Tuesday, February 24, 2009

Success By Default

When Sevy was a culinary student "the joke" was (after getting your very expensive degree) to make a lot of money in the food business, open a pizza place. News of SBA loan defaults in today's WSJ, might make the argument, if you want to stay open, open a pizza place, or even better, a Subway. Or maybe it makes the argument to stay out of the industry - of the 11 highest defaulting franchises, 8 were food related.

Studying loans made from 2001 to 2008 vs. the number of these loans that defaulted in 2008, the data showed Subway the lowest loser with a default rate of only 2% of loans made, followed by Domino's Pizza (5%), Quizno's (6%), and Cici's Pizza (8%). The highest percentage of defaults came from Dream Dinners (18%).

But buried further, studying a longer period of time, "the worst-performing franchise brands, as measured by the percentage of SBA-guaranteed loans issued to franchisees over the past eight fiscal years that defaulted: Mr. Goodcents Subs & Pasta's, 55%; Philly Connection Sandwiches, 51%,....Carvel and Blimpee, both with 41%."

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