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B59/100FDD 2025

The Paterson Center — Litigation & Risk

Education - Tutoring & Test Prep · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
59 / 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
2
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
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
No
Franchisor can match any purchase offer when you try to sell
Governing law
Delaware
State whose law governs disputes — relevant if you're not based there

What drove the 59/100 rating

Risk Score Breakdown

  1. 01MINORRegulatory enforcement action by Washington State Division of Franchising (July 2024) involving unlicensed franchise agreements by affiliate Paterson Holdings, LLC — suggests compliance gaps in franchise documentation and governance
  2. 02MEDNo Item 19 financial performance data disclosed — impossible to validate the 22.2% YoY unit growth or assess actual franchisee profitability against $20K-$107K investment range
  3. 03MINORUnprotected territory creates direct competition between franchisees and undermines value proposition for $15,000 franchise fee
  4. 04MINORRapid expansion (22.2% YoY growth) without financial transparency raises sustainability and quality control concerns
  5. 05MED3-year term is short for franchisees to recoup investment; combined with no royalties, suggests potential revenue model misalignment or undisclosed income streams

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.