The Franchise With a 20% Loan Default Rate Its Brochure Never Mentions
What government lending data says that the sales deck doesn't. We pulled the SBA's own loan file to check.
9 min
Aug 26, 2026 · Updated Sep 14, 2026 · By the Fine Print desk
Every franchise pitch deck is full of winners. The government's loan files are full of everyone else.
Which franchises have the highest SBA loan default rates? A 2021 U.S. Senate report found that 20% of SBA-backed loans to Dickey's Barbecue Pit franchisees from 2000 to 2020 were charged off, and the FTC's 2024 franchising report cites the same 20% figure.
Then we went further. We pulled the SBA's raw loan file ourselves and scored only loans old enough to have finished their story.
For the 2010s, about a third of resolved Dickey's loans ended in a charge-off. Some brands in the same federal file sit near zero.
The data is free, public, and updated quarterly. This article shows you what it says, and exactly how to pull it for any brand you are considering.
The Numbers Nobody Puts in the Brochure
Start with the baseline. Analyzing the SBA's public 7(a) loan file for loans approved from 2010 through 2019, with statuses as of June 30, 2026, we found franchise-flagged loans were charged off at a 10.2% rate among resolved loans, versus 7.8% for non-franchise small business loans. Being attached to a famous brand did not make the average borrower safer. It made them slightly less safe.
Now the tails, because averages hide everything interesting. Among brands with at least 40 resolved loans in that 2010 to 2019 cohort, the highest charge-off rates we computed were:
Experimac, 69.5%. 41 of 59 resolved loans charged off.
Window Genie, 58.0%. 29 of 50.
Dental Fix Rx, 54.2%. 26 of 48.
Burgerim, 38.5%. 25 of 65.
Dickey's Barbecue Pit, 34.2%. 54 of 158 under the main name spelling, and 30.3% when we merged all three spellings the government file uses.
For contrast, in the same cohort The UPS Store charged off 0.7% of resolved loans and Cold Stone Creamery 2.0%. The gap between the best and worst franchise systems in the same federal dataset is roughly one hundred to one.
The government has published versions of this warning before. A 2021 report from Senator Cortez Masto's office found 28% of SBA 7(a) franchise loans defaulted between 2003 and 2012, costing the SBA $1.5 billion in guarantee payouts, and its brand table for 2000 to 2020 listed Quiznos at 637 charge-offs out of 2,133 loans, about 30%, alongside Dickey's at 20%. A 2013 GAO report examined 170 SBA loans tied to one loan agent's franchise deals and found 44% defaulted, with first-year revenue projections on the applications averaging more than double what borrowers actually earned.
What a 20% Charge-Off Rate Actually Means
It means that among franchisees of that brand who borrowed through the government's flagship small business program and whose loans have reached an outcome, one in five ended with the bank writing the loan off. These are not casual failures. SBA loans are typically personally guaranteed, which means the borrower's house and savings often stand behind them.
Three honest caveats before you quote any of this at a dinner party. First, charge-off is not the same as business failure. Some failed businesses repay their loans, and some surviving owners default for other reasons. Second, the rates above are cohort snapshots. A brand's 2010s number is a verdict on its 2010s system, not necessarily on today's. Cold Stone Creamery proves the point in both directions. An SBA Inspector General review of 2002 to 2009 loans, reported by Franchise Times, found Cold Stone loans defaulted at 46% with an 18% charge-off rate, among the worst of that era. In our 2010 to 2019 cohort it charged off 2.0%. Systems change, in both directions. Third, small denominators lie. A brand with 6 loans and 2 charge-offs is a coin flip story, which is why we required at least 40 resolved loans before ranking anything.
How to Pull a Franchise's SBA Loan Record Yourself
This takes about fifteen minutes and costs nothing.
Get the data. Go to data.sba.gov and open the dataset called "7(a) and 504 FOIA." Download the 7(a) CSV files covering the years you care about. These are the government's actual loan-level records, updated quarterly, currently with statuses as of June 30, 2026.
Find your brand. Filter the FranchiseName column for the brand. Search creatively, because names appear in multiple spellings. Dickey's appears three ways and Subway appears at least three ways in the file.
Count outcomes, not loans. Use the LoanStatus column. Compute charge-off rate as charge-offs divided by charge-offs plus paid-in-full. Ignore open loans, because the file marks the status of many still-active loans as EXEMPT, withheld under a FOIA exemption, and an open loan has not finished its story.
Respect maturity. A loan approved two years ago has had almost no time to fail. Rates computed on recent cohorts will look angelic. This is how some ranking sites end up publishing 0% "default rates" for young brands. Use cohorts at least seven to ten years old for lifetime-style rates.
Check the data dictionary. The dataset page links a data dictionary explaining every field, including FranchiseCode, ChargeOffDate, and GrossChargeOffAmount, if you want to go deeper.
One warning about the recent files. The share of 7(a) loans carrying any franchise brand tag dropped from about 13% in fiscal 2023 to 8 to 9% in fiscal 2024 and 2025, then recovered to about 14% in fiscal 2026. That dip lines up with the SBA eliminating its Franchise Directory in August 2023 and reinstating it effective June 1, 2025, per the law firm Taft's summary of the rule change. Brand-level analysis of loans made during the gap will undercount, so treat 2024 and 2025 vintages gently.
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Why You Won't Hear This From the Sales Team
Nothing requires a franchisor to volunteer its brands' SBA loan performance, and the FTC's Franchise Rule does not put loan data in the FDD. What the FDD does contain is Item 20, tables of outlet openings, closures, terminations, and transfers for the last three years, plus contact lists of current and former franchisees. The FTC's consumer guide adds a caution worth memorizing: "Some franchisors may buy back failed outlets and list them as company-owned outlets," which can make the turnover tables look calmer than reality. The same guide calls talking to current and former franchisees the most reliable way to verify a franchisor's claims.
So the full diligence stack is: SBA loan data for the brand's lending track record, Item 20 for system churn, and franchisee calls for the ground truth. Each one catches what the others miss.
How to Check a Franchise's Failure Rate
There is no single official "failure rate" for a franchise brand, and anyone quoting one number is simplifying. The widely repeated claim that 95% of franchises succeed has no locatable primary source, and we could not verify it anywhere. What you can verify:
SBA charge-off rates from the FOIA file, using the method above. Hard, public, brand-level.
Item 20 churn from the FDD. Count terminations, non-renewals, reacquisitions, and ceased operations against total outlets, across all three disclosed years.
Former franchisee interviews. Item 20 requires the franchisor to list franchisees who left in the most recent fiscal year with contact information.
If all three point the same direction, believe them.
FAQ
Which franchises have the highest SBA loan default rates?
In the SBA's own 7(a) file for loans approved 2010 through 2019, the worst charge-off rates we computed among brands with 40 or more resolved loans were Experimac at 69.5%, Window Genie at 58.0%, Dental Fix Rx at 54.2%, Burgerim at 38.5%, and Dickey's Barbecue Pit at roughly 30 to 34% depending on how name variants are merged. Earlier federal reviews flagged Quiznos at about 30% for 2000 to 2020 and Planet Beach and Petland at 60% or higher default rates for 2002 to 2009 loans. Every one of these is a specific cohort and methodology, which is why we show our math.
Where does SBA franchise loan data come from?
From the SBA itself. The agency publishes loan-level 7(a) and 504 records, released under the Freedom of Information Act, at data.sba.gov, updated quarterly. Each record includes the franchise name where tagged, loan amount, approval date, and status, including charge-offs with amounts. It is the same file journalists, ranking sites, and this publication use. No login, no fee.
Is a loan default the same as a franchise failing?
No. A default means the loan went into serious distress, a charge-off means the lender wrote it off, and a business failure means the outlet stopped operating. They overlap heavily but not perfectly. A federal Inspector General review found Planet Beach loans from 2002 to 2009 defaulted at 61% while charging off at 21%, one brand with two very different-sounding numbers, both true. Always ask which definition a statistic uses.
Does the SBA still publish franchise default rates by brand?
The SBA has never published an official brand-by-brand default ranking, but it continuously publishes the raw loan file that lets anyone compute one. What changed recently is tagging quality. The SBA eliminated its Franchise Directory in 2023 and reinstated it effective June 1, 2025, and during the gap the share of loans tagged with a brand name dropped by roughly a third, so brand-level analysis of 2024 and 2025 loans undercounts.
Why do some websites show famous brands with 0% default rates?
Because they measure loans that are too young to fail. A ranking built on loans approved in the last three or four years is scoring loans that mostly have not had time to go bad, which produces flattering zeros for fast-growing young brands. Lifetime-style rates require matured cohorts, meaning loans approved seven or more years ago, measured after they resolve.
What is a good SBA charge-off rate for a franchise?
In the matured 2010 to 2019 cohort, resolved franchise loans overall charged off at 10.2%. Brands meaningfully below that, like The UPS Store at 0.7% or Cold Stone Creamery at 2.0% in that cohort, showed lending performance far better than the franchise average. Anything at double the franchise average or worse deserves a direct conversation with current and former franchisees before you sign anything.
Can a franchise with a bad default history improve?
Yes, and Cold Stone Creamery is the documented example. Federal reviews of 2002 to 2009 loans put it among the worst performers, with a 46% default rate. In the 2010 to 2019 cohort we computed a 2.0% charge-off rate. Treat any rate as a snapshot of the era it measures, and weigh recent cohorts and current franchisee interviews more heavily than ancient history, good or bad.
How does Item 20 of the FDD relate to loan data?
Item 20 is the FDD's outlet history section, with three years of openings, closures, terminations, and transfers, plus lists of current franchisees and franchisees who recently left, with contact information. It measures system churn where loan data measures borrower outcomes. The FTC warns that buybacks of failed outlets can soften how Item 20 looks, which is exactly why checking it against the SBA loan file is worth your fifteen minutes.
The Bottom Line
The riskiest fact about franchise lending is not any single brand's number. It is that the numbers sit in a free federal file while buyers make decisions from brochures. A brand's SBA record will not tell you your outcome. It will tell you what happened to hundreds of people who borrowed real money for the same logo, which is more than any sales deck will ever volunteer.
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Find Out What the Franchise Is Not Telling You
Every week we take one famous franchise brand's FDD apart and show the real costs, the fees that show up later, the exit traps, and how many owners walked away. The people who sell franchises hate it.
