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F82/100FDD 2024

Spenga — Litigation & Risk

Health & Fitness · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
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
55
Government-backed loans issued
Default rate
32.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
8 loans
Loans charged off or defaulted
Total loan volume
$30.9M
Avg loan size
$562K
Participating lenders
21

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

What drove the 82/100 rating

Risk Score Breakdown

  1. 01MINORSystem declining 13.6% YoY (58 units) indicating brand contraction and potential market saturation or operational failure
  2. 02HIGHActive litigation involving breach of lease, fraud, and conversion of security interest raises governance and trustworthiness concerns
  3. 03MEDNo average revenue disclosure despite disclosed net income ($237,698) is a major transparency red flag and prevents ROI validation
  4. 04MINORDual royalty structure (7% or $1,000/month minimum) creates unpredictable cost burden; $1,000/month floor problematic if revenue drops
  5. 05HIGHGoing Concern = False is critical; franchisor's financial viability is questionable, threatening support and system stability
  6. 06MEDHigh initial investment ($435k-$823k) combined with undisclosed revenue makes payback period impossible to calculate
  7. 07MEDOnly 58 remaining units after 13.6% decline suggests franchisees are exiting; insufficient scale for supply chain leverage or brand recognition

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.