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A54/100FDD 2025

Philly Pretzel Factory — Litigation & Risk

Food & Beverage - Bakery · 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
54 / 100
FranchiseVerdict composite
Rating
STRONG
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
37
Government-backed loans issued
Default rate
10.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$8.8M
Avg loan size
$239K
Participating lenders
24

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

What drove the 54/100 rating

Risk Score Breakdown

  1. 01HIGHPast litigation involving founder Ron Heil for conversion of funds, breach of fiduciary duty, and fraud — even though settled, raises governance concerns about corporate oversight and financial controls
  2. 02MEDNo Item 19 (Financial Performance Representations) disclosed — the claimed $611k average net income cannot be independently verified and may not be representative of typical franchisee experience
  3. 03MINORModest unit growth of 6.2% YoY in a mature 162-unit system suggests market saturation or execution challenges; unclear if growth is accelerating or decelerating
  4. 04MINORWide investment range ($149.5k–$495.7k) indicates highly variable unit economics depending on location, format, or build-out scope — suggests inconsistent support or unclear path to profitability
  5. 05MINORSuspiciously high claimed net income ($611k) nearly equals average revenue ($612k), implying ~99% net margins — mathematically implausible and a red flag for data accuracy or cherry-picked locations

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.