Franchisees invest thousands of dollars when they open a franchise location. Like every business investment, some are doomed to fail. However, some are more likely to lose it all than others.
The published an article ranking the 10 worst franchise brands in terms of Small Business Administration loan defaults. Analyzing SBA-guaranteed loans from the last decade, the Journal found that franchisees of these 10 brands were responsible for 21 percent of all franchise-loan charge-offs. That's a whopping $121 million borrowed and never paid back.
If you're looking into franchising, finding the right company to invest in is crucial. You can be an incredible marketer, experienced entrepreneur and an amazing manager, but if other franchisees have struggled to make a return on their investments, you likely will, too.
Related: Franchise Players: I Used All My Money to Buy a Franchise
Here are the top 10 franchises to avoid, according to the Wall Street Journal's analysis. The data reflects only chains whose franchisees took out 100 or more loans.
1.
Default rate: 41.1 percent
Amount: $10.8 million
2.
Default rate: 31.1 percent
Amount: $7.8 million
3.
Default rate: 29.6 percent
Amount: $38.4 million
4.
Default rate: 29.4 percent
Amount: $34.1 million
5.
Default rate: 26.4 percent
Amount: $6.3 million
6.
Default rate: 25.1 percent
Amount: $6.7 million
7.
Default rate: 20.9 percent
Amount: $7.3 million
8.
Default rate: 20.3 percent
Amount: $2.6 million
9.
Default rate: 20.2 percent
Amount: $4.6 million
10.
Default rate: 17.5 percent
Amount: $2.2 million
Related: Why Chipotle Won't Franchise