D70/100FDD 2026
Sotheby’s International Realty — Litigation & Risk
Real Estate · FDD Items 3, 4 & 5
Elevated Risk
11 cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
11
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
70 / 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
4
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
Non-compete
1 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
New Jersey
State whose law governs disputes — relevant if you're not based there
What drove the 70/100 rating
Risk Score Breakdown
- 01MINORDeclining unit count (0.9% YoY growth indicates stagnation/contraction in mature system)
- 02MEDMultiple active class-action antitrust lawsuits regarding commission structures—core business model under legal challenge
- 03MINORNo Item 19 financial disclosure—cannot validate claimed average revenue or profitability claims
- 04MINORWide fee range ($47K-$519K) suggests highly variable territory quality with no protected territory guarantees
- 05HIGHOngoing litigation regarding franchise non-renewal (Brazen case) signals franchisor-franchisee disputes over renewal rights
- 06MINORTCPA class action and shareholder disclosure lawsuits indicate broader governance and transparency concerns post-Compass acquisition
- 07MED6% royalty on undisclosed revenue base makes ROI assessment impossible; combined with no protected territory, creates margin compression risk
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.