Question 1

How is franchise risk calculated?

Accepted Answer

FranchiseIQ rates each franchise on a 0-100 risk scale using five data-driven factors: SBA loan default rates, unit growth trends, Item 19 financial disclosure transparency, distress signal analysis, and cash-on-cash return. Scores are converted to letter grades (A through F) for easy comparison.

Question 2

What is a good franchise risk score?

Accepted Answer

A risk score of 75+ (Grade A) indicates low risk — the franchise has strong fundamentals: low SBA defaults, growing units, transparent financials, and good returns. Scores of 60-74 (Grade B) are moderate-low risk. Below 45 (Grade D or F) signals elevated risk that warrants careful due diligence.

Question 3

What does SBA default rate tell you about a franchise?

Accepted Answer

The SBA loan default rate shows what percentage of franchisees who borrowed through SBA loans failed to repay. A rate below 5% suggests the business model supports debt service. A rate above 15% is a red flag — franchisees may be struggling with profitability, high costs, or weak demand.

Question 4

How many franchise brands have risk scores?

Accepted Answer

FranchiseIQ computes risk scores for 5,800+ franchise brands using data from FDD filings, SBA loan performance records, and longitudinal unit tracking. This is the largest free franchise risk database available.

Question 5

What are the riskiest franchise industries?

Accepted Answer

Based on SBA default data and unit growth trends, the highest-risk franchise industries typically include cleaning/janitorial services, staffing agencies, and technology services. However, risk varies enormously between individual brands within any industry — always check the brand-specific score.