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B62/100FDD 2024

Studio 6 — Litigation & Risk

Lodging - Hotels & Motels · FDD Items 3, 4 & 5

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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
62 / 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
47
Government-backed loans issued
Default rate
4.0%
vs <3% typical · system-wide
5-yr default rate
14.3%
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$132.1M
Avg loan size
$2.8M
Participating lenders
28

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

What drove the 62/100 rating

Risk Score Breakdown

  1. 01HIGHActive litigation involving breach of contract, civil rights violations, and immigration data disclosure issues creates legal and reputational risk
  2. 02MEDNo Item 19 financial disclosure (Avg Revenue and Net Income not disclosed) prevents accurate ROI analysis and suggests weak unit economics
  3. 03MINORFranchisor collection actions indicate cash flow problems and potential non-compliance with franchise obligations
  4. 04HIGHGoing Concern status is FALSE, indicating potential financial viability concerns at corporate level
  5. 05MINORExtremely wide investment range ($197K–$9.2M) with no average revenue/profit data makes unit performance assessment impossible
  6. 06MINORHigh unit growth (27.7% YoY) may indicate aggressive recruitment masking underlying profitability issues rather than organic health

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.