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.

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.

Franchises with the Highest Failure 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.”

Franchises with the Lowest Failure Rates:

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

According to the NOTICE OF PENDENCY OF CLASS ACTION Morgate LLC v. Mail Boxes Etc., Inc., United Parcel Service, Inc., et al.
Superior Court of California, County of Los Angeles, Case No. BC294647": 

“The Court has certified a national class (“the Class”) consisting of all franchisees in the U.S. who operated a Mail Boxes Etc. store and who converted their franchise to The UPS Store through the Gold Shield Amendment on or before March 21, 2003, regardless of whether such franchisee is still operating The UPS Store Center.

The Court has also certified a subclass (“the California Sub-class”) consisting of all franchisees who meet the above-described criteria and whose centers are or were located in California. Every franchisee who is a member of the California Sub-class is also a member of the Class.”

Janet Sparks summarized the class action allegations in her post on Blue Mau Mau:

The complaint alleges three claims against defendants: negligent misrepresentations; intentional misrepresentations; and misrepresentations based upon disclosures required by the California Franchise Investment Law (CFIL).  Plaintiff alleges that the members of the class were misled by false statements and concealment of material facts contained in five documents provided to franchisees during an organized presentation to franchisees by UPS and MBE, known as the “Gold Shield Program.”

…Plaintiffs are seeking the recovery of damages from the MBE defendants. In addition, for the alleged violations of the California Investment Law, they are seeking the option to rescind the Gold Shield amendment of their franchise agreements.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Are you familiar with the The UPS Store® franchise opportunity? 

Are The UPS Store® or MBE franchise owners happy?  Why or why not?  

Please share your thoughts and opinions below.

*     *     *    *    *

In 2009, Entrepreneur magazine named The UPS Store/Mail Boxes Etc. franchise opportunity #8 on it’s much-hyped Franchise 500 list. 

Previous years The UPS Store/Mail Boxes Etc. was also favorably ranked at #11 (2008); #5 (2007); #4 (2006); and #5 (2005). In it’s listing, it claims “The UPS Store® – the perfect opportunity to be your own boss. We are the top-rated postal & business services franchise. Locations available nationwide. Take control of your business future & benefit from a world-class support system with The UPS Store.”

According to Entrepreneur’s franchise listing:

The first Mail Boxes Etc. store was opened in Carlsbad, California by Gerald Aul, Pat Senn and Robert Diaz, who designed it as an alternative to the U.S. Postal Service. In 2001, Mail Boxes Etc. became a subsidiary of UPS and began re-branding as The UPS Store in 2003. The UPS Store locations provide packaging, shipping, copy and print services, mailbox services, computer time rentals and more. Franchises are located throughout the United States and in over 40 countries.

According to Entrepreneur, The UPS Store/Mail Boxes Etc. has 4,459 U.S. franchises, 332 Canadian franchises, 1,236 foreign franchises and 0 corporately owned locations. 

Are The UPS Store/Mail Boxes Etc. Franchise Owners Happy?

Do The UPS Store franchise owners enjoy control of their business futures?  Do they benefit from a world-class support system with The UPS Store? The high ranking bestowed by Entrepreneur magazine and other advertising-driven magazines seems contradictory to the highly publicized franchise lawsuits and the negative comments from The UPS Store Franchise owners we’ve seen (Read THE UPS STORE: Overview.)

WHAT DO YOU THINK?  DO YOU OR HAVE YOU OWNED A THE UPS STORE or MAIL BOXES ETC. FRANCHISE?  ARE THE UPS STORE / MAIL BOXES ETC. FRANCHISEES HAPPY?  WHY OR WHY NOT?

Many feel that UPS intentionally undercuts franchisees’ business by offering customers the option of printing their own labels, then dropping their packages off at The UPS Store locations.  The franchisees do not get a cut of the shipping revenue, provide tape and supplies at their cost, and only get a nominal amount for the drop-off packages.

Other critics of The UPS Store franchise claim that the business model is severely flawed, and few stores will ever turn a profit.  Nevertheless, UPS continues to aggressively market its flawed franchise opportunity.

Read posts and comments, positive & negative, on The UPS Store franchise opportunity:
Is The UPS Store a Good Franchise Opportunity? (260 comments)
THE UPS STORE Franchisees: Drop-Offs Can Drop Dead
Franchise Owners Say Opening a UPS Store Franchise is a “Bad Financial Decision”
THE UPS STORE Franchise: Recent Comments
The UPS Store: Fan Mail From Some Flounder(ers)
THE UPS STORE: Overview
The UPS Store Franchise: This Dog Won’t Hunt!
The UPS Store Franchise: Follow the System and Succeed!
UPS Store Franchise Owner Says You’d Succeed If You’d Stop Whining
The UPS Store Franchise Owner’s Lawsuit Certified as Class Action
Franchise Owners Say Opening a UPS Store Franchise is a “Bad Financial Decision”
UPS Store Franchise Dream Ends in a Florida Trailer Park
The UPS Store PLUS The eBay Drop-Off Store Equals…?
Is UPS Cheating its Customers, Franchisees… and YOU?
Owners call the UPS Store Franchise “Indentured Servitude,” and “A Nightmare”

What do you think?  Share your experience, viewpoint or other comments about The UPS Store franchise program, below.