WORST FRANCHISES IN AMERICA by SBA Loan Defaults

24 thoughts on “WORST FRANCHISES IN AMERICA by SBA Loan Defaults”

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• I have owned a Hunrtington Learning Center franchise for the past 2.5 yrs. I started from zero and expect to have a net profit after taxes and interest over $100K this calendar year.
  I have operated two non frachise businesses over the past 25 yrs and therefore came to the Huntington system with signigicant business experience.
  A Huntington franchise does present a few challenges that other businesses do not. Four challenges stick out in particular:
  1. The business revenue is highly season. Virtually all of the annual income is arned in the first and second quarters.
  2. A majority of the tuition revenue is prepaid at the start of the program and so it is easy to confuse earned and unearned revenue. The fact that the costs associated with the prepaid tuition will incurred over the following 3 to 5 months makes it difficult to predict future monthly cash flow and more importantly can result in negative cash flows in low revenue months that can exceed fixed costs.
  3. Selection of Center Management staff is more difficult as the ideal center director must possess skills in education and in sales, an uncommon skill set. The ideal director has an degree in education and an extraverted personality with the ability to close a sale that typically is in the $6,000 to $8,000 range.
  4. This is not a business for parents of young children. The hours of operation when the owner needs to be at the center are from 11AM to 7:30 or 8:30PM. This is not a business that can be run as an absentee owner, at least not for the first 3 or 4 years.

  These issues can be overcome and centers that do overcome these issues are quite profitable with net operating incomes over $200,000 per year.

  The educational product that Huntington offers is outstanding. In the short time period that I have been a franchisee, I have had several parents come back to visit the center following the conclusion of their child’s program, to say that it was “the best money they ever spent” and that their child has become very successful in school.

  The exam prep program also has outstanding results and our center averages a 270 point increase in SAT scores which is phenomenal. Parents and students are thrilled with the results.

  I hope this comment may be useful for individuals considering a Huntington franchise. It has it’s challenges but when done properly with good business sense, it is an enjoyable and rewarding business to own and operate.

• A question for anonymous. So, if Huntington is such a great opportunity why does the SBA loan administration have to hand out government backed tax payer loans to put their franchisees in business? Why don’t they take the profit from the franchises that are giving them profits and reinvest it back into their business opportunity? I’ll answer that one for you! Because when you can get free money for blue sky and profit from it and you have an organization like the International Franchise Association and its created organizations to back and perpetuate the fleecing of American taxpayers why use your money which might be lost to the fraudulent opportunity you offer?

• Some rogue franchise operations do not use the franchise business name in the SBA loan process. They use some other business identities and SBA cannot trace the failures back to these franchises. Note that SBA does not monitor success but failures only.
  For example, Discovery Point Franchising uses Discovery Development as the business entity in SBA loans. Similarly Legacy Academy Franchising uses Commercial Contractors Enterprises in the SBA loan documents. However, during the loan courtship, the franchise name gets used as proven business model for the SBA loan evaluation.
  Since the final documents are not linked to SBA data, the failures do not get recorded against the franchises. Franchise registry or other databases monitors failures, and these franchises get a favorable treatment because statistically these franchises have no failure records.
  These childcare franchises provide the business for free when the franchisee purchases $2.5M+ building from the franchise owners. FDD and SBA registry are shown as clean and both franchise officials and SBA loan officers claim that the business model is excellent because there had been no failures in the past.
  ————-
  Comment by Anonymous on Huntington is based on imagination because so many Huntington franchisees have gone bankrupt. HLC has a proven path towards bankruptcy for franchisees. Hopefully new franchisees will not fall for those misleading information.

• The high failure rate franchises are still in the SBA favor list called SBA registry. HLC has nearly 50% failure rate and SBA is still encouraging that franchise by allowing loans and advertising them in SBA registry. Does not make sense.

• Surely there has to be a reason why our government officials are allowing tax payers to fund these franchisor opportunities instead of the franchisors themselves. If the franchisors have such a great opportunity then why do they need tax payers to fund start-up costs? You would think that these successful franchisors with a proven system would be cashing in on the financing of the franchises they sell as well as providing them with the tools (product) to be successful. There is no way main stream media would allow tax payers to bare the burden of fraud. Reputable magazines like Forbes and Fortune would NEVER allow tax payers to promote something that is a scam and does not promote growth or jobs. They would surely EXPOSE this industry if it was PROMOTING FRAUD. Wouldn’t they?

• anonymous,

  It makes absolute sense! The coalition forces within the confounds of franchise organizations, attorneys, government organizations and political officials have spoken. It makes perfect sense!

• Unhappy,

  Is there any way you can tell us how many of these franchisors listed are members of the International Franchise Association? As well as the IFA’s created organization called Vetfran? I think that would only be fair to the IFA as they and the FTC (Federal Trade Commission) seem to work together for the greater good of franchising. Surely none of the franchisors listed above are members of the IFA and Vetfran. Our political officials who serve the people would surely step in or those who issue membership’s would surely revoke these franchisor’s memberships as not to mislead the investors with F.D.D.’s approved by the FTC.

  Maybe the organization called the International Franchise Association accepts ANY franchisor as long as they contribute to FranPac. FranPac is an organization which legally (A grey area to control the people) takes donated money from franchisors and contributes it to campaign officials who might be swayed to vote their way. Bribes? Does it work? Why don’t you go to the IFA website and see how the money dispersed to public officials helps their agenda. How they even brag on the internet to its coalition forces

  Why are American’s the target of fraud in our government instead of the target of support? Was our constitution drafted to empower our leaders? Was our constitution drafted to make us slaves to our government? Was our Constitution drafted so the wealthy can fraud the people of the United States into buying fruitless franchises?

  There are some big name franchisors on this list and I challenge some of these failure rates because I know some of these companies who’s success rates are MUCH worst than the rates listed.

• I’m an attorney investigating allegations against the franchisor for Camp Bow Wow Wow. If you have any information concerning your experiences or that of others with this franchisor, I’m interested in hearing from you. Thanks.

• I’m an attorney investigating allegations against the franchisor for Camp Bow Wow. If you have any information concerning your experiences or that of others with this franchisor, I’m interested in hearing from you. Thanks.

  The Kress Law Firm, LLC
  John C. Kress, Esq.
  4247 South Grand Boulevard
  St. Louis, MO 63111
  Phone: (314) 631-3883
  E-mail: jckress@thekresslawfirm.com

• Very interesting post by Anonymous regarding Huntington back in August 2012. What’s interesting about it is that most of the language is taken directly from Huntington’s marketing materials and phone scripts utilized by corporate staff. Even if it were a comment by a legitimate franchisee, his/her experience is the exception rather than the rule for Huntington. Most HLC franchisees are looking to get out as quickly as they can.

• I don’t know where this information comes from but you talk about CRAP! There is no way MATCO TOOLS has only a 35% SBA loan rate failure from 2001 to 2011. Sorry! NO WAY IN HELL!!!

• That’s like the Forbes article saying Snap-On is a #1 franchise of all and has no terminated franchisees over a years time.

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• Scamdemonian: You are absolutely correct. These reporters do not dig deep to find the truth. There has been many Snap-On franchisee failures and Snap-On churned those outlets to make more and more profit without disclosing the failure rates. What is worse is Forbes did not correct their mistake even after knowing the truth. Snap-On remained number one.

  Conspiracy Theory: Not all franchise organizations are hiding their failure rates. The fraudsters are fast and the correction methods are too slow. It is so slow that a fraudster can have a happy life before getting caught. There are many examples- Bernie Madoff had a good life and what difference does it make if he has to spend the old-age life in prison. Cliff Clark, adviser to presidents, got caught a few years before his death. Cliff Clark of Discovery Point is about to…. you see. There are frauds and even if everyone is aware of it, it continues. Fortunately most of us do not want to harm others.

• Forbes did not correct the ranking:
  http://www.forbes.com/sites/jjcolao/2012/03/05/our-response-to-criticism-of-top-twenty-franchises-for-the-buck/

  We, common people, look at a glittering store like McDonalds and dream of owning one someday. How can we even guess that 33% of these well known stores are failing according to the SBA reports. The store operation does not even hiccup with a franchisee’s bankruptcy and endless misery. The actual failure numbers must be more.

• Fraud promoting fraud is what franchise is. Dig deep into franchising and you will see that big money has purchased the rights to commit criminal acts against franchisees through a fraud protection coalition. That coalition starts with the IFA International Franchise Association and its created organizations to promote fraud.(Vetfran, FranPac and Minorityfran) These fran organizations further promote the fraud agenda of the IFA. The IFA along with the FTC are the BIGGEST problems with franchising. FTC or Federal Trade Commission is the fraudulent federal government department created to keep Americans from committing fraud to other Americans but stonewalls Americans from getting justice against corporations. Corporations are the problem with franchising. Yes! there may be some GOOD American franchisors out there that care about their franchisees being successful but the other 90% are screwing investors and using a coalition to do it.

  Franchisees need a coalition but the problem with starting a franchisee coalition is finding honest attorney’s. When it comes to attorney’s the franchisee will never ever be able to build a franchisee coalition because to be an attorney and fight a just cause for Americans does not make money. For an attorney to brave the waters of fraudulent corporations may mean the end to his career or threats from powerful people who have billions but still don’t have money. These CEO’s care about power and prestige. They don’t care about Americans or God. They care about Yachts and chumming it up with their fellow scammers.

• I totally retract these statements I made previously under the alias “G” May 12, 2013. In fact, they were posted outside of my knowledge by someone I thought was giving me sound advice. In a moment of irritation I was frustrated with some things and most of the challenges discussed in this posting were never even reported to Healthy YOU Vending prior to this. Once Healthy YOU and Seaga learned that I had some issues both companies took action immediately. Since the situation had never been seen before on other machines the owners of both companies along with Seaga’s chief engineer flew to my area in San Diego to see my machines in the field first hand. I never expected that kind of service or concern. It showed me just how much they cared about their distributors after the sale. I was very pleased with the genuine interest Jeff Marsh and Michael Burnett took in helping me resolve my issue. At first I was convinced that I was too small time to for them to take my concerns seriously, but when they flew to my area to evaluate the issues I was having, it showed me that they were there to help me succeed. It was definitely the boost I needed being in business for myself. Having them come to San Diego to work with me greatly lifted my confidence in their company. Even though they could not duplicate the situation I had experienced they replaced all of my machines, no questions asked. What I considered to be engineering matters were resolved completely.

  I am happy with the resolution offered by Healthy YOU and feel their owners truly care about my situation and success in this business. Before they sent me the new machines I was allowed to see them first hand, which gave me a lot of reassurance. I was even offered a different model of machines if I wanted but the truth is I really like these machines and decided to stay with the HY900 due to the many features it has that others machines don’t have. It is nice to know that working with Healthy You Vending I am able to work with actual people and not just become another number in a vast arena of franchisees. After having my issues worked with on a personal level, they have regained my confidence in their product and customer service.

• Is this data update beyond 2012?

• Marcus:

  Here’s the 2014 data

  http://www.unhappyfranchisee.com/worst-franchises-2014/

• Why do you still have Tropical Smoothie Cafe on your SBA’S WORST FRANCHISES BY LOAN FAILURE RATE list if you miss represented the numbers in your first review.

  They let you slide once when you screwed up the first time and not sue. But dame, you still got them on blast and listed at number 42. The CEO’s of Tropical Smoothies should follow through this time and sue the dog shit out of you asses. Shame on you Unhappy Franchise.

• Keith:

  Though admittedly eloquent to the point of near-poetry, your comment is factually inaccurate.

  We wrote that the SBA reported that Tropical Smoothie Cafe franchisees had a default rate of 24%, which was published in the Coleman Report. We did not “miss represent” any numbers or screw up. As far as we know, neither the SBA nor The Coleman Report have issued corrections or retractions regarding their Tropical Smoothie loan numbers.

  Tropical Smoothie Cafe hired a private research firm which issued an analysis indicating that, in their opinion, the SBA default rate was actually 15.4% rather than the 24% the Coleman Report indicated.

  We published a dedicated post as well as the FranData report documenting Tropical Smoothie Cafe’s dispute with the SBA numbers. We included a link from the above post to make readers aware of the dispute. We have asked TSC to let us know if the SBA or Coleman have acknowledged a mistake or altered their reports.

  TROPICAL SMOOTHIE CAFÉ Franchise Loan Defaults Overstated, Says Report

  Enhanced SBA Loan Loss Analysis for the years 2000 – 2011 on the Tropical Smoothie Franchise Brand

  As for your recommendation that the TSC CEO “sue the dog shit out of you asses,” it would be worth the legal fees just to see how one might going about attempting such a feat.

  In a year where the con artist behind Trump University actually has a shot at being president, nothing surprises me anymore.

• This SBA statistics is faulty. For example, Discovery Point Franchise teamed up with Fidelity Bank and financed many SBA guaranteed multi million dollar loans. These loans were intentionally not marked as franchised loans by experienced loan officers. Therefore the defaults were not traced back to the franchise and the statistical records of Discovery Point franchise stays clean. Bank and franchise team up to rob SBA and destroy inexperienced young families with dreams. Shame on you! SBA does not do anything to correct the situation.

• any advice on purchasing a 1800 radiators franchise.