Franchise Grade's 2016 Top 500 Franchises

The franchise industry is replete with rankings, including rankings of the top 100, 200, 300 and 500 franchises. Some of these rankings are based upon revenue, while others use system size and new franchisee outlet growth as the key determinants. One common thread that runs through these rankings is that the methodology tends to be simplistic and limited.

Recognizing this fact, wanted to establish a franchise ranking that provided prospective franchisees with a performance based list of the most healthy franchise systems based upon key attributes. To that end, we developed the Franchise Performance Index, a methodology that applied information contained in Franchise Disclosure Documents. By utilizing franchisor specific data including; franchisor executive backgrounds, litigation, franchisee outlet growth, franchisee turnover, comparative sector performance and Item 19 disclosures we rank franchise systems by applying this methodology. The 2016 Top 500 is the result of analyzing 2,387 FDD’s.

Although, one may question why a specific franchise system is included in the Franchise Grade Top 500, the point is the methodology is comprehensive and objectively applied. In order to enhance the rankings we included a grading of Item 19 disclosures based upon the amount of financial detail a franchisor discloses. For example, a franchisor that discloses franchisee revenue, gross margin and operating expenses receives a higher grade than the franchisor that discloses average franchisee revenue.

One of the trends that we’ve seen is that the top ranked franchise systems are not necessarily the most recognized brands, in fact some of the more highly recognized brands didn’t even make our Top 500 or were at the lower end of the list. The QSR and personal services categories were the leading franchise categories and the leading sub-categories were children’s services, pizza, healthcare, hotels and subs/sandwiches.

Franchise systems leading the Top 500 are:

  • Christian Brothers Automotive
  • Batteries Plus Bulbs
  • Zaxby's
  • McAlister's Deli
  • Pizza Ranch

These brands have been in business an average of 27 years, 4 out of 5 provided a protected territory, have had sustained franchise growth with low franchisee turnover and received the highest grade for providing a Financial Performance Representation.

 Some may find issue with certain franchise rankings; however, the Franchise Grade Top 500 provides individuals a list of the most healthy franchise systems. Their responsibility is to perform the appropriate due diligence and obtain the advice of a qualified franchise attorney to assist in this process.

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