Franchise PPP Loans and Restaurant Revitalization Grants: What the Final SBA Files Show

Act one: first-draw franchise PPP loans, April 2020 to June 2021

The first draw of PPP put $584.98 billion into 8,612,447 US loans from April 2020 to June 2021. 81,791 of those loans (0.95%) carry a franchise name, for $16.33 billion (SBA PPP FOIA, as of 2024-09-30).

The timing of those flags is the first sign that the field is incomplete. In April 2020, 2.36% of first-draw loans (68,275 of 2,896,272) were flagged. In May 2020 the rate was 0.41% (6,212 of 1,507,805), and by April and May 2021 it was 0.08% and 0.04%. As a result, 83.5% of all first-draw flagged loans date from April 2020.

The same drop shows inside a single franchise-heavy industry. Among limited-service restaurants (NAICS 722513), 29.6% of 54,638 April 2020 first-draw loans were flagged, against 4.3% of 17,984 in May 2020. If early borrowers skewed toward established franchisees, part of the fall is real; a drop of this size inside one industry within one month suggests that recording changed too, not only borrower mix.

The borrower form did ask. SBA Form 2483 (04/20) question 8 asked whether the applicant was a franchise listed in the SBA Franchise Directory, with a yes or no box and no code field (Form 2483, April 2020; same wording in the June 2020 revision). The lender form required a yes when the applicant was a listed franchise (Form 2484, April 2020). The public file does not show why the name was recorded for some loans and not others.

For comparison, The Washington Post reported in January 2021 that SBA identified 75,746 franchise businesses with $15.6 billion in 2020 PPP loans (Washington Post, 2021-01-28). The final file shows 76,597 first-draw flagged loans approved in 2020 for $16.02 billion, close to that earlier release.

Act two: second-draw loans and the brands behind the flags

The second draw, open from January 2021, lent $207.62 billion through 2,855,763 US loans. 68,295 of them (2.39%) are flagged, for $9.12 billion (SBA PPP FOIA). The second-draw flag rate is 2.52 times the first-draw rate.

The later forms asked more. Form 2483 revised in March 2021 and the second-draw Form 2483-SD both ask whether the applicant is a franchise and, if listed, for the SBA Franchise Identifier Code (Form 2483, 3/21; Form 2483-SD, 3/21). Second-draw flags still faded within the program: 3.69% of second-draw loans in January 2021, 0.34% in May 2021.

Each franchisee entity was limited to one first-draw and one second-draw loan, with caps of $10 million and $2 million per franchisee entity (SBA and Treasury PPP FAQ 23, as of July 29, 2021). The CARES Act waived affiliation rules for franchises with an SBA franchise identifier code (SBA OIG Report 25-14, footnote 5).

Brands. The final file holds 3,728 distinct Directory labels. Subway has the most flagged loans (9,911; 6.6% of all flagged loans), followed by Dunkin’ Donuts (3,691) and McDonald’s (2,390). McDonald’s loans were mostly first draw (2,244 vs 146). Ranked by dollars, dealer agreements lead: the General Motors dealer agreement label carries $1,382.5 million and the Ford dealer agreement $964.0 million. The 15 largest labels account for 23.2% of flagged loans, and 264 labels have 100 or more.

Where flagged loans went: industries and flag rates

Flagged loans cluster where franchising is common. 49.0% of flagged loans went to accommodation and food services (NAICS 72), against 7.1% of all PPP loans, and the 12 most common 6-digit industries hold 66.2% of flagged loans (SBA PPP FOIA).

Flag rates inside those industries are the cleanest gauge of the undercount. In limited-service restaurants, 21.2% of 136,545 PPP loans were flagged; the 2017 Economic Census counted 144,941 franchise establishments among 252,884 US limited-service restaurants (57.3%) (Census, EC1700FRAN). Hotels and motels show 30.5% flagged against 57.9% of establishments; new car dealers 35.5% flagged although the Census counts every new car dealer establishment as a franchise.

Establishments are not loans: a franchisee with several restaurants in one company files one PPP loan, so establishment shares overstate the share of franchise borrowers. The firm-based benchmark in the undercount section corrects for that.

Act three: Restaurant Revitalization Fund grants to franchises

The Restaurant Revitalization Fund (RRF) was a $28.6 billion grant program created by the American Rescue Plan Act of 2021, paying up to $5 million per location and $10 million per applicant with affiliates (CRS IF11819). Applicants with more than 20 locations, counting affiliates, were not eligible, which kept large multi-unit franchisees out. Demand outran funds: more than 278,000 eligible applications sought over $72.2 billion as of June 30, 2021 (CRS).

The RRF file lists 100,828 grants totaling $28.61 billion, approved from 2021-05-07 to 2022-12-23; 99.8% were approved by July 31, 2021 (SBA RRF FOIA). Of these, 10,172 grants (10.1%) carry a franchise name, worth $2.65 billion (9.3% of dollars).

Franchise grants were slightly smaller: the median franchise grant was $115,411 against $127,339 for other grants. RRF awards were sized on lost revenue rather than payroll (CRS). 80.0% of franchise grants list only “Restaurant” as the business type, vs 59.6% of other grants, and 11.9% of franchise grants went to rural locations vs 15.8%.

The application asked whether the applicant operated under a franchise, license or similar agreement and whether it was listed in the SBA Franchise Directory (SBA Form 3172); the program guide required a Directory listing with an identifier code (RRF Program Guide, April 20, 2021). The RRF file names 975 franchise labels. Subway alone accounts for 2,873 grants (28.2%), then Dunkin’ Donuts (302) and IHOP (296). 25 labels have 50 or more grants and 340 have one.

By state, California had the most franchise grants (1,596), then Texas (847). Among states with at least 500 grants, the franchise share ran from 4.5% in Oregon to 16.6% in Alabama. Related state counts of franchise businesses are in franchise statistics by state.

Across programs: forgiveness, charge-offs and jobs

Flagged PPP loans were forgiven at a higher rate and charged off less often than other loans. Part of that gap comes from who was flagged: larger employers in restaurants and hotels, many approved in the first weeks. The comparison below shows both the raw figures and a matched version.

Forgiveness. Forgiven dollars equaled 99.0% of approved dollars on flagged loans ($25.21 billion) and 96.2% on other loans, status as of September 30, 2024 (SBA PPP FOIA). ForgivenessAmount exceeds the approved amount on 90.4% of all PPP loans in the file, so the ratio is not capped at 100% for a single loan.

Charge-offs. 1,061 flagged loans ($101.4 million) were charged off: 0.71% of flagged loans vs 5.67% of other loans. After re-weighting other loans to the flagged loans’ mix of 6-digit industry, draw and jobs band, the comparison is 0.71% vs 1.78%. The raw gap is 8.0 times; the matched gap is 2.5 times. Within limited-service restaurants alone, 0.61% of flagged loans were charged off vs 2.85% of other loans.

Jobs. The median flagged loan reported 13 jobs at application against 1 for other loans. Flagged loans reported 4,083,268 jobs in total, 4.5% of all jobs reported on PPP loans; a business that borrowed twice counts its jobs twice.

The comparison group contains the franchise loans the flag missed, which pulls the two groups closer together. For 7(a) and 504 franchise lending outside the pandemic programs, see SBA franchise loans.

The undercount: how many franchise PPP loans the flag misses

How many franchise PPP loans were there? The flagged count, 150,086, is the only count in SBA’s file. Two Census benchmarks suggest the true number was about double: 299,668 to 308,363 loans, so the flag captures 48.7% to 50.1%.

Benchmark 1, industry. The Census Annual Business Survey for data year 2020 reports that 4.8% of US employer firms answering the question operated all or part of the business as a franchise; 19.9% of restaurant firms (NAICS 7225), 37.9% of traveler accommodation firms and 30.0% of automobile dealers (Census ABS 2020, AB2000CSCB01). Applying each loan’s industry share to 4,776,503 employer-type PPP loans (for-profit entities reporting two or more jobs) and adding the flagged loans outside that group gives 308,363 franchise loans.

Benchmark 2, firm size. Franchise shares rise with firm size, from 2.4% of firms with 1 to 4 employees to 12.3% of firms with 20 to 49 (Census ABS 2023, AB2300CSCB04). Applying those shares by jobs reported gives 299,668.

The two methods land close together on loan counts but far apart on dollars: $40.0 billion to $67.3 billion, against $25.45 billion flagged. The undercount is worse in the first draw: the flag holds 39.8% of the industry-benchmark estimate there and 66.3% in the second draw.

In every one of 10 franchise-heavy industries checked, the PPP flag rate on employer-type loans sits below the Census franchise share: 10.6% vs 19.9% for restaurants, 28.9% vs 37.9% for traveler accommodation, 18.7% vs 30.0% for automobile dealers.