Methodology
How we score, where the data comes from, what we don't know.
FranchiseVerdict is the independent research database for franchise investors. Every rating you see, every metric on every brand page, traces back to a source. This page tells you which one.
FranchiseVerdict Research Team
Methodology last updated May 2026 · Based on 3,022 FDD filings and 126,612 SBA 7(a) FOIA records
Origin of every claim
Data sources
Franchise Disclosure Documents (FDDs)
Brand-specific filings franchisors must give prospective franchisees under FTC rule 16 CFR 436. Items 1, 3, 5, 6, 7, 11, 12, 17, 19, and 20 are the financial and contract sections we extract. Source PDFs come from state regulator portals (CA, MN, NY, ND, RI, VA, WA, WI, plus NASAA/state-administrator records).
Coverage · 3,022 FDD-extracted brands · FDD years 2017–2026
SBA loan disclosures
Public records released under FOIA, covering Small Business Administration loans guaranteed under the 7(a) and 504 programs. We join these to FDD brand names so you can see real charge-off rates per brand. 3,481 brands have SBA loan history.
Coverage · 126,612 7(a) loans · 16,915 504 loans · 3,481 brands with lending records
Charge-off rates are computed against resolved loans (charged off + paid in full), not total originations. Loans still being repaid are excluded from the denominator because their final outcome is unknown. This produces a more accurate picture of actual loss experience but means rates may differ from raw origination-based calculations.
Sub-program note: 7(a) totals include all sub-programs (Standard 7(a), SBA Express, CAPLines, Export Express, and Community Advantage). SBA Express loans carry a lower guarantee percentage and historically show higher charge-off rates than Standard 7(a). 504 totals include both regular purchase and refinance loans. Lender-level charge-off rates reflect each lender's full portfolio mix across these sub-programs.
Charge-off rate = charged-off loans / (charged-off + paid in full), cumulative since 2000. Loans still active or in disbursement are excluded from the denominator.
Brand logos
Logos are sourced from Google's favicon service using each brand's website domain. Where no favicon exists, a monogram tile renders the brand initials.
A · B · C · D · F
The Verdict rating
Every brand receives a Verdict grade (A through F) derived from its underlying risk score. Higher Verdict scores mean lower risk.
Verdict rating scale
Top-tier franchise. Strong financials, growing unit base, low litigation, favorable SBA track record. Lowest risk profile in our dataset.
Above average. Solid fundamentals with minor flags. Most established, well-run systems land here.
Middle of the pack. Mixed signals across financial, legal, or growth metrics. Requires deeper due diligence.
Below average. Notable concerns in multiple areas: high turnover, litigation history, weak unit economics, or declining system.
Significant risk. Multiple red flags across financials, legal, and operational metrics. Proceed with extreme caution.
What the risk score reflects
The score blends FDD text analysis with quantitative financial signals. Lower scores mean lower risk. We weight the following:
FDD disclosure signals
- Bankruptcy disclosure in Item 3: +15 to +25 points depending on recency
- Litigation count in Item 3: +1 point per active case, +2 per government action. Recency-weighted: cases in the last 2 years count double
- Going-concern note in Item 21 audited financials: +20 points (significant red flag)
- Unit terminations: termination rate above 5% adds +3 to +10 points scaled linearly
Financial outcome signals
- SBA 7(a) charge-off rate (weight: ~40% of final score), the only outcome-validated signal in the model. <2% charge-off with ≥10 loans: -15 points. 2-5%: -8 points. 10-20%: +10 points. >20%: +15 to +30 points. Requires ≥10 loans for standard tiers, ≥5 for extreme rates (≥50%)
- Revenue-to-investment ratio (weight: ~20%). >3× ratio: -8 points. 1-3×: no adjustment. <0.5×: +8 points
- Unit growth trajectory (weight: ~10%). >10% YoY growth: -5 points. Shrinking by >5%: +5 points
Structural adjustments
- Mega-system floor: brands with >2,000 units, >$1M revenue, and low SBA charge-off are capped at score 40 regardless of FDD language (proven systems)
- SBA hard floor: ≥40% charge-off rate on ≥10 loans floors at D minimum (score ≥60). ≥25% charge-off on ≥5 loans cannot earn an A. Prevents clean FDD language from masking poor real-world outcomes
- FDD staleness: filings older than 2023 add +2 to +8 points depending on age. A 2017 FDD carries more uncertainty than a 2025 one
Base score starts at 40 (neutral). Penalties add points; rewards subtract them. Final score is clamped to 10-95 then mapped to a letter grade. Approximate factor weights shown above; exact contribution varies per brand because some signals are absent (e.g., no SBA data means that 40% weight redistributes to FDD signals).
Manual overrides
0 brands have a manually reviewed score override. These are cases where the automated model produces a misleading grade due to data anomalies (e.g., name collisions in SBA matching, unusual FDD structures, or known extraction errors). Each override is documented internally with a justification. We aim to reduce overrides as data quality improves.
SBA-only brands
1,898 brands have SBA 7(a) loan data but no FDD on file. Their Verdict score is based solely on lending outcomes: charge-off rate is the primary signal, with adjustments for loan volume confidence and recent performance trends. These brands are marked “SBA data only” throughout the site.
Gaps, by name
What we don't know
A research database is only as honest as its named gaps. Here are ours.
- Net income disclosed
- 11%
- Most franchisors report Item 19 gross sales but not net income. Cash-on-cash is shown only for the 524 brands that disclose.
- FDD brands with SBA history
- 52%
- 1,583 of 3,022 FDD-extracted brands have matched SBA loan records. An additional 1,898 SBA-only brands have loan data but no FDD.
- States-list coverage
- 60.4%
- Where we know which states a brand is registered in.
- CEO name disclosed
- 61.1%
- From Item 2 business-experience disclosures.
- Logo coverage
- 93%
- Logos via Google's favicon service using each brand's website domain; the rest render a monogram tile with brand initials.
- Excellent data quality
- 50%
- 2,480 of 4,920 total brands. Standard 11%, Limited <1%, SBA-only 38%.
Pricing model
What's free, what's $49
All financial data is free to browse. There is no subscription. The $49 unlock applies only to the franchisee phone numbers (and AI- generated validation questions) for a single brand. One-time purchase.
- Free: investment ranges, royalty rates, Item 19 revenues, unit growth, SBA charge-off rates, ratings, contract terms, litigation summaries, comparison and matrix views.
- $49 / brand: ~100 franchisee phone numbers from that brand's FDD Item 20, plus AI-generated questions to ask owners during validation calls.
Refresh cadence
Updates
FDDs are filed annually with state regulators. We re-extract a brand when its filing year changes. SBA 7(a) data is refreshed quarterly when SBA publishes new FOIA datasets. The data ticker on the home page reflects the current totals; each brand page stamps the FDD year it was extracted from.
Who built this
About the research
FranchiseVerdict was founded by Usman Khan with a background in data engineering, SBA lending analysis, and public records extraction. The rating model, data pipeline, and methodology documentation are built and maintained by the founding team. Questions about data accuracy or methodology can be directed to hello@franchiseverdict.com.
Not investment advice
Disclaimer
FranchiseVerdict is informational only. Ratings reflect our model's reading of the public record. They are not investment recommendations. Past unit performance, charge-off rates, and litigation history do not guarantee future outcomes. Read the full FDD before signing any franchise agreement, and consult a franchise attorney.
Frequently asked questions
How is the Verdict rating calculated?+
Each brand receives a numeric risk score starting at 40 (neutral). The model adds points for red flags (bankruptcy disclosures, high litigation, going-concern notes, SBA loan charge-offs) and subtracts points for positive signals (low charge-off rates, strong revenue-to-investment ratios, unit growth). The final score maps to a letter grade: A (excellent) through F (avoid).
Where does the data come from?+
Two primary public sources. Franchise Disclosure Documents (FDDs) are annual filings franchisors submit to state regulators under FTC rule 16 CFR 436. SBA 7(a) and 504 loan records are released under FOIA by the Small Business Administration. We extract, match, and cross-reference both datasets to produce every metric on the site.
How often is the data updated?+
FDD data is refreshed annually as franchisors file new disclosures with state regulators. SBA loan data is updated quarterly when SBA publishes new FOIA datasets. Each brand page shows the FDD year it was sourced from, and the home page ticker reflects current database totals.
What does the risk score mean?+
The risk score is a numeric value from 10 to 95 that quantifies franchise investment risk. Lower scores indicate lower risk. SBA loan charge-off rates carry the heaviest weight (roughly 40%), followed by revenue-to-investment ratio and FDD disclosure signals like bankruptcy history and litigation counts. The score maps to the letter grade shown on brand cards throughout the site.