The current financial conditions facing franchise owners can only be described as extremely difficult.  Recent reports show that SBA loans for franchises are at a record default rates in 2008-2009.  Compared to 2009 the default rates have gone up 43% and have cost the SBA over $93 million last year.

So, what can franchise business owners learn from the above statistics regarding recent SBA loan default rates?  What should a franchisor do in this environment?

It is crucial for franchisors to maintain their current base of operators and expand their base cautiously.  Nothing is more valuable to a franchisor than a demonstrable track record of success as evidenced by their customer base.  A large number of failures and defaults does not inspire confidence in a potential franchise opportunity seeker.  there are several things the franchisor can and should do.  Speak to your customer base regularly and poll them on their market situations.  Provide advise and counseling where appropriate and direct them to financial resources when needed.  When selecting new franchise owners, have a higher standard, for financial and capital requirements, so they can withstand the market forces longer.  Make sure to provide adequate training in operations so they are more successful in operating their business.