FRANdata: How Changes in SBA Policy Will Affect Franchising

The franchising industry has been anxiously awaiting the launch of new changes to the franchise affiliation process from the Small Business Administration. And during last week’s national SBA lender conference, those changes were finally announced through the release of a new Standard Operating Procedure.

According to a news update from FRANdata, the new SOP includes a one-page addendum that addresses all franchise affiliation requirements. And the SBA says that franchisors will not be able to request modifications to the addendum in order to meet the requirements of a particular brand or industry, even though franchising professionals have long opposed a standard franchise agreement because of the different approaches that can be taken to the franchise business model.

These changes will ultimately lead to franchisors having to negotiate with each lender in addition to placing the burden of solving SBA affiliation and credit-related SOP issues back on franchisors and lenders on a loan by loan basis.

However, in an online statement, FRANDATA notes, “Fortunately, senior SBA staff indicated that the SOP is a flexible document. The implication was that they are exploring how far they can push the envelope with the goal of streamlining and standardization. They realize that there could be substantial negative feedback and therefore say during the next 60 days are open to understand the issues that arise as a result of this SOP change.”

FRANdata says it's reaching out to attorneys representing different industries to gain a better understanding of what these changes mean for the franchising industry. Right now, the new changes are set to go into effect on January 1, 2017 at the earliest. However, it’s unclear whether or not the 2016 presidential election results will impact the decision.

To read the original news update and find more information on the SBA’s new policy, click here.