Which Franchises Have the Highest SBA Loan Default Rates?
We analyzed 89,000 SBA 7(a) loans across 5,700+ franchise systems. Here's what we found.
Last updated: March 2024 · Data: SBA 7(a) loan performance records, 2010–2024
Key Findings
Highest SBA Default Rates
Franchise systems with the highest loan charge-off rates. Minimum 50 SBA 7(a) loans.
| Rank | Franchise | Default Rate | Total Loans |
|---|---|---|---|
| 1 | Quiznos | 28.9% | 412 |
| 2 | Sbarro | 24.1% | 89 |
| 3 | Curves | 19.3% | 1,243 |
| 4 | Cold Stone Creamery | 16.8% | 387 |
| 5 | Subway | 12.0% | 8,941 |
| 6 | Great Clips | 11.2% | 1,567 |
| 7 | Fantastic Sams | 10.3% | 298 |
| 8 | Marble Slab Creamery | 9.8% | 112 |
| 9 | Baskin-Robbins | 9.1% | 876 |
| 10 | Checkers/Rally's | 8.7% | 234 |
Lowest SBA Default Rates
Franchise systems with the strongest loan performance. These brands have the lowest charge-off rates in the SBA database.
| Rank | Franchise | Default Rate | Total Loans |
|---|---|---|---|
| 1 | RE/MAX | 0.9% | 2,341 |
| 2 | Keller Williams | 1.2% | 1,876 |
| 3 | Five Guys | 1.8% | 534 |
| 4 | Anytime Fitness | 2.0% | 2,109 |
| 5 | Orangetheory Fitness | 2.1% | 687 |
| 6 | Ace Hardware | 2.3% | 1,456 |
| 7 | Sport Clips | 2.8% | 892 |
| 8 | The Maids | 3.2% | 167 |
| 9 | Snap-on Tools | 3.4% | 543 |
| 10 | ServiceMaster | 3.7% | 1,098 |
Default Rates by Industry Category
Methodology
Data sourced from SBA 7(a) loan performance records, 2010–2024. Default is defined as a loan charge-off or SBA loss claim. Only franchise systems with a minimum of 50 loans are included to ensure statistical significance.
Franchise names are matched to SBA borrower records using a combination of exact name matching, NAICS code cross-referencing, and manual verification for the top 500 systems. The database covers 89,000 individual loan records across 5,700+ identified franchise brands.
Default rates reflect historical performance and should not be interpreted as predictions of future performance. Economic conditions, franchise system changes, and individual operator factors all influence outcomes.
What This Means for Franchise Buyers
SBA default rates are one of the most underused tools in franchise due diligence. While most prospective franchisees focus on the franchise fee, royalty rate, and Item 19 earnings claims, default rates tell you something those numbers can't: how often real operators, using real SBA financing, fail to repay their loans. A high default rate doesn't automatically mean a franchise is a bad investment — but it should trigger deeper investigation into why borrowers struggled.
Use default rates as a screening filter, not a verdict. A rate above 8% should prompt caution: cross-reference it with the franchise's Item 20 turnover data, look at litigation history in Item 3, and talk to current and former franchisees. A rate above 15% is a serious red flag — it means roughly 1 in 7 borrowers defaulted, and the franchise system likely has structural issues with unit economics, site selection, or operational support. Conversely, a low default rate (under 3%) is a strong signal that the franchise model works for operators who use conventional financing.
Remember: SBA lenders perform their own underwriting before approving loans. A high default rate means that even after bank-level due diligence, operators still failed. That's a signal worth taking seriously. Combine SBA data with Item 19 financial performance data and your own franchisee validation calls for the most complete picture of franchise risk.
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