A41/100FDD 2025
Prep Academy Tutors — Litigation & Risk
Education - Tutoring & Test Prep · FDD Items 3, 4 & 5
Lower Risk
No litigation cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
0
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
41 / 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
11
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
FDD Items 5, 6 & 17 — what you give up
Contract Risk Indicators
Mandatory arbitration
Not required
You retain the right to sue in court
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 41/100 rating
Risk Score Breakdown
- 01MINORNo average revenue or net income disclosure (Item 19) — impossible to validate ROI claims or profitability benchmarks
- 02MINORVery small system with only 16 units limits peer support network and economies of scale; high growth rate (77.8% YoY) may indicate instability or cherry-picked data
- 03MINORMonthly minimum service fee structure creates fixed overhead risk regardless of actual sales — unclear what the minimum is and how it impacts franchisees with slower months
- 04MEDHigh initial investment ($52.6k–$65.6k) + 8% royalty with no disclosed average revenue means breakeven timeline is completely opaque
- 05MINORProtected territory is positive, but 10-year term is longer than industry standard (5–7 years typical) and limits exit flexibility
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.