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F82/100FDD 2025

Smashburger — 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
82 / 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
11
Government-backed loans issued
Default rate
25.0%
vs <3% typical · system-wide
5-yr default rate
100.0%
Defaults
2 loans
Loans charged off or defaulted
Total loan volume
$7.2M
Avg loan size
$650K
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
Colorado
State whose law governs disputes — relevant if you're not based there

What drove the 82/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 16.7% YoY (194 units), indicating system contraction and potential franchisee struggles
  2. 02MEDNo Item 19 financial performance data disclosed — unable to validate claimed profitability or ROI
  3. 03HIGHTwo significant litigation settlements (2023 and 2025) suggest operational/marketing compliance issues and reputational risk
  4. 04MINORHigh initial investment ($1.2M–$2.3M) paired with declining unit base creates elevated failure risk for new franchisees
  5. 05MED5.5% royalty on undisclosed average revenue means true net margins are unknowable; cash flow sustainability unclear
  6. 06MINOR15-year term locks franchisees into declining brand with no performance benchmarks to assess exit viability

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.