According to CNNMoney.com, the “loan data is from the Small Business Administration, covering loans made from October 2000 through September 2009. The failure rate represents the number of loans in liquidation or charged off, divided by the number of loans disbursed.”
The Matco Tools was deemed the riskiest franchise with a 36% franchise loan default rate.
Cold Stone Creamery franchise was listed as 2nd worst with a 31% failure rate.
The much maligned (& litigated) Quiznos franchise was 3rd worst with a 25% default rate.
The Curves franchise was the 4th worst, with a 16% SBA loan default rate (no surprise to readers of this site or to those who left 600+ comments on our Curves franchise discussion)
Also posting a double-digit default rate is heavily promoted The UPS Store franchise with a 12% SBA franchise loan default rate.
| Franchise | # SBA Loans | $$$ Dispersed | Avg. Loan | Failure Rate |
| Subway | 2,292 | $391.8M | $170,928 | 7% |
| Quiznos | 2,019 | $291.7M | $144,458 | 25% |
| The UPS Store | 1,085 | $159.4M | $146,943 | 12% |
| Cold Stone Creamery | 774 | $180.9M | $233,687 | 31% |
| Dairy Queen | 478 | $157M | $328,383 | 8% |
| Dunkin Donuts | 464 | $270.4M | $582,726 | 8% |
| Super 8 | 456 | 415.2M | $910,476 | 4% |
| Days Inn | 390 | $399.2M | $1,023,690 | 6% |
| Curves | 371 | $36.4M | $98,094 | 16% |
| Matco Tools | 321 | $28.9M | $90,131 | 36% |
The winners include Super 8 and Days Inn motel franchises with 4% and 6% respectively, Subway with a 7% default rate and Dairy Queen & Dunkin’ Donuts franchises with 8% default rates.
Here are comments from the CNN writer, from worst to best:
Matco Tools franchise – 36%: “Tool manufacturer and distributor Matco is the riskiest investment on the top-10 “most popular” list, with more than one third of its SBA-backed loans going bad.”
Cold Stone Creamery franchise – 31%: “The product is sweet, but the financials can be bitter. In the last 10 years almost one in three SBA-backed franchisees defaulted on their loan.”
Quiznos franchise – 25%: “One in four franchise owners was unable to make good on their SBA-backed loan. Quiznos recently settled four class-action suits brought by its franchisees, agreeing to pay as much as $100 million to end years of wrangling over its pricing, royalties and fees.”
Curves franchise – 16%: “The overhead costs are pretty low, but the investment can be risky. Curves’ fast expansion goes hand in hand with a relatively high churn rate, and almost 16% of its SBA-backed franchise loans this decade failed.”
The UPS Store franchise – 12%: “Seven years ago, they [MBE franchisees who converted] filed suit against UPS, and will finally take their case to trial later this month in Los Angeles. Meanwhile, UPS rolls on, adding new franchisees to its network for an initial fee just shy of $30,000.”
Super 8 franchise – 4%: “Getting into the motel industry is pricey… but it’s also a pretty safe bet. Among the handful of franchise brands… a notable number are hotels and motels. Super 8 has the lowest default rate on this top-10 list, hovering just under 4%.”
Days Inn franchise – 6%: “Days Inn is another member of the Wyndham Hotel Group’s franchise family. Launched in 1970, the chain currently boasts 1,900 hotels throughout 15 countries.”
Subway franchise – 7%: “With fewer than 8% of SBA-backed borrowers defaulting on their loans, Subway has a better track record than similar brands — rival sub shop Blimpie has a 46% loan failure rate, and Quiznos is also well into the double digits.”
Dairy Queen franchise – 8%: “Today, it boasts 5,700 locations around the globe and a single-digit failure rate for its SBA-backed franchise loans, making it one of the safer investments in the food franchise market.”
Dunkin’ Donuts franchise – 8%: “Dunkin’ Donuts’ modest default rate is matched by its corporate sibling, Baskin-Robbins, which had a 10% failure rate for its SBA-backed loans.”
ARE YOU FAMILIAR WITH THESE FRANCHISE OPPORTUNITIES? WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Source: CNNMoney.com
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I am sure that jd does not come to this site anymore and we miss unhappy...
When I sold my first club in 2007, I called CI and ask what should the asking price be. I was told by one of the old timers that the price should be 300 per member. I set my asking point at $120 and sold it at $95. I look back at that now and think, my net was only 2,000 a month. I sold a club that only had a net income of $24,000 for 95,000. FYI, I was only 26 then and I did not have any business experience. Now I have gotten a degree and taken business classes. I know that I should have never sold my club at such a high price, but then why did CI tell me to value it so high?
We often heard $50,000 per 100 members was a fair asking price.
I had heard that too, but even the $300 per member would make it $30,000 per 100 members. No matter how you looked at it the per member is just crazy. We did not even net $30,000 a year. This whole thing is just crazy. The sad part is so many people are like you wipedout. I can say that I am, because I purchased my second club which I still own for 12x what it was worth. You live you learn, but I would have never paid that much had CI said look at the net profit. I just hope I can keep going. My husband says he is going to leave everyday, and financially cut me off a year ago. He gives me enough money to buy food and clothes for the kids.
STAY AWAY FROM MATCO TOOLS. THEY WILL SELL YOU A BILL OF GOODS,WHICH IS NO GOOD. RUMOR HAS IT ,MATCO MAKES MORE MONEY SIGNING NEW FRANCHISES THAN THEY DO TAKING CARE OF THEIR CURRENT ONES. DARYL PRITCHETT AND MIKE RAMEY WORK TOGETHER TO SIGN YOU UP AND THEN KICK YOU TO THE CURB. I AM WORKING ON A LAWSUIT AGAINST MATCO,HOPING TO TURN IT INTO A CLASS ACTION SUIT. YOU MAY CONTACT JERRY MARKS AT MARKS AND KLEIN LAW FIRM AT 732-450-2351,IF YOU ARE INTERESTED. I INVESTED ALOT OF MONEY IN MATCO AND AFTER 3.5 YEARS THEY SHUT ME DOWN. WHEN THE ECONOMY SLOWED IN 2008,THEY PUT ME OUT OF BUSINESS. I ALSO SPOKE TO A PREVIOUS EXECUTIVE, WHO CALLED ME, AND STATED THATS THE WAY MATCO DOES BUSINESS. STAY AWAY FROM MATCO TOOLS AND RUN LIKE HELL WHEN YOU SEE THEM. I REPEAT DO NOT BUY OR INVEST IN MATCO TOOLS. PLEASE CALL ME, TOMMY CHEUNG AT [redacted].
NOTE: We don't allow posting of personal contact info in the comments. General contact info for businesses, law firms, etc. is permitted. If anyone wants to get in touch with Marks & Klein their contact info is on their website: http://www.marksklein.com/contact.html Thanks - ADMIN
We upgraded Tommy's Matco Tools complaint to its own post. If anyone has insights into the Matco Tools franchise, please comment here:
https://unhappyfranchisee.mystagingwebsite.com/matco-tools-franchise-complaints/
You whiners stop complaining. Matco is one of the great franchises of our time as long as you follow the model. If you failed you have no one to blam but yourself.
At Jd and unhappy:
Jd, you need to do your research before you speak. I am a Curves owner with a SBA loan. Curves IS considered high risk and my bank would not lend the amount requested. My husband and I make over $100,000 a yr. We both have solid credit scores. (801 for the husband and 792 for me), we have banked with Chase for over 8 yrs. My husband's direct deposit, our savings, IRA's, credit cards are all through Chase. We have established a great relationship with Chase. Despite all this, we were only funded half of our loan. Why? Curves is on the list of top 10 franchises that should not be lent to. I saw the list for myself! Half and yes I said HALF, half of the loan was only disbursed to me. It was stated by Chase and the SBA, half the equity injection must come from me, due to over 50% of loans funded by Chase, were not paid. Those stats are very disheartening and discouraging. This was in 2010, during the summer so it is recent. Fortunately, my husband and I were able to come up with half from our savings.
As for over-priced Curves, it is just that over-priced. Greedy owners making a quick buck and not being honest. I negotiated down the asking prices on both my Curves by 50%! I had an owner (most recent purchase) asking $120,000 on a club with about 400 members. I paid, get this, $55,000! That is how you do business.
Some of this can be blamed on Curves's owners not knowing how to run their clubs, some on the fall of the economy and a lot on corporate greed. I met an owner who ran four clubs into the ground and she flat out blamed herself. Why? She did not work her clubs. I have met owners who did everything and still had to close. Corporate greed has a lot to do with this. My Curves that I bought, had at one point 5 Curves within an 8 mile radius! Sounds like Gary enjoyed collection his royalties. How can owners parked so close to each other, compete with one another??
Curves International and their employees are snakes. They are condescending, right wing Republicans, who at any cost, do what is best for them. They love to talk about the Curves Community of women. What a joke! I bought a club from an Area Director (who is still employed by Curves), who lied and cheated her members. I have owned her club for over two yrs now, and I still have members hesitant to re-join, due to the previous owner continuing to draft their accounts after they cancelled. This AD even took money from products sold and the members never got their money back or the product. These are the woman that are part of the Curves Community. Disgruntled, unhappy and cheated. Yet, Curves continues to employ this woman. Oh, did I mention she has stalked me and my employees, and when I told her boss, her only comment was that's strange!! Strange?? No, it's mentally unstable!
I would not have purchased a Curves, if I knew about their corporate office and their self righteous Christian views, the kind of people they employ (fake!), and how they have screwed other owners and members that are part of the so-called Curves Community.
I enjoy what I do and am thoroughly involved in both my club. And yes, both are profitable. I can tell you, from their stupid redundant training to the corporate staff that talks to you like you are kid, I would not recommend investing your $$ into Curves. I am a female minority and now fully know and understand, that Curves is like any America corporation....in it for themselves!
All franchises are scams at some point. They are designed to implement a system, at first, for investors to profit and then the franchisor squeezes every penny out of them before they dump them. The more popular the franchise is the more they sell and overload areas to maximize their profits and turn their franchisees into non-profitable Pump and Dump machines.
I am about to buy a franchise of Rocky Mountain Chocolate Factory,
for the preliminary application says I need USD.100K Cash, when I received the disclosure agreement to my shocking they failed to tell you about store rental is excluded. I have to pay Franchise Fees, additional 5000 when my application approved, royalty fees, gross sales percentage by the franchisor, all and all in my opinion, I only have to make money for them. How do owner cope with the profit? do they make some? or are they stuck to 10yrs contract with the franchisers.
It also says 7 days training. I have to pay daily for it plus my lodging, flight, food and all expenditures. additional here during opening of the store, franchisor will send one helper to manage around and I have to pay all his expenses from colorado.
Franchisors don't tell you all other charges at first. This is a ripped off.
Any advise for me before I can go ahead?
Most franchises are rip off. Some franchises like Discovery Point do not disclose that SBA loan was a franchised loan. So, their failures do not get counted as statistical records. Banks are in it with the franchises. They are robbing SBA and individuals like you.