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SBA Franchise Directory Broken Down (2023)
SBA Franchise Directory
IA lot of ads recently by franchisors say that they’re SBA-eligible. Essentially, the Small Business Administration says that it’s eligible for SBA loans without a set franchise, or even worse, SBA-approved. The SBA approved this franchise as a good business opportunity. In today’s video, we’re going to go through the importance of understanding what franchises are SBA-eligible. And how the SBA really determines the eligibility of a franchise.
Don't be seduced by a franchise ad that says the SBA approved this business opportunity. As if it was a direct endorsement from the Small Business Administration to that set franchise.
Essentially, all the SBA’s looking at is that there is a unique division between the franchisor and the franchisee. That it’s not a co-employment agreement or arrangement. And that these two entities aren’t operating together, essentially.
Small Business Administration (SBA) Loans
SBA loans are a popular choice for future franchisees. The SBA is a government institution that facilitates long-term loans at competitive rates. How it works is that the SBA doesn’t actually provide loans but instead guarantees a loan from a bank or credit union. This is an excellent option for someone with a low credit score who can’t get approved for a small business loan from a bank on their own.
There are two types of SBA loans: the SBA 7A and the SBA CDA/504 loan:
SBA 7A loans offer individuals up to $5 million with repayment terms ranging from 7 to 25 years. These loans can be used for multiple purposes depending on the terms and conditions of your loan including real estate to franchise fees. Like with most loans, the interest rates for these loans will depend on the amount and length of the loan.
The SBA CDA/504 loan is a collaborative effort, typically broken down into
- A nonprofit Certified Development Company (CDA) provides up to 40% of the amount needed by the franchisee.
- A bank or credit union provides up to 50% of the amount.
- The franchisee contributes the remainder of around 10%.
With an SBA CDA/504 loan, there are limitations to how the funding can be used. For example, you can’t use the loan to pay franchise fees.
While an SBA loan is easier to acquire than business loans from traditional lenders, it’s still a time-consuming process and requires the lender to have a decent credit score.
Most of the time, the franchise is going to be eligible for the 7A loan. You could use it to build out the location, and working capital, pay employees, and buy furniture and fixtures. Even the 504, which is generally used for real estate purchases, whether you’re developing your place of work with a franchise location from the ground up or if you are going to be buying an existing location, like a condo office.
Our work at Vetted Biz...
At Vetted Biz, we make it a lot easier for you. Every couple of weeks, the SBA is updating its directory. It’s a 20, 30-page PDF document that’s not easily sortable. At Vetted Biz, we’ve created a unique link. You can just go through it and see all the franchises that are SBA-eligible. And again, 90, 95% of the franchise brands are going to meet the criteria for an SBA loan. We have other videos that we’ve done with financial experts and financing specialists. If you’ve any doubt about the SBA loan process, I encourage you to take a look at some of those videos.
Franchises with the Highest Percentage of Defaults
Have you ever wondered what franchises default the most? Or which franchises might not be able to make enough to cover their loans? Below, we are going to look at the worst franchises.
This table lists the worst franchises by the number of franchises defaulting. Scroll down to see the franchises with the highest percentage of defaults.
| The name of the Franchise | Number of Franchises that defaulted |
|---|---|
| Dickey’s Barbecue Pit Dickey’s Barbecue Restaurants, Inc. sells franchises to operate under the name and mark “Dickey’s Barbecue Pit,” restaurants specializing in freshly prepared barbecue-style meats and other food products | 27 |
| Subway What started as a small sandwich restaurant called Pete’s Subway in Bridgeport, Connecticut is currently the world’s largest submarine sandwich chain. Today, there are more than 40,000 locations of the Subway Franchise around the world serving fresh, affordable, made-to-order sandwiches | 21 |
| Anytime Fitness It is a Minnesota-based fitness chain that offers access to one-on-one, small, and large group training in exchange for a membership fee. Anytime Fitness is the fourth largest fitness brand in the United States and currently has over 2,300 locations across the United States | 17 |
| Jimmy John’s Their franchises sell gourmet sandwiches and also offer fresh baked breads and other food and beverage products. It was founded in Atlanta, Georgia | 16 |
| Experimax Their franchises own and operate an Experimax store, which operates a retail business buying, selling, repairing, and refurbishing used cell phones, computers, tablets, and other electronic equipment | 14 |
| Which Wich Which Wich Superior Sandwiches is an American quick service restaurant specializing in sandwiches and salads | 12 |
| Window Genie Their franchises operate a business providing window cleaning, window tinting, and pressure washing as well as related ancillary services, such as gutter cleaning, gutter re-securing, concrete and paver cleaning and sealing, and house washing for the residential and commercial markets | 12 |
| Massage Envy Massage Envy Franchising LLC is an American massage and skin care national franchisor. They offer massage therapy, facials, skin peels, and Microderm infusion | 12 |
| Burgerim A Burgerim restaurant offers lunch and dinner menus for dine-in, take-out, or delivery. Burgerim is based in Encino, California | 12 |
| 9ROUND The 9Round fitness franchise is a specialized fitness center dedicated to serving clients who want a unique, fun, and proven workout that guarantees results | 12 |
| Edible Arrangements Their franchise sells sculpted fruit floral arrangements, floral bouquets, plush animals, popcorn, nuts, coffee, teas, gift baskets made with fresh fruit, chocolate-covered fruit, fruit smoothies, fruit salads, cookies, cheesecakes, and similar individual-serving-size baked goods, fruit and yogurt products, and other chocolate and fruit-related products | 12 |
| Firehouse Subs Firehouse Subs offers hot submarine-style sandwiches at affordable prices in a unique fire-fighting-themed atmosphere. Their popular menu items include the Barbecue Cuban Sub, Italian Sub, and Hook and Ladder Sub | 10 |
| Ilovekickboxing.com Franchises operate a single retail outlet providing fitness services to retail customers using designated or authorized workout procedures, methods and techniques | 10 |
| Meineke A Meineke automotive maintenance and repair center specializes in servicing exhaust and brake system components and providing certain other automotive maintenance and repair services | 9 |
| The Pita Pit Franchises operate a single retail establishment devoted to preparing and selling pita sandwiches | 8 |
| Fantastic Sams Their salons provide a full range of hair care products and services to men, women, and children | 8 |
| Fastsigns This is a business that specializes in selling, marketing, producing, installing, and repairing visual communications including signs (both non-electrical and electrical), related work involved in the maintenance, installation and de-installation of interior and exterior signage, etc. | 8 |
| The Grounds Guys Their franchises provide commercial, residential, and municipal property maintenance; landscaping and hardscaping services; snow and ice maintenance services; trash and debris removal; arboriculture services; lawn renovation; residential, commercial and, municipal turf care services; and other related services and products | 7 |
| Menchie’s Their stores offer for sale soft-serve frozen yogurt, ice cream, desserts, beverage items, and other related products | 7 |
| Snap Fitness Snap Fitness is a franchised gym that has been around since 2003. It promises “affordable, convenient, and high-quality fitness” to its members. However, it has consistently received complaints about its poor service and bad product | 7 |
| Mr. Appliance Their franchises install and repair appliances, sell used appliances, and clean dryer vents for residential and commercial customers | 7 |
