FranchiseVerdict
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F79/100FDD 2024

Nathan's Famous — Litigation & Risk

Food & Beverage - Full Service · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
79 / 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
20
Government-backed loans issued
Default rate
35.3%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
6 loans
Loans charged off or defaulted
Total loan volume
$5.4M
Avg loan size
$272K
Participating lenders
15

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

What drove the 79/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count (-1.4% YoY) indicates shrinking franchise system with potential saturation or franchisee exits
  2. 02MINORNo average revenue or net income disclosure (Item 19) prevents realistic ROI modeling and obscures financial performance
  3. 03MINORUnprotected territory creates direct competition risk from other Nathan's franchisees and company-owned locations
  4. 04MINORWide investment range ($82K–$2M+) suggests inconsistent franchise models or hidden costs not clearly delineated
  5. 05MINOR2006 Minnesota regulatory violation shows compliance lapses, though civil penalty was minor
  6. 06MEDHigh royalty rate (5.5%) combined with no disclosed profitability metrics raises sustainability concerns for marginal operators

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.