F79/100FDD 2025
Straw Hat Pizza — Litigation & Risk
Food & Beverage - Pizza · 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
79 / 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
15
Government-backed loans issued
Default rate
38.5%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
5 loans
Loans charged off or defaulted
Total loan volume
$5.7M
Avg loan size
$378K
Participating lenders
14
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
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
California
State whose law governs disputes — relevant if you're not based there
What drove the 79/100 rating
Risk Score Breakdown
- 01MEDNet income not disclosed in Item 19 — unable to validate actual profitability against $165,500–$1,662,000 investment range
- 02MINOROnly 27 units with unknown growth trajectory — suggests stagnant or declining system (mature brands typically have 100+ units)
- 03MINORNo protected territory — franchisees compete directly with other Straw Hat locations and corporate stores
- 04MINORWide investment variance ($165,500–$1,662,000) indicates inconsistent unit economics and unclear cost structure
- 05MINORRoyalty tied to 'Adjusted Gross Sales' (undefined term) — potential for disputes over what counts toward 4% fee
- 06MEDAverage revenue of $496,214 is modest for pizza — suggests below-average unit volumes or limited marketing support
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.