Question 1

What is the average franchise failure rate?

Accepted Answer

Based on SBA loan default data across 2,400+ franchise brands, the average SBA default rate is approximately 8-10%. The estimated 5-year business failure rate is 15-20%, significantly lower than the ~50% rate for independent small businesses.

Question 2

Which franchise industries have the highest failure rates?

Accepted Answer

Cleaning/Janitorial franchises have the highest average SBA default rate at 16.2%, followed by Staffing (12.1%) and Technology (11.5%). However, these averages vary enormously by individual brand.

Question 3

What is the SBA loan default rate for franchises?

Accepted Answer

SBA franchise loan default rates vary by brand from 0% to 100%. The overall average across all tracked brands is approximately 8-10%. A default means the borrower had trouble repaying their SBA loan, not necessarily that the business closed.

Question 4

How many franchise brands have failure rate data?

Accepted Answer

FranchiseIQ tracks failure indicators (SBA default rates, unit growth trends, closure data) for 2,800+ franchise brands across 20 industry categories, sourced from FDD filings and SBA loan performance data.

Question 5

What does a 100% SBA default rate mean?

Accepted Answer

A 100% SBA default rate means every SBA loan issued to franchisees of that brand has defaulted. This is an extreme red flag. However, some brands have very few SBA loans, so a small sample size can skew this metric. Always check the total number of loans alongside the default rate.