METHODOLOGY · hi-1.0.0
How the verdicts are computed
Every brand gets a categorical verdict — Proven & strong · Proven & steady · Showing strain · Distressed · Too new to judge · Not enough disclosure — computed from its own FDD Item 20 filing. Two rules make it honest. First, an evidence gate: a positive verdict must be earned with at least 50 franchised units, 3 disclosed years, and at least 25 franchised units at the start of that window. That last bar matters most — a system that grew from 3 units to 42 clears a units-today test on the strength of the growth itself, but its clean record describes how few units were exposed, not how many survived. Failures take years to surface (median SBA time-to-default is about 61 months), so a young system's clean record is arithmetic, not achievement, and it reads "Too new to judge," never "healthy." Second, hard flags outrank fundamentals: going-concern audit language, disclosed bankruptcies, and live distress signals cap or override the tier. Underneath, a numeric engine built from the factors below orders brands within tiers; it is internal and never displayed. We foreground exit quality, the signal most rankings underweight.
The factors under the verdict
Item 20 Table 1 + status tables
The core signal. Growth is credited in proportion to the base it was earned on — a system opening its 4th unit and one opening its 400th both show “+25%,” but only one is evidence — so above-average credit is scaled by base ÷ (base + 25). Decline is never scaled down for being small. Two or more consecutive years of net decline caps this factor outright.
Item 20 terminations vs. transfers
Our signature metric. Terminations + distressed “ceased operations” as a share of total exits — catches rot that healthy-looking transfer volume hides.
Item 20 Table 3
High churn means franchisees want out, even when sales look “healthy.”
Projected vs. actual openings (Table 5)
Chronic over-promising is a tell. Undisclosed projections render “Not Disclosed” — never imputed.
Item 19 disclosure + completeness
Whether the brand discloses financial performance and files complete tables.
Citability rules
- ▸ Every score links to its source filing and the specific Item it draws from.
- ▸ When a brand doesn't disclose (e.g. no Item 19), we say “Not Disclosed” — we never estimate or impute.
- ▸ Extractions below 70% confidence are flagged and held back, not published as fact.
- ▸ The formula is stable and versioned. When it changes, the version increments and history is retained.
Sources & records
Every dataset feeding a number on this site, with its citation, refresh cadence, and known limitation:
cards.web.commerce.state.mn.us, Franchise Registrations / Clean FDD, 2016–2026 · Rolling crawl; each brand's latest filing plus up to 3 spaced filings for trendlines
Registration-state visibility only: franchisors selling solely in non-registration states never appear in any public portal.
data.sba.gov FOIA 7(a) loan file (franchise-coded loans) · Quarterly file refresh
Charge-off rates computed over resolved loans only (charged-off + paid-in-full); current loans excluded.
CourtListener / RECAP (PACER mirrors) · Continuous monitoring
Only cases mirrored into RECAP are visible; absence of a docket is not absence of litigation.
California EDD WARN Act filings · As filed
CA-only feed today; other states' WARN feeds not yet ingested.
Named outlet cited on every event · Continuous
Events carry their outlet as the source; news reports are treated as signals, never as filings.
Coverage — stated honestly
The corpus currently holds real FDD extractions for 776 franchise systems (220,712 franchised units) — roughly 25.9% of the ~3,000 systems visible across US registration states. Nearly all of it is sourced from Minnesota's registry today, which skews the sample toward brands that register there; we publish that bias rather than paper over it. Coverage grows with every crawl, and cross-corpus findings live on the research page with per-study sample sizes attached.
Distress Index
A separate fast-layer composite (di-1.0.0) of live signals — bankruptcy filings, mass-closure announcements, franchisee litigation, SBA default rates, and foot-traffic decay — each weighted by severity and recency. It is independent of the verdict: a brand can rate well on fundamentals yet throw a distress flag. That contrast is the point. The Distress Index is live and explicitly not a citable annual figure.
FDD Risk Score
A fractional logit scorecard (unweighted), FDD + SBA loan-record features (v2), trained on the 309 systems with at least 5 resolved SBA 7(a)/504 loans. The label is each brand's observed charge-off rate over resolved loans; the inputs are figures the FDD itself discloses plus three drawn from the federal loan record behind its franchisees. The trained scorecard then scores all 569 systems with a real filing — including brands whose franchisees never borrow through SBA, which is the point: the FDD is public years before loan outcomes are.
Accuracy is reported cross-validated, never in-sample. Under 5-fold cross-validation, measured against the 136 brands whose own charge-off rate is itself reliable (≥30 resolved loans), Spearman rank correlation is 0.59 and mean absolute error is 4.8 percentage points. Across all 309 labels including very thin cohorts those figures are 0.37 and 8.8pp — lower mostly because a six-loan brand's own rate is itself uncertain by ±15pp, so it is a noisy yardstick rather than evidence the model is worse. Quintile calibration (modeled → observed): 5.7% → 6.9% · 9.6% → 11.7% · 12% → 14.2% · 15% → 18.4% · 23.3% → 27.4%.
Each brand also carries a confidence tier reflecting the evidence behind its score: 155 corroborated · 163 insufficient · 52 measured · 199 directional. Below the corroborated tier we publish a range rather than a number, because a thin loan cohort cannot support a two-digit claim.
| Feature | Coefficient (standardized) |
|---|---|
| Item 20 exit rate | +0.102 |
| Net unit growth | -0.133 |
| System size (log units) | -0.212 |
| No Item 19 disclosure | +0.003 |
| Royalty rate | -0.027 |
| Item 3 litigation (log) | -0.062 |
| Non-clean audit opinion | +0.089 |
| Investment ceiling (log) | -0.139 |
| Share financed by high-loss lenders | +0.348 |
| Single-lender dependence | -0.134 |
| Share of buyers who are first-time operators | +0.015 |
The score shown on brand pages is the percentile of the modeled charge-off rate across all scored systems, always displayed with its top drivers and, when a resolved cohort exists, the observed rate beside it. It is deliberately a linear scorecard, not a black box — every score decomposes into the disclosed figures that produced it. A score is context for reading the filing, not a substitute for it.
Editorial
Rankings are algorithmic and sourced. They are not for sale and are firewalled from any future referral or sponsorship layer. Corrections: every page links to its underlying filing; if a number is wrong, the filing is the arbiter.