{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-circumstances-allow-a-franchisor-to-be-considered-affiliated-with-a-franchis","api_url":"https://dealroom.so/api/public/questions/what-specific-circumstances-allow-a-franchisor-to-be-considered-affiliated-with-a-franchis","question":"What specific circumstances allow a franchisor to be considered affiliated with a franchisee for SBA size purposes?","topic":"Franchise eligibility","audience":"lender","bot_mode":"lender","short_answer":"A franchisor may be affiliated with a franchisee if the franchise agreement or relationship allows the franchisor to exercise control or have an identity of interest over the franchisee's operations or management.","rule":"Under 13 CFR 121.103, affiliation can arise from control or identity of interest. If a franchisor exerts significant control over a franchisee's business decisions (beyond standard brand protection), or if there are shared financial interests that make them operate as one entity, affiliation may be triggered, requiring their sizes to be aggregated.","example":"A franchisor not only provides brand guidelines but also dictates all operational policies, purchases, and pricing for its franchisees, effectively controlling their businesses. This level of control would lead to affiliation for size standard purposes.","what_lenders_check":"Lenders must review franchise agreements for clauses that grant excessive control to franchisors. Unidentified affiliation with a franchisor can lead to the combined entity exceeding size standards, resulting in an ineligible loan.","required_facts":["Franchise agreement","Franchisor control","Operational decisions","Management control","Identity of interest","Size aggregation"],"source_families":["13 CFR Part 121 - Small Business Size Regulations","SOP 50 10 - Lender and Development Company Loan Programs","Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule"],"official_sources":[{"title":"13 CFR Part 121 - Small Business Size Regulations","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-121"},{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"Affiliation and Lending Criteria for SBA Business Loan Programs - Final Rule","url":"https://www.federalregister.gov/documents/2023/04/10/2023-07173/affiliation-and-lending-criteria-for-the-sba-business-loan-programs"}],"related_questions":[{"question":"What are the specific criteria for a new franchise model to be included on the SBA Franchise Directory?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-criteria-for-a-new-franchise-model-to-be-included-on-the-sba-franchi"},{"question":"How does a lender determine if a franchise agreement contains impermissible control provisions not listed on the Directory?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-if-a-franchise-agreement-contains-impermissible-control-provis"},{"question":"What are the specific requirements for a lender to obtain an approved franchise agreement for a 7(a) loan when the franchise is not listed on the SBA Franchise Directory?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-a-lender-to-obtain-an-approved-franchise-agreement-"},{"question":"Which specific provisions in a franchise agreement raise red flags for undue franchisor control, making it ineligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/which-specific-provisions-in-a-franchise-agreement-raise-red-flags-for-undue-franchisor-co"},{"question":"Can an existing franchise location that is not currently listed on the SBA Franchise Directory be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-an-existing-franchise-location-that-is-not-currently-listed-on-the-sba-franchise-direc"},{"question":"How does the SBA determine if a franchise agreement grants the franchisor 'undue control' over the franchisee, impacting 7(a) eligibility?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-determine-if-a-franchise-agreement-grants-the-franchisor-undue-control-ov"}],"related_terms":[{"term":"Franchisor-franchisee relationship","url":"https://dealroom.so/glossary/franchisor-franchisee-relationship"},{"term":"Industry-Specific Size Standards","url":"https://dealroom.so/glossary/industry-specific-size-standards"},{"term":"Franchisee","url":"https://dealroom.so/glossary/franchisee"},{"term":"Franchisor","url":"https://dealroom.so/glossary/franchisor"},{"term":"SBA size determination","url":"https://dealroom.so/glossary/sba-size-determination"},{"term":"SBA size standard","url":"https://dealroom.so/glossary/sba-size-standard"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-specific-circumstances-allow-a-franchisor-to-be-considered-affiliated-with-a-franchis","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}