The Market

by Simon Lord

last updated 29/10/2017

Top 200 franchises bounce back

by Simon Lord

last updated 29/10/2017

5th October 2017 – After a sales decline last year, global franchises are on the rise again, says a US publication. Who's growing and who's struggling?
Franchise Times' Top 200 ranks the world's biggest franchise brands and shows who's growing, who's struggling

Every year, the influential US publication Franchise Times publishes a list called the Top 200+ which ranks the 500 biggest brands in franchising according to global sales, total number of units in the US and worldwide, and by sales and unit growth. It’s a good indication of overall trends in a variety of market sectors.

Last year, the Top 200+ report found year-on-year sales declined among the 10 biggest global franchises by 2.6 percent – the first decline in 16 years. This year, they bounced back, growing sales by 2.8 percent during 2016 – an impressive US$7.8 billion in combined global sales. The other 190 big franchisors on the list added $12.4 billion in new sales, a 3.9 percent increase. The current US inflation rate is 1.7 percent.

Big numbers

Last year’s decline was led by McDonald’s and Subway, which saw sales drop by 1.5 percent and 3.2 percent respectively. McDonald’s responded this year with a 2.8 percent sales gain (up US$2.3 billion to 85 billion) and a 1.0 percent increase in units, although Subway still posted a small sales decline of 0.6 percent despite unit growth of 4.2 percent. The only other one of the top 10 to go backwards was Pizza Hut, with global sales down by 0.1 percent despite unit growth of 2.2 percent. Meanwhile, another pizza chain, Domino’s, has become a member of the Top 10 for the first time, pushing Wendy's out. Domino’s increased both sales and unit numbers by just over 10 percent. Since 2012, Domino’s has seen its global sales increase by 47.3 percent.

The fastest growth in the top 200 came from the strangely-named Orangetheory Fitness, which offers group personal training workouts that blend cardiovascular and strength training. Orangetheory grew sales by 111.3 percent on the back of unit growth of 73.2 percent, with 520 units in the USA and a further 62 in countries from Israel and Mexico to Australia.

Talking of Australia, the troubles experienced by 7-Eleven there in recent years have not impacted on the franchise giant’s overall performance. With a global turnover of US$82.5 billion, the company sits at number 2 on the overall list and has the most outlets  of any franchise: a massive 61,805 and still growing (up by 5.3 percent last year).

Looking at the overall figures, the biggest growth sectors are Employment Services (up 9.4 percent) and Health & Medical (up 6.9 percent). Perhaps surprisingly, Retail was up, although by only 1.6 percent, while Printing & Shipping were down by 0.5 percent. The Fitness sector is tipped as ‘red hot’ by Franchise Times, with leader Planet Fitness growing sales by 27 percent over the year to $1.9 billion.

Other trends

The report notes that as more of the largest US brands run out of available turf in their home country, they are increasingly focused on international markets. Overall, the Top 200 brands added 11,124 new overseas units during 2016 compared with fewer than 926 new units in the USA.

Franchise Times also notes that, ‘This year’s Top 200+ marks an historic high-water mark in refranchising. Many franchisors have been selling company-owned units to their franchisees or exclusively developing franchisee-owned units.’ 108 of the 200 largest franchisors have 95 percent of their total unit counts owned by franchisees, while 67 of the Top 200 are entirely franchised, with no company-owned units.

‘Ten years ago, 95 of the Top 200+ were 95 percent franchised or more, and 66 were 100 percent franchised. In total, 89.6 percent of all Top 200+ brand locations are now franchised, up from 85.7 percent the previous year.’ Increasing international growth is a key factor in this increased percentage, as national or regional master franchising is often the preferred expansion strategy.

About the Top 200+

The Franchise Times report is based upon publicly-available data in the USA, including the franchises’ most recent franchise disclosure documents and Securities and Exchange Commission filings.

The listing is a little biased towards US companies as, to qualify for inclusion, a company must be a legal US franchise which is either based in the United States, or has at least 10 percent of its total units in the United States. Even a global giant such as KFC (third on the list), for example, still has around 20 percent of its 20,604 outlets in the US currently, although if overseas growth continues as projected then the Times may find itself having to rethink its qualification standards. It’s worth noting that an Australian franchise, GJ Gardner, has broken into the top 100 this year (at number 98).

Read the Franchise Times report

Download a pdf of the full ranking with breakdowns by sector

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