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B59/100FDD 2024

Potato Corner — Litigation & Risk

Food & Beverage - Full Service · 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
59 / 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
5
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$973K
Avg loan size
$195K
Participating lenders
3

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

What drove the 59/100 rating

Risk Score Breakdown

  1. 01MEDStagnant unit growth (3.8% YoY) suggests limited system expansion and potential market saturation
  2. 02MEDNo Item 19 financial disclosure (Avg Revenue and Net Income not disclosed) prevents validation of profitability claims and ROI projections
  3. 03HIGHGoing Concern status is FALSE, indicating potential financial instability or operational challenges at corporate level
  4. 04MINORHistory of regulatory violations (2016 California citation for notice/registration compliance between 2011-2014) demonstrates past disclosure lapses
  5. 05HIGHInternal litigation (2018 ownership dispute involving Cinco Corporation) raises governance and capital structure questions
  6. 06MEDHigh investment range ($242,200-$829,000) combined with undisclosed earnings creates significant financial risk with unclear payback period
  7. 07MINOR7% royalty on gross sales (not net profit) creates ongoing burden regardless of unit profitability

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.