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B62/100FDD 2024

Scottish Inns, Red Carpet Inn, Master Hosts Inns, Passport Inn, Downtowner Inns — Litigation & Risk

Lodging - Hotels & Motels · FDD Items 3, 4 & 5

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Elevated Risk

8 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
8
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
62 / 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
29
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
Not required
You retain the right to sue in court
Jury trial waiver
Waived
You give up the right to a jury trial
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
No
Franchisor can match any purchase offer when you try to sell
Governing law
Georgia
State whose law governs disputes — relevant if you're not based there

What drove the 62/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count (203 units, -0.5% YoY) indicates shrinking franchise system with negative momentum
  2. 02MEDNo disclosed average revenue or net income (missing Item 19) prevents financial viability assessment and suggests weak unit economics
  3. 03MINORHigh royalty-to-investment ratio ($25/room on $134K-$2.6M investment) creates ongoing cash drain with unclear ROI
  4. 04HIGHSeven franchisor-initiated litigations for trademark infringement and past-due fees signal enforcement issues and franchisee financial distress
  5. 05MINORUnprotected territory creates direct competition risk from other franchisees within same brand portfolio
  6. 06MINORLow franchise fee ($10K) relative to total investment suggests high-leverage, asset-heavy model vulnerable to debt stress
  7. 07MINORFive-year term is short, limiting franchisee ability to recover investment and refinance debt
  8. 08MINORMultiple distinct brand names (Scottish Inns, Red Carpet Inn, Master Hosts, Passport Inn, Downtowner) may indicate fragmented legacy system or brand portfolio confusion

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.