For SBA lenders
Short answer
The "franchise rule" generally applies to traditional franchisor-franchisee relationships, but it can extend to independent dealer or licensee models if the degree of control exercised by the licensor/parent company over the licensee's operations is equivalent to that found in a franchise relationship.
Affiliation by control can be established through contractual relationships. If a licensing or dealer agreement grants the licensor significant control over the licensee's management, operations, branding, or supply chain, the SBA may deem them affiliated, requiring aggregation of their size for eligibility purposes.
A small independent tire dealer operates under a licensing agreement with a large tire manufacturer. If the agreement dictates pricing, marketing, purchasing, store layout, and management practices, the lender would need to evaluate if this constitutes affiliation under the "franchise rule" principles, potentially combining their revenues for size eligibility.
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
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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