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Elevated Risk
12 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
12
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
78 / 100
FranchiseVerdict composite
Rating
AVOID
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
38
Government-backed loans issued
Default rate
40.0%
vs <3% typical · system-wide
5-yr default rate
40.0%
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$19.8M
Avg loan size
$521K
Participating lenders
9
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 78/100 rating
Risk Score Breakdown
- 01HIGHMultiple active lawsuits involving pre-sale disclosure violations and fraudulent inducement indicate potential systemic compliance failures and franchisor credibility issues
- 02MINORNo Item 19 (Average Unit Volume) disclosure despite $492,590 average revenue claim raises transparency concerns and makes ROI validation impossible
- 03MEDHigh initial investment ($509K-$1.14M) with undisclosed net income creates unfavorable risk/reward profile and suggests profitability may be inadequate
- 04HIGHLitigation history focusing on breach of contract and pre-sale disclosure violations suggests franchisees may have received misleading financial projections or performance claims
- 05HIGH21.7% unit growth is moderate but insufficient to offset litigation risk and lack of financial transparency; growth rate may not be sustainable
- 06MED7% royalty on gross sales (not net) is aggressive given lack of disclosed net income data, potentially making unprofitable locations unworkable
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.