For SBA lenders
Short answer
Undue control clauses typically include those that restrict the franchisee's ability to transfer ownership, manage operations, select suppliers, or control their assets without franchisor consent, beyond reasonable brand standards.
The SBA requires franchisees to have sufficient control over their business operations and assets. Clauses granting the franchisor excessive authority, such as mandatory repurchase options at less than fair market value, blanket approval rights for all financing, or restrictions on selling the business, are examples of undue control that render a franchise agreement ineligible.
A franchise agreement states the franchisor has an absolute right of first refusal to purchase the business at a pre-determined, non-negotiable price significantly below market value if the franchisee wishes to sell. A lender would identify this as an undue control clause, making the franchise ineligible.
Insider move
Lenders must meticulously review franchise agreements, including all addenda, to identify and understand any clauses that could imply undue franchisor control, jeopardizing the franchisee's independence and 7(a) loan eligibility.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
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.
More on franchise eligibility
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day