The Alternative Board: Litigation & Risk
Business Services · FDD Items 3, 4 & 5
Moderate: Review
1 case disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 1
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 51 / 100
- FranchiseVerdict composite · higher is better
- Rating
- B
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 13
- Government-backed loans issued
- Charge-off rate
- N/A
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 3 loans
- Loans charged off or defaulted
- Total loan volume
- $1.5M
- Avg loan size
- $114K
- Participating lenders
- 9
FDD Items 5, 6 & 17: What You Give Up
Contract Risk Indicators
- Mandatory arbitration
- Required
- Disputes resolved outside court, limits your legal options
- 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
- Colorado
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
TAB Boards International, Inc. v. Lawrence Reines (Case No. 2023CV33449, Denver County District Court, Colorado). Suit filed November 22, 2023 against former franchisee terminated April 18, 2023 for failure to pay accrued amounts and violation of non-disparagement and non-competition covenants. Dismissed with prejudice pursuant to Settlement and Release Agreement dated August 30, 2024.
What drove the 51/100 verdict
Risk Score Breakdown
- 01HIGHSingle concluded litigation matter, dismissed with prejudice
- 02MINORNegative net unit growth of -17.6%
- 03MEDItem 19 disclosed, audited financials, $6.16M revenue
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.