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A51/100FDD 2024

The Entrepreneur’s Source — Litigation & Risk

Business Services - Other · FDD Items 3, 4 & 5

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Moderate — Review

2 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
51 / 100
FranchiseVerdict composite
Rating
STRONG
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
58
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
Connecticut
State whose law governs disputes — relevant if you're not based there

What drove the 51/100 rating

Risk Score Breakdown

  1. 01MINOR25% royalty on placement fees is extremely high and creates misaligned incentives; franchisee success depends on FEE COLLECTION, not client outcomes
  2. 02MINORNo Item 19 (Average Net Income) disclosure is a major transparency red flag; with $143.6K avg revenue and 25% royalties, profitability is unclear
  3. 03HIGHFTC litigation regarding dispute handling representations suggests franchisor made unsubstantiated claims about their support or safe harbor frameworks
  4. 04MINORArbitration award against franchisees for unlawful termination indicates termination disputes and potential franchisor overreach in contract enforcement
  5. 05MINORUnprotected territory in a business model dependent on local client relationships creates cannibalization risk and unfair competition between franchisees
  6. 06MEDHigh initial investment ($114K-$126K) relative to undisclosed net income creates poor visibility on ROI timeline and payback period
  7. 07MINORRapid growth (25.7% YoY) without profitability disclosure may indicate recruitment-driven expansion rather than unit-level sustainability

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.