B65/100FDD 2024
STEM Builders Learning Center — Litigation & Risk
Education - Children's Programs · FDD Items 3, 4 & 5
Lower Risk
No litigation cases disclosed in FDD Items 3 and 4.
Source: FDD Items 3–5
FDD Items 3 & 4
Litigation Metrics
Cases disclosed
0
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
65 / 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
2
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
Required
Disputes resolved outside court — limits your legal options
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
No
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
Minnesota
State whose law governs disputes — relevant if you're not based there
What drove the 65/100 rating
Risk Score Breakdown
- 01MEDNo Item 19 financial disclosure (avg revenue and net income not disclosed) — impossible to validate ROI on $45k-$104k investment
- 02MEDExtremely small unit base (only 5 locations) with no disclosed average unit volumes — high risk of system collapse or franchisor inability to support network
- 03HIGHGoing Concern status is False — suggests potential financial instability or operational challenges at franchisor level
- 04MINOR$500/month minimum royalty on 7% creates unprofitable math for low-revenue locations; unclear breakeven point
- 05MINOR5-year term is shorter than industry standard (10 years typical) — reduced security and higher renegotiation risk
- 06MINOR33.3% YoY growth on only 5 units (1.67 net new units) is mathematically insignificant — cannot extrapolate viability
- 07HIGHNo litigation disclosed but going concern status raises questions about franchisor financial health and dispute history
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.