If you a thinking about buying a franchise you must read this article and the links below. There is no more important piece of information that can help you compare franchise opportunities then the SBA’s elusive list of franchise default rates.
Let me explain. If you knew that seven out of ten people who bought a franchise from a particular franchisor that you were considering, defaulted on their SBA bank loan would you reconsider? Conversely, if only one out of thirty people who bought a franchise from a particular franchisor defaulted on their SBA loan would you feel better about your chances? Of course you would.
Well, that information is available online and the results may shock you. Many well known franchise brands regularly show that more than 50% of the franchises they sold to franchisees defaulted on their SBA loans- and probably went out of business.
Does that mean that every franchisee that bought one of those poor performing franchises failed? No, but it shows a trend and raised a red flag that needs to be thoroughly investigated by any potential buyer.
My advice to a anyone considering buying a new or resale franchise offering? Check out these default rate lists below or several others that you can google online. Then consider playing the odds. It’s your hard earn money. If it were mine, I’d play the odds and go for the franchises with the lowest default rates and instead focus on those with the best odds.