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B66/100FDD 2024

PAINT Nail Bar — Litigation & Risk

Personal Services - Beauty & Salon · FDD Items 3, 4 & 5

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Moderate — Review

2 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
66 / 100
FranchiseVerdict composite
Rating
MODERATE
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
22
Government-backed loans issued
Default rate
9.1%
vs <3% typical · system-wide
5-yr default rate
14.3%
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$6.9M
Avg loan size
$313K
Participating lenders
11

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

What drove the 66/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 14.8% YoY (26 units), indicating system contraction and potential franchisee dissatisfaction
  2. 02HIGHNo Item 19 financial performance representation (Going Concern = False), making it impossible to verify if $17,760.50 average net income is realistic or cherry-picked
  3. 03MINORRoyalty structure of greater of $1,500 or 6% is aggressive; at average revenue of $86,084, monthly royalties ($1,500) represent 20.8% of net income, severely limiting profitability
  4. 04MINORHigh investment range ($217,850–$755,700) relative to average net income ($17,760.50 suggests payback period of 12+ years at lower end, longer at upper end
  5. 05HIGHTwo litigation events involving Lanham Act violations and non-compete disputes suggest franchisor enforces brand standards aggressively and may have history of operational conflicts
  6. 06MINORFranchise fee of $52,500 is substantial given modest average unit economics and negative system growth trajectory

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.