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F82/100FDD 2024

Spray-Net — Litigation & Risk

Home Services - Painting · 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
38
Government-backed loans issued
Default rate
41.7%
vs <3% typical · system-wide
5-yr default rate
41.7%
Defaults
5 loans
Loans charged off or defaulted
Total loan volume
$6.2M
Avg loan size
$164K
Participating lenders
6

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

What drove the 82/100 rating

Risk Score Breakdown

  1. 01MINORActive arbitration alleging materially deficient Franchise Disclosure Document—suggests legal/transparency issues with franchisor
  2. 02MINOROnly 26 units system-wide with unknown growth trajectory—indicates stagnant or declining network; insufficient scale for support infrastructure
  3. 03HIGHGoing Concern status is FALSE—franchisor may have financial viability questions or accounting irregularities
  4. 04MINORHigh royalty floor structure (7% of Minimum Gross Sales regardless of actual revenue)—creates financial burden during slow periods and may explain 15.7% net margin compression
  5. 05MINORNo Item 19 financial performance representations—cannot independently verify if $60,723 average net income is achievable or representative

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.