The International Franchise Association (IFA) arranged a call with Steve Olear, Chief Franchise Counsel at the U.S. Small Business Administration, on April 7th.
Here is a full transcript of the questions-and-answers with Steve Olear:
Mike Layman: Can a franchise business – if it has fewer than 500 employees, and meets the SBA employee-based or revenue-based size standard corresponding to its primary industry – have access to Paycheck Protection loans if their brand is not listed on the Franchise Directory?
Steve Olear: If you are an applicant that operates under the agreement and meets the FTC definition of a ‘franchise’ then you need to be on Directory in order to qualify for the loan.
ML: Conversely, can franchisees within a franchise system that IS registered in the SBA’s Franchise Directory be eligible for PPP loans, even if they do NOT meet some of the other CARES Act criteria?
SL: A franchisee of a franchise brand that is on the Directory could potentially be eligible to pass the franchise (definition) piece but has to meet all other qualifications under the CARES Act and/or SBA eligibility requirements.
ML: Can franchisors be eligible for Paycheck Protection loans?
SL: They can if they meet the qualifications under the CARES Act and/or SBA eligibility requirements.
ML: Can franchise brands quickly apply and be added to the Franchise Directory right now, amid all of the competing demands for SBA attention right now?
SL: If a brand is on the Directory, SBA waives affiliation. We are allowing franchises to join the agency and tell us that they only want to get on the Directory for the Paycheck Protection Program. We will not look at affiliation at all, we will only look at eligibility of the brand and then put them on the Directory with the limitation that they are only on there for the Paycheck Protection Program and be removed after. So that will be a quick expedited review – we would just do the eligibility piece of it and if it meets SBA eligibility requirements, we will put them on there because affiliation is waived for any franchise on the Directory.
ML: Can franchise brands become temporarily listed in the Franchise Directory for the purpose of enabling their franchisees to access Paycheck Protection loans, and if so, what is the process for doing so?
ML: Depends on the eligibility piece. If they were not out on Directory because of control or affiliation issues but would otherwise eligible under SBA eligibility regulations, then potentially they can be placed in the Directory in a limited capacity to have their franchisees and applicants apply for the Paycheck Protection Program.
ML: Every franchise system is different. What are some reasons why a franchise applicant to the Directory may be denied?
SL: It is difficult to say because it is very broad. I would say it is based on SBA eligibility requirements. Illegal businesses (businesses that cannot operate in every state) is one. SBA has a path of business type/operations (things like that) that SBA normally looks at in terms of what is considered an eligible business.
ML: To apply for registration with the Directory, a Franchisor is required to upload certain documents, can you explain what those documents are?
We definitely need to see the FDDs. That would give us all the information we need in terms of franchise system and brand. If you want to be on Directory just for the Paycheck Protection Program, let us know that in your submission and we can do an expedited review.
ML: For those unfamiliar with this process, what is the best way to apply to get on the Franchise Directory?
SL: You should send documentation to our email mailbox which is firstname.lastname@example.org.
ML: Do franchisees in a brand that is not on the Franchise Directory have access to an Economic Injury Disaster Loan (EIDL)?
SL: In terms of applying for the EIDL loan – yes, they have to be on the Directory, and affiliation is NOT waived for that program.
FRANdata has been a strategic research partner for the IFA for the past 5 years. The IFA is constantly championing the cause of franchising and pushing out important information on calls such as what was held above. If you are not yet a member we strongly suggest you look into becoming an IFA member. Check out how to become a member here — https://www.franchise.org/membership