25 Worst Franchises to Buy

25 Worst Franchises to Buy
Submitted by Mr. Blue MauMau on Sat, 2009/01/24 - 08:35


LEXINGTON, Ky. (Blue MauMau) - Sub shops, car care and quick printers dominate the list of worst franchises to buy, according to a Small Business Administration list given to lenders.

Blue MauMau once again gained access to this banking list and is publishing it to help inform franchise investment decisions. Taken straight from an SBA's loan performance list covering the years from 2000 to 2007, this is the list that the agency provides loan officers of its most trusted lenders and banks throughout the country.

This is how the list is used. It is a quick filter of loan risk, of what franchise brands to navigate around and what looks less risky. For example, with a 48% failure rate on SBA loans, Mr. Goodcents Sub has the dubious honor of being at the top of worst investments. Compare the 48% to another sub chain, Subway's, which had only 4% failures out of 1,974 disbursed loans.

The good news for Quiznos is that it didn't make the worst 25 list. However, it was #26, worthy of a dishonorable mention. Blimpie, a sub maker that belongs to Kahala Corp's group of franchising firms, ranked considerably worse at #5.

The loan officer and the franchise buyer realize that there are thousands of franchise opportunities to buy from, so why mess with the riskiest? Unless there is a miraculous reason why concepts with high failure rates are a great investment, the franchise buyer may want to move to other brands with lower failure rates.

Each franchise brand listed has Small Business Association loans with at least 51 disbursements, a substantial number. Having larger figures for the disbursement of loans filters out most of the small franchise systems. What is left is largely major franchise brands with the worst failure rates of nearly 115 big brand concepts.

These are the worst franchise brands, where franchise owners struggled more than others to pay back their SBA loans. To put it another way, this group is the lowest performing quintile (20%) by loan failure rate of major franchise brands in the SBA list.

So here it is: The list of 25 of the worst franchise investments, ranked from worst to bad, from the viewpoint of being a lender of SBA loans and wanting to ensure the best chance of having the loan repaid by franchisee borrowers.

Click HERE to view the list/online article.