Papa Murphy's: Litigation & Risk
Quick-Service Restaurants · FDD Items 3, 4 & 5
Elevated Risk
8 cases disclosed in FDD Items 3 and 4. Bankruptcy disclosed in Item 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 8
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- Disclosed
- Franchisor or officer bankruptcy
- Verdict score
- 69 / 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
- 119
- Government-backed loans issued
- Charge-off rate
- 9.3%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 10 loans
- Loans charged off or defaulted
- Total loan volume
- $32.2M
- Avg loan size
- $271K
- Participating lenders
- 52
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
- Not waived
- 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
- Washington
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Multiple settled franchisee class-type actions (WFIPA claims re Item 19 representations) resolved 2014-2020 with payments ranging $10,000-$4,000,000 per group and several store buybacks; a declaratory judgment/tortious interference suit resolved via store purchase; and several state regulatory consent orders/settlements (Maryland, Virginia, New York) against MTY-affiliated predecessor brands (Triune/Blimpie/Maui Wowi/SweetFrog) for unregistered franchise sales or disclosure violations, with penalties from $2,500 to $50,000.
What drove the 69/100 verdict
Risk Score Breakdown
- 01MINORUnit count declining 2.3% YoY (1127 units) indicates system contraction and potential market saturation or operational challenges
- 02HIGHMultiple settled litigation cases involving misrepresentations and marketing obligations suggest compliance issues and franchisee disputes
- 03MINORNo average net income disclosure (Item 19) prevents assessment of actual profitability relative to $367-670K investment
- 04MINORUnprotected territory creates direct competition risk from other franchisees and corporate-owned locations in same area
- 05MINOR5% royalty on top of operating costs with declining unit economics may pressure franchisee margins
- 06MINORHigh investment range ($303K spread) with declining units raises questions about ROI and break-even timeline
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.