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B67/100FDD 2024

Prepaze Academy — Litigation & Risk

Education - Tutoring & Test Prep · FDD Items 3, 4 & 5

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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
67 / 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
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
Required
Disputes resolved outside court — limits your legal options
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
3 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
North Carolina
State whose law governs disputes — relevant if you're not based there

What drove the 67/100 rating

Risk Score Breakdown

  1. 01MINOROnly 2 existing units with unknown growth trajectory suggests nascent/stalled system with no proven scalability
  2. 02MEDNo Item 19 financial performance data disclosed despite $154k-$308.5k investment — impossible to validate ROI claims
  3. 03HIGHGoing Concern status is FALSE, indicating potential financial viability questions about franchisor sustainability
  4. 04MINORRoyalty floor of $750/month ($9,000/year) is substantial burden on small academy operations and may not align with actual revenue
  5. 05MEDHigh franchise fee ($39,000) relative to system size creates early cash drain with limited peer validation or support infrastructure
  6. 06MINOR5-year term is short for education-based franchise requiring brand establishment and student roster building
  7. 07HIGHNo litigation disclosed is positive, but minimal unit count limits legal/operational history to evaluate

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.