The SBA Franchise Directory is officially back online from June 1, 2025, and with it comes a series of critical updates for franchisors and franchisees discussed in the virtual briefing led by Stephen Olear, Senior Franchise Counsel at the U.S. Small Business Administration.
The SBA Franchise Directory was intended to simplify the loan approval process for franchisees by providing the lender with the information of franchise systems that already evaluated and pre-screened by the SBA as meeting the SBA’s eligibility requirements for SBA financial assistance. A franchisor must be listed in the directory in order for its franchisees and franchisors to qualify for SBA loans. There is no cost to be listed on the Franchise Directory. However, there are two different processes for franchise brands.
Franchise Brands already listed on the SBA Franchise Directory prior to May 2023
Franchisors previously included in the Directory must submit the new SBA Franchisor Certification by July 31, 2025, to remain on the Directory. Many of these conditions are the same as those of the previous Franchise Directory. A request for a few days’ extension can be requested by email to SBA at franchise@sba.gov. The estimated timeline for response suggested by the SBA is approximately one week from the date of submission.
If the brand name has changed since the initial registration prior to 2023 or if the brand prefers to be listed by a name different from its legal name listed in the franchise documents, then brands must provide such clarification by email to SBA at franchise@sba.gov.
If the franchisor or distributor has not executed the Certification by July 31, 2025, or latest by the extension date approved by the SBA, the existing brand will be removed from the Franchise Directory. Once removed, the brand, along with the franchisee, will have to execute and perform the requirements of the SBA Addendum (Form 2462 or negotiated addendum) in order to be listed on the Directory again.
Franchise Brands Who Wish to be Listed for the First Time
For franchise brands that will be applying for the first time to be listed on the Franchise Directory, they must submit their Franchise Disclosure Document (FDD), franchise agreement, and all required ancillary documents to the SBA at franchise@sba.gov. The SBA will conduct a centralized review and may request additional materials such as operations manuals.
The Franchise Directory is intended to include only those brands that meet the FTC definition of a “franchise”. However, the SBA will analyze any contractual arrangement and list that brand if that brand is eligible in all other respects.
Upon completion of SBA’s review and a determination by SBA that the brand is eligible, SBA will send the Franchisor Certification or the Distributer Certification to the franchisor or distributor for review and an authorized representative’s signature. Once a properly executed Franchisor or Distributor Certification is returned to SBA at franchise@sba.gov, the SBA will list the brand on the Directory and will assign an SBA Franchise Identifier Code, though listing does not imply endorsement of business success.
Major Developments in the Reinstated Franchise Directory and SOP 50 10
- Evaluation Metrics – In order to evaluate if a brand is eligible, the SBA will analyze the brand’s history; litigation and the ownership; how the brand has operated and the ability of SBA’s to secure the loan with collateral (some of the FA/FDD have a provision that they will subordinate their lien over the SBA loan/SBA will have senior lien over the franchisee’s assets).
- “Passive” Franchisee – Business systems that indicate that the franchisee is a “passive” investor will not qualify for SBA financing. Therefore, the SBA will evaluate if the franchisee has “meaningful oversight” over the business operations, such as oversight over the budget, the employees, and the bank accounts, etc. Similarly, master franchisees who fundamentally earn revenue through collecting royalties from other sub-franchisees will also be considered “passive” investors and therefore, not eligible to be listed on the Directory.
- Multi-Brand Franchisee – If a franchisee is operating multiple franchise brands, such franchisee must clear the SBA eligibility for each franchise brand and each such franchise brand must be independently listed in the directory.
- Franchisor’s Eligibility for SBA Financial Assistance – A franchisor itself may be eligible for SBA Financial Assistance if –
- The brand is listed on the Directory
- Franchisor on its own, meets SBA size standards
- Applicant itself is eligible under all SBA current regulations
- Removing brand from Directory – Subject to a 30-day notice and an opportunity for the brand to respond, the SBA now has the authority to remove a brand listed on the Franchise Directory if any of the following event, as determined by the SBA its discretion, occur:
- If the brand that has been listed on the Franchise Directory has not compiled with the terms of the Certification submitted; orIf the brand has engaged in any illegal activities; orIf the brand is proved to have submitted material false information in its application to SBA or the SBA lender; orIf the brand has withheld material information from the SBA or the SBA Lender;
- If the state has issued an ordering prohibiting the brand from operating within that state.
We at Fox Rothschild see the re-institution of the SBA Franchise Directory as a very positive development and are excited to see it active again.
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