Top 20 Franchise Investments to Avoid (2023)

Written by: Patrick Findaro
Last Updated by Rocio Somoza: March 6, 2023
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Buying and successfully running a franchise takes preparation and commitment. Educating yourself on the various franchises available in the market is pivotal for your personal and financial success. We atĀ Vetted Biz take pride in delivering you accessible data and information to make your entrepreneurial endeavors become a reality. We have also reviewed thousands of franchise loans from the past 10 years to identify the top 20 franchise investments you should avoid given their poor track record.

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Top 20 Franchise Investments to Avoid

We analyzed the loan data on more than 5,000 franchise brands to see which ones proved to be a major failure (and success!). By measuring how many franchise loans issued under the SBA 7(a) loan program were paid in full compared to how many were charged off (i.e. defaulted), we computed theirĀ SBA loan success ratio.

We have compiled an extensive list of the top worst 20 franchise investments by their SBA loan success ratio, many of which fail more often than they succeed!

20 Franchise Investments with the Lowest SBA Loan Success Ratios

Franchise Investments to Avoid

Paid-in-Full Rate

43.8%

Charged Off Rate

10:35

SBA Loan Success Ratio

On average, for every 10 loans paid in full including interest, there have been 35 charged off, unable to be paid back after default.

Franchise Investments to Avoid

17.3%

Paid-in-Full Rate

40.4%

Charged Off Rate

9:21

SBA Loan Success Ratio

On average, for every 9 loansĀ paid in full,Ā there have been 21Ā charged off,Ā unable to be paid back after default.

3- Embroidme

Franchise Investments to Avoid

16.2%

Paid-in-Full Rate

29.7%

Charged Off Rate

6:11

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 11Ā charged off,Ā unable to be paid back after default.

eat maid-rite
Franchise Investments to Avoid

7.7%

Paid-in-Full Rate

12.8%

Charged Off Rate

6:10

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 10Ā charged off,Ā unable to be paid back after default.

30.8%

Paid-in-Full Rate

53.8%

Charged Off Rate

4:7

SBA Loan Success Ratio

On average, for every 4 loansĀ paid in full,Ā there have been 7Ā charged off,Ā unable to be paid back after default.

Franchise Investments to Avoid

12.8%

Paid-in-Full Rate

15.4%

Charged Off Rate

5:6

SBA Loan Success Ratio

On average, for every 5 loansĀ paid in full,Ā there have been 6Ā charged off,Ā unable to be paid back after default.

Franchise Investments to Avoid

42.9%

Paid-in-Full Rate

42.2%

Charged Off Rate

6:6

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 6Ā charged off,Ā unable to be paid back after default.

Franchise Investments to Avoid

19.2%

Paid-in-Full Rate

19.2%

Charged Off Rate

5:5

SBA Loan Success Ratio

On average, for every 5 loansĀ paid in full,Ā there have been 5Ā charged off,Ā unable to be paid back after default.

Franchise Investments to Avoid

16.8%

Paid-in-Full Rate

14.9%

Charged Off Rate

17:15

SBA Loan Success Ratio

On average, for every 17 loansĀ paid in full,Ā there have been 15Ā charged off,Ā unable to be paid back after default.

flip flop shops

38.9%

Paid-in-Full Rate

33.3%

Charged Off Rate

7:6

SBA Loan Success Ratio

On average, for every 7 loansĀ paid in full,Ā there have been 6Ā charged off,Ā unable to be paid back after default.

meineke

19.4%

Paid-in-Full Rate

15.5%

Charged Off Rate

20:16

SBA Loan Success Ratio

On average, for every 20 loansĀ paid in full,Ā there have been 16Ā charged off,Ā unable to be paid back after default.

tutor doctor

14.7%

Paid-in-Full Rate

10.7%

Charged Off Rate

11:8

SBA Loan Success Ratio

On average, for every 11 loansĀ paid in full,Ā there have been 8Ā charged off,Ā unable to be paid back after default.

mr appliance

9.1%

Paid-in-Full Rate

6.5%

Charged Off Rate

7:5

SBA Loan Success Ratio

On average, for every 7 loansĀ paid in full,Ā there have been 5Ā charged off,Ā unable to be paid back after default.

patrice & associates

11.7%

Paid-in-Full Rate

8.3%

Charged Off Rate

7:5

SBA Loan Success Ratio

On average, for every 7 loansĀ paid in full,Ā there have been 5Ā charged off,Ā unable to be paid back after default.

orange leaf

32.2%

Paid-in-Full Rate

22%

Charged Off Rate

19:13

SBA Loan Success Ratio

On average, for every 19 loansĀ paid in full,Ā there have been 13Ā charged off,Ā unable to be paid back after default.

16- Automotive Technologies

54.4%

Paid-in-Full Rate

36.4%

Charged Off Rate

6:4

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 4Ā charged off,Ā unable to be paid back after default.

cell phone repair

28.6%

Paid-in-Full Rate

19%

Charged Off Rate

6:4

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 4Ā charged off,Ā unable to be paid back after default.

togo's

16.7%

Paid-in-Full Rate

11.1%

Charged Off Rate

6:4

SBA Loan Success Ratio

On average, for every 6 loansĀ paid in full,Ā there have been 4Ā charged off,Ā unable to be paid back after default.

fantastic sams

18.3%

Paid-in-Full Rate

11.5%

Charged Off Rate

19:12

SBA Loan Success Ratio

On average, for every 19 loansĀ paid in full,Ā there have been 12Ā charged off,Ā unable to be paid back after default.

arcpoint labs

25.6%

Paid-in-Full Rate

15.4%

Charged Off Rate

10:6

SBA Loan Success Ratio

On average, for every 10 loansĀ paid in full,Ā there have been 6Ā charged off,Ā unable to be paid back after default.

baja fresh

43.5%

Paid-in-Full Rate

26.1%

Charged Off Rate

10:6

SBA Loan Success Ratio

On average, for every 10 loansĀ paid in full,Ā there have been 6Ā charged off,Ā unable to be paid back after default.

Guidelines of Analysis

Paid-in-Full Counts (PIF Counts) are the loans that are fully paid off by the small business owner, including interest, indicating financial strength

Charged off Counts (CHGOFF Counts) are the loan counts that default where loans have no confidence in being paid off by the small business owners

Loan Success Ratios are ranked from ascending order (worst to best)

Analysis time frame: from 2010-2020 Q3

Beware of High Charged Off Rate

While you should avoid many of these franchise investments, many have paid-in-full loans. They are subsequently drawn back by large enough charged off counts. The data shows that a paid-in-full rate of 20% is challenging while sustaining a charged off rate that is below the 20% or 15% threshold. It leads to greater loan success and an ability to pay the loan back in full. It is important to do your due diligence and evaluate the business decision that best suits your personal and professional endeavors.

One Important MetricĀ 

Even with a poor loan success ratio, with the right location and operator, the business can be a success. It is important to review all the factors that will lead to your franchise’s success or failure.


We at Vetted Biz bring you the bottom franchises over the last 10 years with the lowest loan success ratios to help you properly execute your business plans and mitigate any risks involved for everyone in your franchise investments.


Loan Success Ratios

Loan success ratios are a good indicator of profitability over time and help potential franchise owners get familiar with how they stand within their industry. The higher the loan success ratio, the greater the franchisees’ ability to pay back their loan plus interest to the lenders. It is crucial for franchises to demonstrate an ability to pay back their loans. As a basic tool to remember moving forward in your entrepreneurial endeavors, avoid franchises that have a loan success ratio lower than 3:1.

Analysis Provided By: Alex Bourhas, Data Analyst, Vetted Biz Intern

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