Glossary · People and paperwork
Franchisor-franchisee relationship
In short
The legal and operational agreement between the brand owner (franchisor) and the individual business owner (franchisee). The SBA has specific rules for these relationships.
What it means in a deal
If you're buying a franchise, the SBA requires that the franchisor-franchisee relationship meets specific criteria to ensure the franchisee has sufficient control over the business. Your lender will verify the franchise is listed on the SBA Franchise Directory or request a franchise agreement addendum.
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 Franchisor-franchisee relationship
- When does a franchisor's influence, even without ownership, trigger affiliation for the franchisee?
- What specific circumstances allow a franchisor to be considered affiliated with a franchisee for SBA size purposes?
- How does the SBA determine if a franchisor has "control" over a franchisee for affiliation purposes, beyond standard agreements?
- How does the SBA determine if a franchise agreement grants the franchisor 'undue control' over the franchisee, impacting 7(a) eligibility?
- When does familial relationship between owners of separate businesses trigger affiliation for size?
- When does a prior contractual relationship create affiliation for 7(a) size determination?
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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