Over the weekend, we circulated a Client Alert detailing some of the financial assistance potentially available to franchisors and franchisees under the CARES Act. We've been in contact with industry groups, and we understand that SBA may issue rules and procedures as early as April 1st.

Many franchisors have expressed interest, on behalf of themselves or franchisees, in the Paycheck Protection Program (PPP). Like other SBA programs, there is a limited pool of funds available, currently $349 billion, to support loans under this program. Our sources have also indicated that many estimate that these funds will be depleted within three days given the expanded pool of eligible borrowers. If you or your franchisees are interested in seeking funds through this program, we strongly encourage interested applicants to proactively engage their lenders and gather the documentation that may be required as part of the application.

Additionally, the SBA has communicated to us that a franchised brand must be listed on the SBA Franchise Directory in order for its franchisees to be eligible for the PPP, even if the business falls within NAICS Code 72. Our interpretation of this provision differs from that of the SBA, and we are actively liaising with our industry and government contacts to further clarify this point. However, in light of the extremely fast pace of the rulemaking process, any brand interested in access to this funding that is not on the SBA Franchise Directory should consider applying as soon as possible. For those brands listed on the SBA Franchise Directory, our contacts have indicated that the SBA will not require an addendum to the franchise agreement under the PPP.

Please contact us with any questions.

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