SBA Franchise

Eligibility
Michele Courneya
SBA Senior Franchise
Counsel/Minnesota
District Counsel

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Eligibility & the
Franchise Registry
z How to Access the Franchise Registry
z How to Use the Franchise Registry
z How to Use Private Information on the
Registry
z What if a Franchise is Not on the
Franchise Registry
z Determining Eligibility of Non-Registry
Franchises
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How to Access the
Franchise Registry

z Registry is on Internet at
www.franchiseregistry.com
z You can also access this site from SBA’s
banking site www.sba.gov/banking
z If you don’t have Internet access, contact
your local SBA office and ask them to
check the Registry.
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How to Use the
Franchise Registry
z Lenders may assume Franchises listed
on the Registry are not affiliated.
z If Franchise is listed, Lender only needs
to obtain a Certification of No Change or
Non-Material Change OR a Certification
of Change.
z If Certification of No Change or Non-
Material Change is provided, no further
review of the franchise documents is
necessary.
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How to Use the
Franchise Registry cont.
z Send Certification of No Change or
Non-Material Change to SBA with the
application or put it in your file for PLP
or PCLP loans.
z If Certification of Material Change is
provided, send a copy to Frandata.
Wait to approve loan until changes
have been reviewed and approved by
SBA or conduct the eligibility review.
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How to Use Private
Portion of the Registry
z Obtain User Name and Passcode from
Sandy Lear at the PLP Center
sandy.lear@sba.gov, 916-930-2461
z Go to www.franchiseregistry.com/private
z Enter User Name and Passcode
z Click on “Lenders Welcome”
z Search for Franchise by name or
industry.
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How to Use Private
Portion, Cont.
z You will find:
z Date the franchise was put on the Registry and
dates of any updates
z Franchisor Contact Information
z Eligibility Worksheet Franchise Documents,
Addenda
z Review sections of documents for
Franchise you are interested in
z If you have problems, contact Frandata
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What if a Franchise is
Not on the Registry?
z Only franchises listed on the Registry have
been found eligible under 121.103(g) for
all SBA loans
z Just because a Franchise has an SBA
Franchise Code does NOT mean it’s
eligible for all purposes
z Franchise Documents must be reviewed
for each loan, no matter how many SBA
loans have been made to that franchise.
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Franchises Not on Registry
Cont.
z Review is necessary because:
z Documents may have changed
z Franchises eligible in one state may NOT be
eligible in another
z Franchisors may have several different
agreements
z Franchise may Not be eligible without an
amendment negotiated by SBA or PLP Lender

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How to Determine Eligibility of
Non-Registry Franchises

z Franchise Eligibility Checklist

z E-mail FRANCHISE@sba.gov and ask if
SBA has any Franchise Findings and/or Loan
History for the Franchise
z See 13 CFR 120.100(d),13 CFR 121.103(g),
SOP 50-10(4) p.75, and SOP 70-50(3) App. 3
for additional Franchise Eligibility Guidelines

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Issues
z Based on the franchise documents, is
Franchisor affiliated with Franchisee
and too big for SBA size standards?
z Does franchisee have the right to profit
from its efforts and bear the risk of loss
commensurate with ownership?
z Are their other factors such as
excessive restraint on transfer that give
control to the franchisor?
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When Does Affiliation Exist in
Franchises?

z When the Franchisor controls or has the

power to control the Franchisee
z When the Franchisee does not have the
right to profit from its efforts, or bear the
risk of loss commensurate with
ownership

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Franchisor May:

z Establish quality control guidelines

z Impose premises design
z Mandate advertising & accounting
formats
z Require training
z Impose special conditions on
Franchisee for specific business
needs
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Franchisor May Not:

z Charge excessive franchise fee

z Prohibit or excessively restrict transfer of
franchise
z Retain sole discretion in decisions on
transfer
z Control all of Franchisee’s receipts and
billings and hire all employees
z Control the price at which it will buy back
the Franchise business.
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If Franchise is Not Eligible

z Notify the Franchisor with the reasons

z Try to negotiate an amendment to the
agreement to fix problems
z Suggest Franchisor apply for the Registry if
they plan on doing lots of SBA loans

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Remember
z 2 major issues are:
z Too much control by Franchisor
z Franchisor interferes significantly with
Franchisee right to benefit from profits.
z Most common problem areas in
Franchise Agreements:
z Transfer
z Franchisor Control of accounts
z Franchisor control of employees

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Who to Contact with
Questions
z FRANCHISE E-mail Box -
FRANCHISE@sba.gov
z Senior Franchise Counsel, Michele Courneya
michele.courneya@sba.gov
(612)370-2353
z Chief Counsel for Finance, Harry Kempler
harry.kempler@sba.gov,
(202) 205-6866
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Formal Size
Determination
z Applicant always has the right to request a
formal size determination from the
appropriate SBA Government Contracting
Area Office. 13 CFR 121.1001(b)(1)
z There is no right of appeal from a formal
size determination. SBA’s Office of
Hearings & Appeals may choose to review
these decisions at applicant’s request. 13
CFR 121.1101
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