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D77/100FDD 2025

Rocky Mountain Chocolate Factory — Litigation & Risk

Food & Beverage - Ice Cream & Desserts · FDD Items 3, 4 & 5

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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
77 / 100
FranchiseVerdict composite
Rating
CAUTION
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
176
Government-backed loans issued
Default rate
20.1%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
29 loans
Loans charged off or defaulted
Total loan volume
$36.5M
Avg loan size
$208K
Participating lenders
67

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

What drove the 77/100 rating

Risk Score Breakdown

  1. 01MINORSystem declining 7.4% YoY with only 140 units remaining—suggests weakening brand momentum and potential saturation
  2. 02HIGHMultiple active litigation cases including fraudulent inducement and breach of contract claims raise concerns about corporate practices and transparency
  3. 03MEDNet income not disclosed in FDD Item 19—prevents accurate ROI calculation and suggests weak or inconsistent franchisee profitability
  4. 04HIGHGoing concern status indicates potential financial instability at corporate level, affecting support and long-term viability
  5. 05MINORWide royalty range (4-6%) and initial 5% rate on gross sales (not net) creates unpredictable cost structure and incentivizes corporate revenue extraction over franchisee profitability
  6. 06MEDHigh investment ceiling ($871,700) with undisclosed profit data creates disproportionate risk-to-reward scenario

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.