Bottom line
- Total investment $80K – $155K including a $40K franchise fee, 5.0% ongoing royalty.
- Average unit revenue of $551K/year (median $468K). Estimated payback in 0.9 years.
- Rated STRONG with a risk score of 50/100. SBA loan default rate of 0.0% across 2 loans (below the industry average).
- Auditor disclosed a going-concern note — flagged doubt about the franchisor's ability to continue operations. Verify against the latest FDD.
Item 1 · who you're contracting with
The Franchisor
Yale framework · single-unit ROIC
Returns Analysis
Pulls Item 7 (investment) and Item 19 (revenue) from this brand's FDD into the Yale unlevered-ROIC formula. Override any input to stress-test it against your own assumptions.
The model · Yale framework
What would one The Hot Spot unit return on the cash you put in?
Unlevered ROIC · per unit
74%
Above typical band (30–60%)
Levered LBO scenario · Yale Crease Capital framing
What would 25 The Hot Spot units return on equity?
Equity IRR · 5-yr
49.9%
7.57× MOIC
Year-1 DSCR
1.88×
EBITDA ÷ debt service
Equity required
$1.1M
on $5.5M purchase
Total debt
$4.4M
SBA $2.8M + senior + seller note
Overview
About
The Hot Spot franchisees operate quick-service restaurant or beverage-focused retail locations. Day-to-day operations likely involve inventory management, food/beverage preparation, staffing, customer service, marketing within protected territories, and biweekly royalty reporting to corporate.
Item 7 · what it costs
The Vitals
Item 19
Financial Performance
Item 20 · unit dynamics
The Growth Chart
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 16 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator — not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee phone area codes (Item 20). Approximate — ported numbers may show the original state, not the franchisee's current location.
Government records
SBA Loan Data
Aggregated from SBA 7(a) loan disclosures, public data unique to FranchiseVerdict.
FranchiseVerdict rating + FDD Items 3, 5, 6, 12, 17
Risk & Legal
A micro-franchise system with unverified growth, unclear unit economics variance, and limited operational proof points that requires intensive validation of franchisee profitability claims.
Score breakdown · what drove the 50 / 100 rating
- 01MEDOnly 9 units systemwide indicates extremely small, unproven franchise system with limited scale and operational support infrastructure
- 02MEDNo disclosed unit growth trajectory despite 5-year track record raises questions about expansion viability and franchisee satisfaction
- 03MINORHigh royalty burden (5% biweekly) combined with $39,500 franchise fee structure may compress margins for lower-performing locations
- 04MINORSignificant variance between average revenue ($551k) and average net income ($124.9k) suggests 22.7% net margin may not be achievable across all unit types or locations
- 05MINORHigh initial investment range ($80.1k-$154.7k) relative to unit count suggests uneven performance or territory-dependent profitability concerns
Severity inferred from the FDD text · not a regulatory classification
FDD Items 5, 6, 12, 17 · continued from Risk & Legal
Contract & Territory Detail
Item 11
Training & Operations
Item 20
Franchisee Contacts
Phone numbers extracted directly from this brand's FDD Item 20. After purchase, you'll also receive a list of validation questions tailored to this brand.
Franchisee contacts
18 numbers
One-time purchase · CSV download · Validation questions included
FDD download
The Hot Spot · FDD (2025) PDF