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Moderate — Review
3 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
3
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
66 / 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
98
Government-backed loans issued
Default rate
16.3%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
15 loans
Loans charged off or defaulted
Total loan volume
$33.9M
Avg loan size
$345K
Participating lenders
49
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
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
Arizona
State whose law governs disputes — relevant if you're not based there
What drove the 66/100 rating
Risk Score Breakdown
- 01MEDUnit count declined 8.7% YoY (42 units), indicating system contraction and potential market saturation or franchisee struggles
- 02MEDNo average net income disclosed in FDD Item 19, making ROI analysis impossible and suggesting weak performer metrics the franchisor wants hidden
- 03MINORThree concluded lawsuits involving trademark infringement, breach of contract terminations, and misuse of proprietary materials indicate operational/compliance friction and aggressive enforcement history
- 04MINORHigh investment ceiling ($661,190) relative to modest average revenue ($735,075) creates thin margin for error and extended payback periods
- 05MINOR6% royalty on gross revenues (not net) means franchisees pay during unprofitable months, exacerbating cash flow pressure in declining system
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.