America's Best And Worst Franchises

28/05/2014
This story appears in the June 16, 2014 issue of Forbes.
“Franchising has been the savior of free enterprise in this country,” Art Bartlett, the founder of the real estate chain Century 21, once told a reporter. “It has given the small businessman a way to survive.” That’s not as hyperbolic as you might think. For more than 150 years franchising–from the Middle French word franchir, “to free”–has given countless thousands a turnkey chance to become their own bosses.
There’s no denying its extraordinary impact. This year an estimated 770,000 franchise establishments will employ 8.5 million Americans and create $840 billion in output, according to IHS Global Insight, which prepared a report for the International Franchise Association. That’s 3.5% of the total U.S. GDP.
And a vital part of the entrepreneurial economy. Suppose you’re in the market to buy a franchise. What are your first steps?

To help you focus FORBES has created the first-ever critical list of the best and worst franchises in America. With invaluable intel and statistics from FRANdata of Arlington, Va., we’ve divided the sheep from the goats in three categories: entry costs of up to $150,000; $150,001 to $500,000; and over $500,000.
To generate the list of the best and worst franchises, FRANdata sifted through 3,000-plus chains. A brand with fewer than 20 franchised locations in 2008 couldn’t qualify for the “best” category; neither could those that notched a year of negative growth from the beginning of 2008 until the end of 2012 (2013 numbers are not all in yet).
While there’s no predictor of franchisee success, FRANdata did screen for two key criteria over those years that give some indication of market demand for the brand and overall support for its franchisees: growth rate and the so-called continuity rate. Continuity gives some indication of the ongoing success of the stores. If a franchise had, say, 80 units at the start of the period and added 30 through the end, it should have a total of 110 locations. But suppose, for whatever reasons, 10 units dropped by the end of 2012. The continuity rate for the period is 100/(80+30) = 91%. Other factors that affected the ranking: a franchisor’s transparency in reporting historical performance, which lets prospective franchisees evaluate the opportunity; support for franchisees (financing and the like); and recurring revenue self-sufficiency (does the franchisor depend on revenues from selling additional franchises to sustain ongoing operations?).
For a more detailed look at our rankings, see our full methodology here.

By: forbes.com

LEGGI GLI ALTRI BLOG

• < Prec
• Succ >