REVISED FRANCHISE PROCEDURES
On July 27, 2016, SBA revised its regulations governing affiliation with respect to the Business Loan, Disaster Loan and Surety Bond Guaranty Programs (81 FR 41423). Under the revised regulations, the principles of affiliation with respect to these programs can be found at 13 CFR 121.301(f). The regulation identifying affiliation based on franchise and license agreements is found in §121.301(f)(5) and was modified to read: Affiliation based on franchise and license agreements. The restraints imposed on a franchisee or licensee by its franchise or license agreement generally will not be considered in determining whether the franchisor or licensor is affiliated with an applicant franchisee or licensee provided the applicant franchisee or licensee has the right to profit from its efforts and bears the risk of loss commensurate with ownership. SBA will only consider the franchise or license agreements of the applicant concern. SOP 50 10 5(I) replaces the current franchise review process with new guidance that reflects the changes to the affiliation regulations, and incorporates significant improvements in policy and process that will reduce time and costs.
Effective January 1, 2017, SBA:
a) will no longer review franchise and license agreements to determine affiliation between the franchisor and franchisee; instead, SBA will require the SBA Addendum to Franchise Agreement (see Attachment 1 to this Notice) be executed by the franchisor and franchisee for each loan involving a franchise or similar agreement;
b) will no longer maintain an internal or external centralized listing of franchise systems where the franchisee is not considered affiliated with the franchisor for size determination (formerly known as the “Franchise Registry”);
c) will no longer maintain an internal or external centralized listing of franchise systems where the franchisee is considered affiliated with the franchisor (formerly known as the “SBA Franchise Findings List”); and
d) will identify the specific franchise of the applicant in E-Tran/SBA One.