Brands that Crank Out Rich Franchisees, 2010

CHICAGO — A 2010 survey shows that Yum Brands (NYSE:YUM) and McDonald's (NYSE:MCD) have the lion's share of the richest franchisees. Both brands have the most large, multi-unit franchise owners who are listed among restaurant franchisees with the highest systemwide sales in the United States.

Why is that important?

It is like being at a horse race and deciding which horse to bet on. One wants to look at the horse farm that is best at producing winners to safely bet on a likely winner. Or one could live on the dangerous side, taking a huge gamble by betting the farm on the long shot — franchises developed by small, unproven franchising firms.

The brands in the slide show produce the richest franchisees (by sales).

With 65, McDonald's has the most number of rich franchisees for a single brand. But crossing the finish line in second, fourth and fifth place are Yum's franchisees. An incredible 134 of the 500 richest restaurant franchisees, as recorded by Technomic, Inc., is under the umbrella of Yum Brands. Considering that there are some 3,500 franchising firms in North America, it is a major accomplishment.

Scott Haner, vice president of franchise development at Yum Brands, says simply, "We're proud of our many franchisees who have made wonderful businesses from our great brands."

Franchise consultant Craig Slavin, president of Franchise Architects and Franchise Navigator, thinks it is more than just the size of the total system that explains why Yum Brands and others have the lion's share of richest franchisees. He says that the larger systems have the necessary supportive environment for franchisees. The consultant to franchisors and franchisees says that emerging franchise companies and their founders typically do not have the tools, education or resources to professionally manage a chain at a sophisticated level. "This is generally why founders start off by selling single unit franchises versus multi-unit franchises," Slavin observes. "If, by chance, they are able to sell a multi-unit franchise, the business acumen of the franchisee would be stronger, with greater resources, than the franchisor's."

Besides this information, Technomic's Tristano recommends that franchisee prospects look at the Top 400 list of franchise brands. The largest chains list is a measure of the clout and establishment of a brand as measured by systemwide sales.

Disclosure: Mr. Slavin's firms conduct business with Yum Brands.