{"ok":true,"canonical_url":"https://dealroom.so/glossary/franchise-system","api_url":"https://dealroom.so/api/public/glossary/franchise-system","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"franchise-system","term":"Franchise system","group":"Reading the business","definition":"A franchise system is a business model where a franchisor grants a franchisee the right to operate a business using their established brand, products, and operating procedures in exchange for fees.","what_it_means":"If you're buying a franchise, the SBA has specific rules. The franchise system must be listed on the SBA Franchise Directory or have an approved addendum. Lenders will verify the franchise agreement and ensure it complies with SBA eligibility, especially regarding negative control or affiliation.","url":"https://dealroom.so/glossary/franchise-system","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"},{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"}],"related":[{"slug":"franchisee","term":"Franchisee","url":"https://dealroom.so/glossary/franchisee"},{"slug":"franchise-directory","term":"Franchise Directory","url":"https://dealroom.so/glossary/franchise-directory"},{"slug":"franchise-agreement","term":"Franchise agreement","url":"https://dealroom.so/glossary/franchise-agreement"},{"slug":"affiliation","term":"Affiliation","url":"https://dealroom.so/glossary/affiliation"}],"related_questions":[{"question":"If I am buying a franchise, does the SBA need to approve the franchise system?","url":"https://dealroom.so/sba-loans/basics/if-i-am-buying-a-franchise-does-the-sba-need-to-approve-the-franchise-system"},{"question":"What if a franchise system is not listed on the SBA Franchise Directory but the agreement is SBA-compliant?","url":"https://dealroom.so/for-lenders/questions/what-if-a-franchise-system-is-not-listed-on-the-sba-franchise-directory-but-the-agreement-"},{"question":"What specific due diligence must a lender perform if a franchise system is not listed on the SBA Franchise Directory?","url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-must-a-lender-perform-if-a-franchise-system-is-not-listed-on-t"},{"question":"What specific requirements apply to a franchise system for SBA 7(a) loan eligibility?","url":"https://dealroom.so/sba-loans/basics/what-specific-requirements-apply-to-a-franchise-system-for-sba-7-a-loan-eligibility"},{"question":"How does the SBA evaluate an emerging franchise system for 7(a) loan eligibility?","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-evaluate-an-emerging-franchise-system-for-7-a-loan-eligibility"},{"question":"How do I check if a specific franchise system is eligible for SBA 7(a) financing?","url":"https://dealroom.so/sba-7a/questions/how-do-i-check-if-a-specific-franchise-system-is-eligible-for-sba-7-a-financing"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Franchise system","url":"https://dealroom.so/glossary/franchise-system","source_type":"DealRoom Data"}}