Verified — real FDD extraction
SBA-eligible · directory code S8150 since 2025
The Hot Spot
Other · independent · est. —
The Hot Spot is a small-footprint consumer services franchise operated from a local storefront. A franchisee runs a single location with a small staff, serving walk-in customers in the surrounding trade area.
The Hot Spot net unit count grew +766.7% from 2023–2025 per its FDD Item 20.
New to franchising? Start here
A franchise is a business where you (the franchisee) pay a company (the franchisor) for the right to open and run a location using their brand and system — think a local Anytime Fitness or Taco John's owned by a small-business owner, not the corporation.
Before you can buy in, U.S. law requires the franchisor to give you a Franchise Disclosure Document (FDD) — a long legal filing covering its fees, finances, and history. The numbers on this page come straight from that document:
- Franchise fee — the one-time cost to buy in.
- Royalty — the ongoing cut of your sales you pay the franchisor.
- Item 20 — how many locations opened and closed, the basis for our verdict (from Proven & strong down to Distressed — or Too new to judge).
The verdict
Too new to judge
Distress
23 franchised units over 3 disclosed years is not a track record — systems this early have realized only a fraction of their eventual failures. Judge the disclosures, not a verdict.
Exit rate · latest year
0.0%
fiscal 2025, per Item 20
Cost to open
$83K–$156K
Item 7 total investment range
SBA loan defaults
Too few resolved
5 loans exist; too few resolved to rate
Behind the verdict
the record, factor by factor · Item 20
3-yr trend · Item 20 Table 1
terminations + ceased-ops vs. all exits · Table 3
transfers vs. base · Table 3
actual vs. projected openings · Table 5
Item 19 disclosure + completeness
Systemwide units
2023–2025
Survival record
FDD Item 20 · outlet status by year
In fiscal 2025, 0 of 6 franchised outlets left the system — a 0.0% annualized exit rate. Not every exit is a failure — but this is the measurable floor.
Show the outlet tables ↓Hide the evidence ↑
| Status (FTC) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Outlets at start | 3 | 3 | 9 |
| Opened | 0 | 6 | 17 |
| Transfers | 0 | 0 | 0 |
| Terminations | 0 | 0 | 0 |
| Non-renewals | 0 | 0 | 0 |
| Reacquired by franchisor | 0 | 0 | 0 |
| Ceased — other reasons | 0 | 0 | 0 |
| Outlets at end | 3 | 9 | 26 |
| Net change | 0 | +6 | +17 |
The lender's view
SBA 7(a)/504 loan performance · FY1991–present
Banks have made 5 SBA-backed loans to The Hot Spot franchisees since 2025. Most are still open, so there is not yet a resolved cohort large enough to rate.
—
0 resolved · too thin to rate
—
avg. charged-off $ ÷ approved $
—
default rate × loss severity
$138,200
what recent franchisees borrowed
—
approval → charge-off, defaulted loans
—
distinct banks lending
Charge-off rate by loan approval year (%)
SOURCE: SBA 7(a)/504 FOIA LOAN DATA (DATA.SBA.GOV), FY1991–PRESENT · MATCHED TO THE HOT SPOT BY FRANCHISE NAME · RESOLVED = CHARGED-OFF + PAID-IN-FULL
What it costs — and what it drags
FDD Items 5–7 · fees, investment, royalty
Buying in means a $40K franchise fee (Item 5) and a total investment of $83K–$156K (Item 7). The franchisor publishes an earnings claim (Item 19) — read its methodology closely.
To open (Item 7)
$83K–$156K
all-in investment range
Franchise fee (Item 5)
$40K
upfront, one-time
Royalty (Item 6)
5%
of sales, ongoing
Your figure — cross-check against this brand's Item 19 and current-owner validation.
Royalty you'd pay / yr
$50K
5% of sales, before profit
Over a 10-yr term
$500K
royalties alone, excl. ad fund
This is not profit. It's the only money the FDD actually pins down — what you put in, and the royalty you owe on every dollar of sales. Your real take-home depends on labor, rent, food cost, and ramp-to-breakeven, none of which any FDD discloses.
Build a real pro-forma for The Hot Spot with an independent CPALabor record
US Dept. of Labor enforcement · franchisee-level · FY2005–present
Federal investigators have concluded 2 wage cases against operators of this system, recovering $1K in back wages for 3 workers. These cases name franchisee-owned locations, not the franchisor itself.
Concluded cases
2
Back wages owed
$1K
Employees affected
3
Since 2020
0
Read this carefully. The employers in these cases are individual The Hot Spot franchisees — separately owned businesses operating under the brand name — not The Hot Spot itself. The franchisor is not the respondent and in most cases is not a party. What the record shows is how this system's operators run their payrolls, which is worth knowing before you become one of them. Counts rise with system size and with age: a 20-year-old, 10,000-unit system will out-count a young one regardless of conduct. Source: DOL Wage and Hour Division concluded compliance actions, FY2005–present, most recent finding 2013.
Distress signals
news-sourced · bankruptcies, closures, lawsuits
No recent closures, bankruptcies, or major lawsuits found in the news for The Hot Spot. That's a good sign — but it reflects news coverage, not a guarantee.
A broker is paid by the franchisor to place you. An independent CPA is paid by you — and the job is pressure-testing The Hot Spot's numbers, including talking you out of a bad deal.
Talk to an independent CPA before you buy →The Hot Spot franchise questions, answered from the filings
What percentage of The Hot Spot franchises closed last year?
In The Hot Spot's latest FDD Item 20 (fiscal 2025), 0 of 6 franchised outlets left the system — an annualized exit rate of 0.0%. That counts terminations, non-renewals, and "ceased operations — other reasons." There is no official failure rate, and not every exit is a failure, but this is the measurable floor.
How much does a The Hot Spot franchise cost?
Per The Hot Spot's 2026 FDD, buying in requires an initial franchise fee of $40K (Item 5) and a total initial investment of $83K–$156K (Item 7).
What royalty does The Hot Spot charge?
The Hot Spot charges an ongoing royalty of 5.0% of gross sales, per Item 6 of its 2026 FDD.
Does The Hot Spot disclose earnings (Item 19)?
Yes — The Hot Spot makes a financial performance representation in Item 19 of its 2026 FDD. Read it closely: franchisors choose which units and which metrics to include.