Twists & Turns to the Top: Ranking franchising’s big 500
The Franchise Times Top 200+ project is a comprehensive way to check the vitals of the franchise industry. And the chart based on sales and unit data from 2018 looks pretty good.
In all, the Top 200 added $26.9 billion in sales, for a grand total of $671.3 billion. That puts those top 200 franchised brands at 3.27 percent of total U.S. gross domestic product, which was $20.5 trillion in 2018.
The overall group grew sales by just over 4 percent, a slight decline from the 4.6 percent growth rate seen last year, though it doesn’t seem to be a sign of illness overall but rather the result of two companies that had a pretty bad year. Subway and RE/MAX reported sales declines of $1.1 billion and $862 million, respectively. Without those losses, the rest of the Top 200 grew by 4.61 percent, almost exactly the same as last year.
The top 10 grew by $10.8 billion, or 3.6 percent, down slightly from the 5 percent growth rate in last year’s rankings, but including the big loss from Subway. The top 10 added more than 6,300 locations, and they now have a footprint of 234,717.
Delving deeper into that coveted group, it’s a lot of same-old-same-old with McDonald’s retaining the No. 1 spot, adding an incredible $5.2 billion in sales and adding 614 restaurants. It’s a minor slowdown from the 7 percent growth seen in 2017, but two years of more than $5 billion in sales growth is nothing to sneeze at.
The convenient 7-Eleven stayed at No. 2, adding $1 billion, a significant slowdown from last year, but still 1.2 percent growth. KFC stays at No. 3 and added $1.7 billion, a significant 7 percent acceleration from last year. Burger King stays at No. 4 and added $1.5 billion in sales (a 7.7 percent jump and the most aggressive growth in the top five).
But here is where it gets interesting: Ace Hardware bumped Subway out of the top five for the first time since 2009. The company is the only non-food brand in the group and made the jump by growing 4 percent, adding $643 million in sales. Leaders at the company credited strong same-store sales growth, a near 50 percent jump in online orders and 147 additional locations for the impressive results. Of course, the results from Subway (No. 6) made the jump easier.
Rounding out the top 10, both Domino’s and Pizza Hut kept their spots at No. 7 and No. 8, respectively. Domino’s saw the best sales growth in the top 10 at 10.2 percent, adding an additional $1.2 billion. The pizza juggernaut led the charge on unit growth, too. Domino’s grew by 8.5 percent. Marriott Hotels & Resorts stayed at No. 9 with strong sales growth and minor unit growth.
And after years of impressive results and success around its various innovations, Taco Bell jumps from No. 12 into the top 10 with a healthy 6.3 percent sales growth rate and an additional 223 restaurants. While the plunge from No. 10 to No. 15 by RE/MAX helped, Taco Bell actually jumped right over Wendy’s at No. 11 as well, showing that the company strategy has really paid off in recent years, pushing the concept into the realm of the strongest brands in franchising.
Healthy growth across the list
Moving down the list, there was strong growth in every subcategory and some explosive movers at every turn. IHOP (No. 44) grew by nearly 4 percent on $3.3 billion in sales, an impressive push for a big, legacy brand. A legacy convenience store grew fast, too, as Circle K added 26 percent to sales, a $2 billion growth tear. Chick-fil-A keeps growing like crazy on its long lines and good service, as it jumped up four spots this year to No. 12 with a 16.2 percent sales growth. And HomeVestors shot up the list 20 spots with a strong 26.5 percent sales growth.
Really, across all the categories, there was no specific rough spot, but plenty of change as new brands grow and others can’t keep up. Traditional casual dining continued to see pressures, but even that was down by just under 1 percent. The chicken and Mexican categories were the strongest among restaurants, with 9.8 and 6.8 percent growth overall. But pizza had a banner year with some disruption, the standout being Blaze Pizza with 32.9 percent unit growth as it added 78 locations and jumped into the Top 200 for the first time. The fastest builder, however, was 7-Eleven, which built more than 3,000 locations in 2018 as it made a big push internationally.
The strongest growth category for the year was health and medical, which grew by 14.5 percent followed closely by personal services (last year’s top grower) at 14.3. Fitness was a big part of that, growing overall by 24.8 percent with Orangetheory Fitness being the fastest sales grower on the Top 200 by percentage with 43.1 percent sales growth. Education helped, too, as concepts there grew by 7.4 percent.
Hair care saw a major bounce this year. The subcategory grew by 11 percent in 2018. That puts the category just behind fitness as one of the strongest growth subcategories. But the fastest grower was trampoline parks, which grew sales by 19.8 percent in 2018. Disaster restoration was a big grower, too, thanks to all those folks in the unsexy field of pumping who knows what out of your basement or office. That subcategory grew sales by 18.9 percent last year. The only other double-digit growth stories across the subcategories were collision repair with 10.9 percent growth, and senior care, which grew by 11.6 percent.
Beyond franchising, the Top 200 is also a good check-up on the consumer. Clearly, commercial cleaning’s growth means there is plenty of business activity. Marriott and other hotels show that people are spending more money in hotels and on vacations (and likely getting a haircut before they do). Ace shows they’re fixing things up around the house, another good sign that consumers have money to invest in all those honey-do projects that have built up. In all, the vitals of the Top 200 say a lot of good things about the economy. So while there continue to be growers taking market share, along with plenty of challenges from labor to traffic and quickly evolving consumer demands, things are looking pretty darn healthy.