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B61/100FDD 2025

The Closet Trading Co. — Litigation & Risk

Business Services - Printing & Signs · FDD Items 3, 4 & 5

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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
61 / 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
1
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
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
California
State whose law governs disputes — relevant if you're not based there

What drove the 61/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 25% year-over-year (8 units total) — indicates system contraction and potential franchisee dissatisfaction
  2. 02HIGHGoing Concern status is False — suggests financial instability or operational uncertainty at corporate level
  3. 03MINORNo Item 19 financial disclosures — inability to validate claimed $591,531 average revenue across only 8 locations
  4. 04MINORHigh initial investment ($157,400–$370,300) relative to small unit count and declining trajectory raises ROI sustainability questions
  5. 05MED5% royalty on gross sales with no disclosed marketing fund — franchisees bear full profit erosion without documented co-op support
  6. 06MINORExtremely small franchise system (8 units) limits peer support network and increases risk of system failure

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.