What Does It Really Mean to Be Named a 'Top Franchise'?

Franchisors love rankings. Visit any well-known franchisor’s website, and you are bound to see a laundry list of rankings purporting to provide third-party validation of the franchisor’s superiority in its niche, if not in the franchise industry as a whole. Similarly, a Google search for “franchise rankings” provides links to web pages and articles with titles like:

  • Top 100 Global Franchises
  • 2018 Franchise 500 Ranking
  • Top 100 Franchises – Rankings of Global Franchises 2018
  • Rankings of the Best Franchises
  • America’s Best and Worst Franchises to Buy
  • Top 50 Franchises in the World
  • Top 100 Franchises of 2018

As a prospective franchisee, how much stock, if any, should you put in a particular opportunity’s ranking as a “top franchise”?

Understanding Franchise Rankings

When considering what value to place on a ranking, it is always important to consider the source. As a general rule, legitimate media outlets (such as Forbes.com and Entrepreneur.com) will be more reliable than websites that exist solely to sell advertising (often for their own “top-ranked” franchise opportunities). A site that seeks to have some legitimacy behind its rankings should disclose the source of its data and its methodology as well. For example, in compiling its list of “America’s Best and Worst Franchises to Buy,” Forbes.com relied on five years’ worth of statistical data compiled by FRANdata examining system sustainability, system demand, value for investment, franchisor support and franchisor stability.

On the other hand, the Forbes.com list also relies on data that are a minimum of two years old, and this can be a lifetime in the world of franchising.

Then, there is the question of how a site is determining what constitutes a “top” franchise. Is the site simply considering the number of franchised outlets that are currently open? Is it focusing on “value” factors (such as initial investment costs and royalty rates)? Or, is it actually conducting comparative analyses to arrive at quantitative or qualitative conclusions?  One of these is not necessarily “better” than the other; but, it is important to understand why one franchise opportunity is being ranked ahead of another.

Also, keep in mind that some “rankings” in the franchise industry are pay-for-play. With these sites, franchisors must pay a fee in order to be considered for ranking, and the rankings are often based on the amount paid. Additionally, some rankings – even well-known rankings like Entrepreneur’s Franchise 500 – require franchisors to apply for inclusion. So, a franchisor that does not care about rankings will not show up regardless of the quality of its system and franchise opportunity.

In short, when evaluating franchise opportunities, take rankings with a grain of salt. Base your decision on your own qualitative and quantitative analysis, and take your time to gather as much reliable information as possible.

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Comments

'Hell, I paid good money to that journal for that outcome.'

As a former employee in a franchising company I remember one occasion when I mentioned to a top officer of the company how marvelous it was that a journal (a well-known national one) had just named our brand as one of its best franchises to buy.

"Congratulations," I said.

He read my naivete and promptly responded, "Marvelous? Hell, I paid good money to that journal for that outcome." 

Having said that, there are a number of journals that well-meaningly crunch data either through their own or an expert's magic black box. What goes into the mix are things such as franchise unit growth, initial franchise fee… er, thrifty, kind, clean, brave and courteous. These are weighted and lumped together in a score to be ranked in a list of top franchises to buy. As Mr. Goldstein indicates, such rankings are meaningless to a buyer.  

Franchisee Success?

The problem with the rankings is that they are most often ranking franchisor success, not franchise owner success.  Entrepreneur is likely the most read and quoted by franchisors selling their brand.  Here is their Top 5 from 2006:

1. Subway, 2. Quiznos Sub, 3. Curves, 4. The UPS Store, 5. Jackson Hewett Tax Service

How many franchise owners went broke following these rankings?  Unfortunately, too much of the franchise industry is all about the sale of franchises, and too little is concerned with the success of the franchise owner. 

 

Throwing a dart at a board would have been better

Here is their Top 5 from 2006: 1. Subway, 2. Quiznos Sub, 3. Curves, 4. The UPS Store, 5. Jackson Hewett Tax Service

Bow wow!! Even if someone would have thrown a dart on a board of names, they probably would have come up with better franchising brands than these. Franchisees of these brands hit upon very tough times.