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Worst 20 Franchises in the SBA Franchise Directory
Written by: Patrick Findaro
Contents
Top 20 Franchise Investments to Avoid
Buying and successfully running a franchise takes preparation and commitment . Educating yourself on the various franchises available in the market is pivotal for your personal and financial success.
We at Vetted Biz take pride in delivering you accessible data and information to make your entrepreneurial endeavors become a reality. In addition, we reviewed thousands of franchise loans from the past 10 years to identify 20 franchises you should avoid given their poor track record.
We analyzed the loan data on more than 2,000 franchise brands to see which ones proved to be a major failure (and success!). By measuring how many franchise loans issued under the SBA 7(a) loan program were paid in full compared to how many were charged off (i.e. defaulted), we computed their SBA loan success ratio.
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We have compiled an extensive list of the worst 20 franchises by their SBA loan success ratio, many of which fail more often than they succeed!
The Bottom 20 Franchises with the Lowest SBA Loan Success Ratios:
Experimac
Paid-in-Full-Rate
43.8%
Charged Off Rate
10:35
SBA Loan Success Ratio
On average, for every 10 loans paid-in-full including interest, there have been 35 charged off, unable to be paid back after default
Dental Fix Rx
17.3%
Paid-in-Full-Rate
40.4%%
Charged Off Rate
9:21
SBA Loan Success Ratio
On average, for every 9 loans paid-in-full, there have been 21 charged off, unable to be paid back after default
Embroidme
16.2%
Paid-in-Full-Rate
29.7%
Charged Off Rate
6:11
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 11 charged off, unable to be paid back after default
Maid-Rite Sandwich Shop
30.8%
Paid-in-Full-Rate
53.8%
Charged Off Rate
4:7
SBA Loan Success Ratio
On average, for every 4 loans paid-in-full, there have been 7 charged off, unable to be paid back after default
Window Genie
7.7%
Paid-in-Full-Rate
12.8%
Charged Off Rate
6:10
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 10 charged off, unable to be paid back after default
Glass Doctor
12.8%
Paid-in-Full-Rate
15.4%
Charged Off Rate
5:6
SBA Loan Success Ratio
On average, for every 5 loans paid-in-full, there have been 6 charged off, unable to be paid back after default
Extreme Pita
42.9%
Paid-in-Full-Rate
42.2%
Charged Off Rate
6:6
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 6 charged off, unable to be paid back after default
Tom and Chee
19.2%
Paid-in-Full-Rate
19.2%
Charged Off Rate
5:5
SBA Loan Success Ratio
On average, for every 5 loans paid-in-full, there have been 5 charged off, unable to be paid back after default
Signarama
16.8%
Paid-in-Full-Rate
14.9%
Charged Off Rate
17:15
SBA Loan Success Ratio
On average, for every 17 loans paid-in-full, there have been 15 charged off, unable to be paid back after default
Flip Flop Shops
38.9%
Paid-in-Full-Rate
33.3%
Charged Off Rate
7:6
SBA Loan Success Ratio
On average, for every 7 loans paid-in-full, there have been 6 charged off, unable to be paid back after default
Meineke
19.4%
Paid-in-Full-Rate
15.5%
Charged Off Rate
20:16
SBA Loan Success Ratio
On average, for every 20 loans paid-in-full, there have been 16 charged off, unable to be paid back after default
Tutor Doctor
14.7%
Paid-in-Full-Rate
10.7%
Charged Off Rate
11:8
SBA Loan Success Ratio
On average, for every 11 loans paid-in-full, there have been 8 charged off, unable to be paid back after default
Mr. Appliance
9.1%
Paid-in-Full-Rate
6.5%
Charged Off Rate
7:5
SBA Loan Success Ratio
On average, for every 7 loans paid-in-full, there have been 5 charged off, unable to be paid back after default
Patrice & Associates
11.7%
Paid-in-Full-Rate
8.3%
Charged Off Rate
7:5
SBA Loan Success Ratio
On average, for every 7 loans paid-in-full, there have been 5 charged off, unable to be paid back after default
Orange Leaf Frozen Yogurt
32.2%
Paid-in-Full-Rate
22%
Charged Off Rate
19:13
SBA Loan Success Ratio
On average, for every 19 loans paid-in-full, there have been 13 charged off, unable to be paid back after default
Automotive Technologies
54.4%
Paid-in-Full-Rate
36.4%
Charged Off Rate
6:4
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 4 charged off, unable to be paid back after default
CPR-Cell Phone Repair
28.6%
Paid-in-Full-Rate
19%
Charged Off Rate
6:4
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 4 charged off, unable to be paid back after default
Togo’s
16.7%
Paid-in-Full-Rate
11.1%
Charged Off Rate
6:4
SBA Loan Success Ratio
On average, for every 6 loans paid-in-full, there have been 4 charged off, unable to be paid back after default
Fantastic Sams
18.3%
Paid-in-Full-Rate
11.5%
Charged Off Rate
19:12
SBA Loan Success Ratio
On average, for every 19 loans paid-in-full, there have been 12 charged off, unable to be paid back after default
T20. Arcpoint
25.6%
Paid-in-Full-Rate
15.4%
Charged Off Rate
10:6
SBA Loan Success Ratio
On average, for every 10 loans paid-in-full, there have been 6 charged off, unable to be paid back after default
T20. Baja Fresh Mexican Grill
43.5%
Paid-in-Full-Rate
26.1%
Charged Off Rate
10:6
SBA Loan Success Ratio
On average, for every 10 loans paid-in-full, there have been 6 charged off, unable to be paid back after default
Guidelines of Analysis:
- Paid-in-full Counts (PIF Counts) are the loan is fully paid off by the small business owner including interest, indicating financial strength
- Charged off Counts (CHGOFF Counts) are the loan counts that default where loans have no confidence in being paid off by the small business owners
- Loan Success Ratios are ranked from ascending order (worst to best)
- Analysis time frame: Between 2010-2020 Q3
Beware of High Charged Off Rate
Although, many of these franchises have many paid-in-full loans, they are subsequently drawn back by large enough charged off counts. The data shows that a paid in full rate of 20% is challenging while sustaining a charged off rate that is below the 20% or 15% threshold leads to greater loan success and an ability for the loan to be paid back in full.
A well, It is important to do your due diligence and evaluate the business decision that best suits your personal and professional endeavours.
One Important Metric
Even with a poor loan success ratio, with the right location and operator the business can be a success. It is important to review all the factors that will lead to your franchise’s success or failure.
This is why we at Vetted Biz bring to you the bottom franchises over the last 10 years with the lowest loan success ratios in order to properly execute your business plans and mitigate any risks involved for everyone in your franchise investments.
Loan Success Ratios
Loan Success ratios are a good indicator of profitability over time and even help existing or potential franchise owners get familiar with how they stand within their industry. The higher the loan success ratio the greater the franchisees ability to pay back their loan plus interest to the lenders. It is crucial for franchises to demonstrate an ability to pay back their loans.
As a basic tool to remember moving forward in your entrepreneurial endeavours AVOID franchises that have a loan success ratio lower than 3:1.
Analysis Provided By: Alex Bourhas, Data Analyst, Vetted Biz Intern
