Glossary · Reading the business
Franchise
In short
A business model where an independent business owner (franchisee) operates under the brand and system of a larger company (franchisor). If you're buying a franchise, the SBA has specific eligibility requirements.
What it means in a deal
When buying a franchise, the SBA requires the franchisor to be listed on its Franchise Directory or have an approved addendum. This ensures the franchise agreement meets SBA eligibility rules regarding control and affiliation. Always confirm the franchise's SBA status early in your due diligence.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Franchise
- Can an SBA 7(a) loan finance a franchise resale where the current franchisee is selling the existing location?
- Can I use an SBA 7(a) loan to purchase a franchised business with no prior experience in that specific franchise system?
- How does the SBA determine if a franchise agreement grants the franchisor 'undue control' over the franchisee, impacting 7(a) eligibility?
- If I acquire a franchise, does the SBA approve the specific franchise location?
- What if a franchise agreement is not listed on the SBA Franchise Directory?
- What due diligence is required for a franchise not on the SBA Franchise Directory?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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