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Best and Worst Franchise Default Rates: Popular Franchises and How They Measure Up with Failure and Success Rates

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

Date: 04/23/2010 | Category: Buy a Franchise | No comments

In a recent article by Catherine Clifford at CNN Money‚ Ms. Clifford reports the most popular franchise brands over the past decade and the rate by which their franchisees repaid their Small Business Administration loan obligations.  Significantly‚ prospective franchisees should evaluate this list and give consideration to the “default rate” by which each brands failed to repay their SBA loan obligations.  Failed SBA loan repayment equals a failed business and some franchisee hardship.

Some of these default rates should be raising a red flag – the list follows:

  • Subway

Reported SBA Default Rate: 7%
Reported Number of SBA Loans: 2‚292
Reported Total Amount Dispersed: $391.8 million
Reported Average Loan Size: $170‚928

  • Quiznos

Reported SBA Default Rate: 25%
Reported Number of SBA Loans: 2‚019
Reported Total Amount Dispersed: $291.7 million
Reported Average Loan Size: $144‚458

  • The UPS Store

Reported SBA Default Rate: 12%
Reported Number of SBA Loans: 1‚085
Reported Total Amount Dispersed: $159.4 million
Reported Average Loan Size: $146‚943

  • Cold Stone Creamery

Reported SBA Default Rate: 31%
Reported Number of SBA Loans: 774
Reported Total Amount Dispersed: $180.9 million
Reported Average Loan Size: $233‚687

  • Dairy Queen

Reported SBA Default Rate: 8%
Reported Number of SBA Loans: 478
Reported Total Amount Dispersed: $157 million
Reported Average Loan Size: $328‚383

  • Dunkin' Donuts

Reported SBA Default Rate: 8%
Reported Number of SBA Loans: 464
Reported Total Amount Dispersed: $270.4 million
Reported Average Loan Size: $582‚726

  • Super 8 Motel

Reported SBA Default Rate: 4%
Reported Number of SBA Loans: 456
Reported Total Amount Dispersed: $415.2
Reported Average Loan Size: $910‚476

  • Days Inn

Reported SBA Default Rate: 6%
Reported Number of SBA Loans: 390
Reported Total Amount Dispersed: $399.2
Reported Average Loan Size: $1‚023‚690

  • Curves For Women

Reported SBA Default Rate: 16%
Reported Number of SBA Loans: 371
Reported Total Amount Dispersed: $36.4
Reported Average Loan Size: $98‚094

  • Matco Tools

Reported SBA Default Rate: 36%
Reported Number of SBA Loans: 321
Reported Total Amount Dispersed: $28.9
Reported Average Loan Size: $90‚131

Learn More and Increase Your Chances of Franchise Success

To learn more about franchising‚ what it means to become a franchisee‚ how to negotiate your franchise agreement and critical mistakes that you must avoid:

  1. Order a complementary copy of Charles N. Internicola‚ Esq.'s book "An Entrepreneurs Guide to Buying a Franchise"; and 
  2. Visit Franchisee University and watch our complimentary videos about buying a franchise.

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