Business Failure Rates | Franchise Research
Franchisor & Franchisee Attrition Rates
Standardized Reporting Agencies, Regulatory Disclosures & Tracking Metrics
- FTC Item 20 Benchmark3 YearsMandatory historical tracking of transfers, terminations, and closures required in every FDD.
- High Churn Threshold> 10%Annual unit turnover rate triggering scrutiny from state regulators and institutional lenders.
- SBA Loan Horizon10 YearsRolling cumulative window used by the SBA to track brand-level loan default & distress rates.
Key Reporting Agencies & Primary Data Sources
| Agency / Entity | Data Scope | Attrition Metrics Tracked | Primary Utility |
|---|---|---|---|
| FTC DisclosuresRegulatory | Mandatory (All Active Brands) | Terminations, Non-Renewals, Reacquisitions, Ceased Operations & Unit Transfers (Table 3 & 4) | Legal baseline for 3-year historical unit movement per franchisor brand. |
| FRANdataCommercial Research | Comprehensive Archive | System stability, FUND Scores, multi-year turnover rates & systemic growth vs. churn. | Underwriting standard for lenders and institutional private equity. |
| Vetted Biz & FranchiseGradeCommercial Research | 4,500+ Franchise Brands | 3-Year outlet changes, net growth performance, structural turnover & systemic grading. | Comparative benchmarking and prospective buyer due diligence. |
| U.S. SBAGovernment | SBA 7(a) & 504 Loans | Historical Brand Loan Default Rates & Cumulative Financial Distress over 10-year windows. | Objective proxy for franchisee financial survival and bankability. |
Core Attrition & Stability Formulas
- Annual Outlet Turnover Rate:
- Turnover Rate = [(Terminations + Closures + Non-Renewals + Reacquisitions) / Initial Total Units] × 100
- Resale / Transfer Ratio:
- Transfer Ratio = [Transfers / (Transfers + Terminations + Closures)] × 100
- 3-Year Cumulative Loss:
- Cumulative Loss = [∑(3-Year Net Exits) / Year 1 Starting Units] × 100