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D77/100FDD 2025

Schooley Mitchell — Litigation & Risk

Business Services - Other · FDD Items 3, 4 & 5

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Moderate — Review

2 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
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
68
Government-backed loans issued
Default rate
37.9%
vs <3% typical · system-wide
5-yr default rate
31.2%
Defaults
11 loans
Loans charged off or defaulted
Total loan volume
$8.8M
Avg loan size
$129K
Participating lenders
13

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

What drove the 77/100 rating

Risk Score Breakdown

  1. 01MEDNo average net income disclosed (Item 19) despite $223k average revenue — impossible to assess profitability or ROI on $75-262k investment
  2. 02HIGHTwo separate litigation cases involving misrepresentation and regulatory violations (Ontario settlement $120k CAD + NY AG penalty $12k) suggest compliance and disclosure issues
  3. 03MINORNo protected territory combined with 14.2% YoY growth of 298 units creates saturation risk and inter-franchisee competition
  4. 04HIGHGoing Concern status is FALSE, indicating potential financial instability at corporate level despite unit growth
  5. 05MEDHigh franchise fee ($73k) relative to disclosed revenue without net income transparency creates pay-back period uncertainty
  6. 06MINOR8% royalty on gross sales (not net profit) means franchisees pay even in unprofitable months

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.