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B58/100FDD 2021

Skrimp Shack — Litigation & Risk

Food & Beverage - Full Service · 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
58 / 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
7
Government-backed loans issued
Default rate
16.7%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$1.6M
Avg loan size
$232K
Participating lenders
5

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

What drove the 58/100 rating

Risk Score Breakdown

  1. 01HIGHTwo regulatory settlements with Virginia SCC for selling unregistered franchises and FDD disclosure violations indicate compliance failures and potential fraud risk
  2. 02MEDNet income not disclosed in Item 19 prevents accurate ROI calculation; average revenue of $796k may not translate to reasonable profit margins for $286k-$614k investment
  3. 03MINOROnly 32 units with unknown growth trajectory suggests stagnant or declining system; no visibility into unit growth rate or franchisee retention
  4. 04MEDRoyalty structure (7% year 1, 6% thereafter) on ~$800k average revenue extracts $48k-$56k annually, creating cash flow pressure on undisclosed net income
  5. 05MINOR5-year term is shorter than industry standard (10 years), increasing renewal uncertainty and reducing franchisee investment protection
  6. 06MINORRegulatory history suggests potential ongoing compliance issues; unclear if additional violations exist or whether disclosure practices have improved

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.