Moderate: Review
5 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 5
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 85 / 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
- 615
- Government-backed loans issued
- Charge-off rate
- 4.6%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 14 loans
- Loans charged off or defaulted
- Total loan volume
- $1.3B
- Avg loan size
- $2.1M
- Participating lenders
- 136
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
- 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
- TX
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
1 pending franchisee suit (MS & Sons, CA federal court); 1 prior franchisee suit settled (Park Property Management, UT); 1 prior class action (MALDEF/Arizona ICE guest data, $10M settlement); 1 government action (Washington State ICE guest data, $12M settlement); 1 collection action against former franchisee (Aesha LLC, TX 2024)
What drove the 85/100 verdict
Risk Score Breakdown
- 01MINORDeclining unit count (-0.9% YoY) signals shrinking franchise system despite 1,195 locations
- 02MEDNo disclosed average revenue or net income (Item 19) prevents financial performance validation and suggests weak or inconsistent unit economics
- 03HIGHMultiple active litigation cases including franchise termination disputes, data privacy class actions, and franchisor collection actions indicate systemic operational and legal friction
- 04HIGHData privacy litigation (Jane V. class action, Washington State action) over guest information disclosure to immigration authorities creates reputational and operational liability risk
- 05MINORFranchisor initiating collection actions against franchisees (G6 Hospitality vs. Aesha LLC) suggests cash flow stress among operators
- 06MED20-year term length is lengthy for a declining brand with limited financial transparency
- 07MEDHigh investment ceiling ($8.2M) with 5% royalty on undisclosed revenues creates uncertainty on ROI calculations
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.