1851

Not all franchises are created equal. Some franchisors provide tons of support to franchisees and want to see them succeed. These franchisors provide training programs and have franchise support teams where franchisees can reach out to ask questions if they need to. Unfortunately, not all franchisors care about their franchisees this way, and sometimes franchisees are left without support. This lack of support can lead to franchisees defaulting on their loans and ultimately losing their business. Here are 10 brands with some of the highest franchise loan default rates.&nbsp;<h3>Dickey’s Barbeque Pit and Subway&nbsp;</h3>In 2019, a U.S. senator investigated Dickey’s Barbeque Pit and Subway because many franchisees were defaulting on their loans to these companies. Senator Catherine Cortez Masto wrote a letter to the Small Business Association (SBA), asking for a range of information on what the SBA is doing to help struggling businesses. Masto’s letter cited an article about a large number of Dickey’s closures and said that the loan failures may be because the franchisor is over-promising what franchisees can potentially make.&nbsp;Also, Subway franchisees were struggling to stay open because of expensive promotions and corporate decisions that undermine the franchisees' success. Masto found that Subway was trying to force franchisees out of business due to the most minor infractions. Subway put out a statement saying it was&nbsp;<a href="https://www.restaurantbusinessonline.com/financing/us-senator-scrutinizing-federal-loans-subway-dickeys-franchisees?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">“enforcing expectations</a>.” Meanwhile, Subway had 21 defaults during the pandemic (2020–2022), and Dickey’s had 27.&nbsp;<h3>Jimmy John’s</h3>During the pandemic, Jimmy John’s had 16 defaults. Much of this contributed to the fact that Jimmy John's and other sandwich companies catered to the employee lockdown crowd. With everyone on lockdown, some Jimmy John’s locations were not able to stay in business.&nbsp;The sandwich was founded in 1983 and saw great success from the years 2010–2018 with 148% growth in the number of locations. As if the pandemic wasn’t affecting sales enough in 2020, the FDA also sent Jimmy John’s a notice about&nbsp;<a href="https://www.mashed.com/738218/chain-sandwich-shops-that-are-disappearing-across-the-country/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">e. coli outbreaks</a> that were occurring because of the brand's clover sprouts and cucumbers.&nbsp;<h3>Pita Pit</h3>Pita Pit, another sandwich-based brand, saw eight defaults during the pandemic. Like other sandwich shop concepts, Pita Pit relied heavily on lunchtime traffic. When the pandemic started, it forced people to close their doors. Franchisee owners in Iowa had been in operation since 2016, but the&nbsp;<a href="https://www.mashed.com/1039489/the-untold-truth-of-pita-pit/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925#:~:text=Pita%20Pit%20was%20not%20immune,%22It's%20all%20Covid." target="_blank" rel="nofollow">pandemic forced them to shut their doors</a> permanently.<h3>Fantastic Sams</h3>Fantastic Sams Cut &amp; Color had eight defaults from 2020–2022. During the pandemic, the luxury of getting your hair professionally cut was not an option for money and safety reasons. Fantastic Sams then had to switch to an appointment-based model. This switch-up caused businesses to suffer. In 2021, a franchise owner said that they saw&nbsp;<a href="https://www.hometownsource.com/sun_thisweek/news/business/the-most-challenging-year-personal-service-businesses-share-how-they-ve-coped-during-pandemic/article_8c97bf0a-77d0-11eb-b925-23ae06531c44.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">25</a>–<a href="https://www.hometownsource.com/sun_thisweek/news/business/the-most-challenging-year-personal-service-businesses-share-how-they-ve-coped-during-pandemic/article_8c97bf0a-77d0-11eb-b925-23ae06531c44.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">30% fewer guests</a>.&nbsp;<h3>Petland</h3>Petland has a high SBA&nbsp;<a href="https://williambruce.org/2020/06/29/best-and-worst-franchises-ranked-by-loan-default-rates/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">loan default rate of 60%</a>, an increase from the 56% in 2012. Its loan default rate got the pet brand ranked as one of the&nbsp;<a href="http://www.unhappyfranchisee.com/worst-franchises-in-america/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">worst franchises by the SBA</a>. Petland has been known to&nbsp;<a href="https://winknews.com/2023/03/22/second-family-unknowingly-buys-sick-puppies-from-petland-naples/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">sell people sick puppies</a> or charge&nbsp;<a href="https://www.washingtonpost.com/politics/2022/09/30/pet-stores-high-interest-loans-state-bans/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">terrible financing loans</a> to customers.&nbsp;It’s also one of the few pet store brands that still sells puppies and sources its puppies from mills. Many pet stores are choosing to work with shelters in order to get animals adopted instead of working with breeders. In 2022, the state of Illinois passed a law banning pet stores from&nbsp;<a href="https://www.wrex.com/news/top-stories/petland-stores-across-illinois-close-after-puppy-mill-ban-goes-into-effect/article_ad0122b8-a704-11ec-9657-df827e51af2c.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">purchasing animals from breeders</a>, causing pet stores all over the state to shut down.&nbsp;<h3>Firehouse Subs</h3>Firehouse Subs is another sandwich brand that is currently suffering loan defaults. During the pandemic, Firehouse suffered 10 defaults&nbsp; Like many other fast-casual restaurants, Firehouse had to pivot during the pandemic and move away from dining room eating to takeout orders.&nbsp;Firehouse was purchased for $1 billion in 2021 by Restaurant Brands International because it was struggling with closed dining rooms. Restaurant Brands owns Popeyes, Burger King and Tim Hortons. Other brands under&nbsp;<a href="https://www.mashed.com/738218/chain-sandwich-shops-that-are-disappearing-across-the-country/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">Restaurant Brands weren’t performing well</a> in 2021, and this could impact Firehouse’s sales as well.&nbsp;<h3>Massage Envy</h3>Massage Envy had 12 defaults during the pandemic. Though this is unfortunate, it makes sense that stores would have to close during the pandemic. Many people were losing their jobs and did not have the money to spend on the luxury of a massage. Additionally, with a raging virus, it would be impractical and unsafe to be in such close proximity to another person.&nbsp;In 2021, franchise owners were calling for new management because of the doubling of fees for the national ad fund, forced purchases of more expensive massage oils&nbsp;<a href="https://www.franchisetimes.com/franchise_news/massage-envy-owners-call-for-new-management-as-profits-cut-in-half/article_9dca1828-209e-11ec-864e-43f7c8ca895d.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">that supposedly would only benefit the franchisor</a>, and increased fees for apps and other technology that is “atrocious,” according to a franchisee. Jim Mellon, president of the Envy Owners Association, helped take the franchisees' complaints about management public and filed a lawsuit against Massage Envy.&nbsp;<h3>Which Wich</h3>Which Wich, a quick-service restaurant focusing on sandwiches and salads, had 12 franchisees default on their loans. The lack of foot traffic in 2020 caused many franchisees to have to close their doors. For one Ann Arbor franchisee, the decision to close was primarily&nbsp;<a href="https://www.mashed.com/738218/chain-sandwich-shops-that-are-disappearing-across-the-country/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">due to labor shortages.</a> Staff shortages and lower foot traffic caused a lot of the “Superior Sandwich” shops to be doomed.&nbsp;<h3>UFC Gyms</h3>The fitness industry was also impacted by the pandemic. UFC Gyms had 6% of its businesses default on their loans. In 2020, 17% of gyms closed permanently, and 40% of members left. UFC has big growth plans for the coming years but is&nbsp;<a href="https://www.clubindustry.com/industry-news/ufc-gym-ceo-says-company-will-begin-opening-one-gym-week?utm_source=1851franchise.com&utm_medium=article&utm_campaign=10-brands-with-the-highest-franchise-loan-default-rates-2721925" target="_blank" rel="nofollow">facing staffing shortages and equipment chain issues</a>, contributing to franchisee problems.&nbsp;

10 Brands with the Highest Franchise Loan Default Rates

1851 Franchise

These brands have some of the highest loan default rates, according to the Small Business Administration. 

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