Top 20 Franchise Investments To Avoid

Top 20 Franchise Investments To Avoid

Top 20 Franchise Investments To Avoid

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 at Vetted Biz take pride in delivering you accessible data and information to make your entrepreneurial endeavors become a reality. We reviewed thousands of franchise loans from the past 10 years to identify 20 franchises you should avoid given their poor track record.

We analyzed the loan data on more than 2,000 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 their SBA loan success ratio.

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

The Bottom 20 franchises with the lowest SBA loan success ratios:

Experimac

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

Dental Fix Rx

17.3%

Paid-in-Full-Rate

40.4%%

Charged Off Rate

9:21

SBA Loan Success Ratio

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

 

Embroidme

16.2%

Paid-in-Full-Rate

29.7%

Charged Off Rate

6:11

SBA Loan Success Ratio

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

 

Maid-Rite Sandwich Shop

30.8%

Paid-in-Full-Rate

53.8%

Charged Off Rate

4:7

SBA Loan Success Ratio

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

 

Window Genie

7.7%

Paid-in-Full-Rate

12.8%

Charged Off Rate

6:10

SBA Loan Success Ratio

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

 

Glass Doctor

12.8%

Paid-in-Full-Rate

15.4%

Charged Off Rate

5:6

SBA Loan Success Ratio

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

 

Extreme Pita

42.9%

Paid-in-Full-Rate

42.2%

Charged Off Rate

6:6

SBA Loan Success Ratio

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

 

Tom and Chee

19.2%

Paid-in-Full-Rate

19.2%

Charged Off Rate

5:5

SBA Loan Success Ratio

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

 

Signarama

16.8%

Paid-in-Full-Rate

14.9%

Charged Off Rate

17:15

SBA Loan Success Ratio

On average, for every 17 loans paid-in-full, there have been 15 charged off, 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 loans paid-in-full, there have been 6 charged off, 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 loans paid-in-full, there have been 16 charged off, 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 loans paid-in-full, there have been 8 charged off, 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 loans paid-in-full, there have been 5 charged off, 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 loans paid-in-full, there have been 5 charged off, unable to be paid back after default

 

 Orange Leaf Frozen Yogurt

32.2%

Paid-in-Full-Rate

22%

Charged Off Rate

19:13

SBA Loan Success Ratio

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

 

 Automotive Technologies

54.4%

Paid-in-Full-Rate

36.4%

Charged Off Rate

6:4

SBA Loan Success Ratio

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

 

 CPR-Cell Phone Repair

28.6%

Paid-in-Full-Rate

19%

Charged Off Rate

6:4

SBA Loan Success Ratio

On average, for every 6 loans paid-in-full, there have been 4 charged off, 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 loans paid-in-full, there have been 4 charged off, 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 loans paid-in-full, there have been 12 charged off, unable to be paid back after default

 

Arcpoint

25.6%

Paid-in-Full-Rate

15.4%

Charged Off Rate

10:6

SBA Loan Success Ratio

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

 

Baja Fresh Mexican Grill

43.5%

Paid-in-Full-Rate

26.1%

Charged Off Rate

10:6

SBA Loan Success Ratio

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

 

Guidelines of Analysis: 

  • Paid-in-full Counts (PIF Counts) are the loan is 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: Between 2010-2020 Q3

Beware of High Charged Off Rate

Although, many of these franchises have many 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 leads to greater loan success and an ability for the loan to be paid back in full.  It is important to do your due diligence and evaluate the business decision that best suits your personal and professional endeavours.

One Important Metric 

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. This is why we at Vetted Biz bring to you the bottom franchises over the last 10 years with the lowest loan success ratios in order to 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 even help existing or 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 endeavours 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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