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D70/100FDD 2024
True REST — Litigation & Risk
Personal Services - Beauty & Salon · FDD Items 3, 4 & 5
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
70 / 100
FranchiseVerdict composite
Rating
CAUTION
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
20
Government-backed loans issued
Default rate
8.3%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
1 loans
Loans charged off or defaulted
Total loan volume
$8.4M
Avg loan size
$422K
Participating lenders
12
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
No
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 70/100 rating
Risk Score Breakdown
- 01MINORCatastrophic profitability crisis: Average net income of only $269 on $397,787 revenue (0.07% net margin) indicates systemic business model failure
- 02HIGHGoing Concern warning from franchisor suggests financial instability and potential system collapse risk
- 03MINORMassive investment-to-profit ratio: $414,547 minimum investment requires 1,540+ years to break even at current profitability levels
- 04MEDSlow unit growth (11.1% YoY) with only 44 locations indicates limited scalability and market traction
- 05MINORNo Item 19 financial disclosures (Avg Revenue/Net Income appear unverified or worst-case scenarios)
- 06MINORHigh franchise fee ($39,950) relative to franchisee profitability suggests franchisor revenue model prioritizes upfront fees over franchisee success
- 07MINOR6% royalty on near-zero profits creates additional cash flow burden on already-drowning unit economics
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.