How We Score Risk

Every business guide has a Risk Meter. Here is exactly how it works, so you can check it and disagree with it.

Last updated October 30, 2026

The meter scores eight factors from 1 (lowest risk) to 5 (highest). Each score comes from numbers already on the guide, using the fixed thresholds below. Nobody adjusts a score by hand, and no business or franchisor can pay to change one.

The overall score

The overall score is the plain average of the factors that have data, weighted equally.
A factor without data is shown as “Not scored” and left out of the average. We never fill a gap with a guess.
We only show an overall score when at least 4 factors have data.
Low: 1 to under 2. Moderate: 2 to under 3. Elevated: 3 to under 4. High: 4 to 5.

Money at risk

How much could you lose if the business doesn't work? The top of the startup budget (the professional plan's high end). Not scored while some startup lines aren't sourced yet, because the real figure would be higher; the one exception is a budget whose sourced lines already reach the top level.

1: Under $10,000
2: $10,000 to under $50,000
3: $50,000 to under $150,000
4: $150,000 to under $500,000
5: $500,000 or more

Time to earn it back

How long until the business pays back what you put in? The conservative forecast preset, with the lean startup cost and sourced operating costs. Not scored when some cost lines aren't sourced yet, because the result would look better than it is.

1: Within 3 months
2: Within 6 months
3: Within 12 months
4: Within 24 months
5: Not within 24 months

Franchise closure rate

Even with a franchisor's support, how often do these businesses close? Each compared brand's FDD Item 20: terminations, non-renewals and outlets that stopped operating in one year, divided by franchised outlets at the start of that year. Averaged across brands that started the year with at least 10 outlets.

1: Under 3% a year
2: 3% to under 6%
3: 6% to under 10%
4: 10% to under 15%
5: 15% or more

Loan default rate

When people borrowed to start or buy this kind of business, how often couldn't they repay? SBA 7(a) loans approved FY2010–2019 for this industry's NAICS code: the share the SBA charged off, compared with the rate for all industries. Covers independent businesses as well as franchises. Industries with fewer than 100 loans aren't scored.

1: Under half the all-industry rate
2: 0.5 to 0.85 times the all-industry rate
3: About the same (0.85 to 1.15 times)
4: 1.15 to 1.5 times the all-industry rate
5: 1.5 times the all-industry rate or more

Demand trend

Is this kind of business growing compared with all businesses? Government data (Census business counts or BLS job projections) compared with the all-industry baseline for the same years.

1: Growing much faster than all businesses (15+ percentage points above the all-industry rate)
2: Growing faster (3 to 15 points above)
3: About the same (within 3 points)
4: Growing slower (more than 3 points below, but still growing)
5: Shrinking

Licensing and rules

How much licensing and regulation stands between you and your first customer? The licensing section of the guide (California).

1: Light: a business license and basic registrations
3: Moderate: a state registration, certification or exam
5: Heavy: a state license with experience requirements, or legal limits on who may own it

Customer concentration

How many customers does the business depend on? How the business gets paid, described in the guide.

1: Many customers; losing one barely matters
3: A few large customers or referral partners
5: One customer or platform that can end the relationship

Physical demand

How hard is the work on your body, especially past 55? The guide's physical demand rating.

1: Low
3: Moderate
5: High

What the meter can't tell you

It measures risk, not reward. A higher-risk business can still be the right choice if the return is there; check the franchisee revenue figures and the forecast on each guide.
Some inputs are judgments (licensing, customer concentration, physical demand). Each one states its reason on the guide so you can weigh it yourself.
Closure rates cover franchised outlets only. Loan default rates cover any business that borrowed through the SBA, which leans toward owners who could qualify for a loan; an industry code can also include businesses unlike the one in the guide.
Your own savings, health, local market and experience matter more than any score.

Every input lists its source. See all sources.