According to a Wall Street Journal article by Richard Gibson, the number of SBA-backed loan defaults by franchisees increased 52% in the fiscal year ended Sept. 30, 2008, from fiscal 2007. Loan losses totaled $93.3 million, a 167% jump from $35 million just 12 months earlier.
Quiznos Sub had the highest number of loan defaults, with 108 franchisee failures. Cold Stone Creamery franchises racked up 75 defaults, followed by the Subway franchise with 42 defaults and Curves for Women with 24.
By percentage of defaults to total loans, meal prep kitchen Dream Dinners had the highest, with 18% of franchisees having defaulted thus far. Next worse were Taco del Mar and Carvel, with 15.49% and 15.38% defaults, and Cold Stone Creamery with 9.82%.
Fiscal 2008* Loan Defaults at Franchises with 50 or More SBA-backed Loans
|FRANCHISE||# Loans 2001-08||# Defaults 2008|
|2. Cold Stone Creamery||763||75|
|4. Curves for Women||362||24|
|5. Planet Beach||230||22|
|6. Aamco Transmission||169||15|
|7. CiCi’s Pizza||155||13|
|10. Dream Dinners||61||11|
|11. Taco Del Mar||71||11|
Source: U.S. Small Business Administration *Year Ended Sept. 30
Who are franchising’s biggest losers in terms of loan default percentages from this list?
|FRANCHISE||% 2008 Defaults to Total Loans|
|1. Dream Dinners||18.03%|
|2. Taco Del Mar||15.49%|
|4. Cold Stone Creamery||9.82%|
|5. Planet Beach||9.56%|
|6. Aamco Transmission||8.87%|
|8. Curves for Women||6.62%|
Curves International Inc. chief executive Gary Heavin, added a bit of levity to the dismal news by claiming “These loan problems were a result of the overpriced resales of franchises between third parties.” Franchise Pick has published many accounts of Subway resales offered for $1.00 with no takers.
FranchisePick.com and UnhappyFranchisee.com have reported candidly on many of these companies:
Cold Stone Creamery franchise on Unhappy Franchisee
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