The thousands of franchisee failures who continue to pay on startup debt to avoid surrender of their collateral and to avoid bankruptcy don’t show up on any official records — or the records of the banks who made thousands and thousands of “startup loans” to franchisees from their home equity accounts. As long as the failed franchisees continue to pay on the startup debt, these failures are invisible to the new buyers and to the regulators.

It is this somewhat invisible “churning” of franchisees that has made franchising so durable for franchisors and so painful for franchisees. Let the Buyer Beware of incomplete and misleading SBA failure rates!

At Blue MauMau, this list is posted annually. In fact, we were the first to publish it. For the record, the worst brand by failure of franchisees to pay back their SBA-backed loans up to Sept 30, 2008 is Tilden for Brakes Car Center. The second is Executive Tans. These other concepts are considerably farther down the list.

The 2009 list is not yet available. It will be available in 2010.

Mr. Blue MauMau
http://www.bluemaumau.org