Research Newsletter September 27, 2006:

Which franchise systems have franchisees who get SBA-backed loans? Are they new systems or veterans? Do they have many units or few?

We analyzed those franchise systems listed on the SBA Franchise Registry. Franchise systems on the Registry are facilitating SBA-loans for the franchisees by submitting their franchise agreement for a one-time, centralized pre-approval. These systems provide for a good cross-section of those franchises who use SBA-financing options.

Outcomes. While SBA-financing is used by systems of any "age" (years franchising) and size, the last few years have seen a trend towards newer systems with fewer units.

Chart 1	Chart 2	Chart 3

Chart 1 shows the distribution by years franchising of franchise systems at the time they initially applied for the Registry. It also implies an increase in the number of systems who use SBA loan options.

Franchises who use SBA-financing options tend towards the small size. Chart 2 shows the number of existing franchised units that each system has when they first apply for a Registry listing. Almost 60% of the systems had less than 100 units. However, also note that systems such as Subway, Burger King, Dairy Queen and Dunkin' Brands are included in the 40% who are larger.

Finally, as Chart 3 shows, use of SBA-financing is not determined by industry.

So what does all this tell us about the profile of a typical franchise system who use SBA financing options? Simply that the SBA's value proposition appeals to a broad spectrum of franchise systems. Young, mature, small and large systems all have found the SBA to help their growth.

As you are aware, we are working with the IFA Educational Foundation to produce the Profile of Franchising: 2006. This newer edition updates and extends the original Profile produced from 1996-1998.

The report is being released in sections via Franchising World magazine and the IFA Website. Sections I and II are available below, look for Section III in the October issue.