Midas: Litigation & Risk
Automotive · FDD Items 3, 4 & 5
Moderate: Review
3 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 3
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 74 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 451
- Government-backed loans issued
- Charge-off rate
- 13.3%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 40 loans
- Loans charged off or defaulted
- Total loan volume
- $185.2M
- Avg loan size
- $411K
- Participating lenders
- 134
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
- DE
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Three concluded cases disclosed: (1) VieRican, LLC arbitration (franchise termination/royalty dispute) settled for $203,362.67; (2) People of California v. CRC Luxury Motors/Midas (franchise consumer fraud by franchisee), Midas paid $210,000 in penalties and restitution fund, fully satisfied; (3) 8435758 Canada Inc. v. Midas Canada (rescission/damages under Arthur Wishart Act), settled for Cdn $414,359
What drove the 74/100 verdict
Risk Score Breakdown
- 01MINORDeclining unit count (0.8% YoY contraction) suggests system-wide challenges and potential franchisee dissatisfaction
- 02MINORNo Item 19 financial performance disclosure limits ability to validate the $175k average net income claim across diverse locations
- 03HIGHMultiple litigation cases involving termination disputes, royalty conflicts, and regulatory violations indicate franchisor-franchisee friction and compliance issues
- 04MINORUnprotected territory creates direct competition between franchisees and risk of brand cannibalization
- 05MINORHigh royalty rate (10%) combined with declining units suggests franchisees may struggle with profitability and unit economics
- 06HIGHGoing Concern status of False raises questions about financial stability and long-term viability of support systems
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.