputes — relevant if you're not based there
What drove the 28/100 rating
Risk Score Breakdown
- 01MEDSystem stagnation: Only 0.1% YoY unit growth indicates mature/declining system with limited expansion opportunity
- 02MINORUnprotected territory: No territorial exclusivity means corporate can open competing locations within your service area, directly cannibalizing revenue
- 03HIGHSignificant litigation exposure: Multiple class actions (consumer fraud, joint employer, discrimination, trademark) suggest systemic operational and legal risks that could impact franchise model
- 04MINORHigh capital requirement relative to net margins: $522.5K-$2.6M investment against $835K average net income creates thin margin for error and slow payback period
- 05MINOR4-5% royalty on gross sales (not net) extracts $158K-$198K annually from average unit, reducing net income by 19-24%
- 06MINOR20-year term locks franchisee into potentially unfavorable agreement as brand faces reputational and operational headwinds
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.