How Likely Is Your Favorite Franchise To Go Bust?

Buying a franchise is never a move without risk, but some franchises are bigger risks than others.

We've talked here before--but not since 2009 if my search results were correct--about buying franchises as a way to put extra cash in your pocket and make money to, as always, bolster your savings.   But after a little looking around, it turns out that some franchises are bigger risks than others, and for reasons that make a lot of sense.  Read on.

One of the lowest risk franchises out there also requires one of the biggest initial investments--Super 8 Motel (NASDAQ: WYN) may require an average loan size of just under a million bucks but there's only a four percent default rate on the SBA loans taken out to start them.  This makes some sense; Super 8 is a very low-cost motel, and even in an environment of decreased business travel and vacationers, low cost certainly appeals to what's left.

Strangely, the cheapest franchise to start--Matco Tools, which requires little startup money as tools are sold from the back of mobile trucks--has the highest percentage of default rate on SBA loans, with just over one in three (thirty six percent) ending up in default.

One of the best values in franchise, however, comes from Subway, with a minimal thirty five thousand dollar investment and only a seven percent default rate. 

These are just averages, of course, and may not work for you wherever you are.  But if you're looking to start your own business, you can do much worse than franchises.

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