The Restaurant Finance Monitor's 2009 Top 200 Restaurant Franchisees
At a time when the restaurant industry as a whole is struggling, here are 200 examples of multi-unit franchisees running successful companies. Research for this special feature was compiled by our sister publication, the Restaurant Finance Monitor, and was first printed in its June issue.
Top of the Heap
So many units, so little time
Once again, Franchise Times presents the Monitor Top 200, ranking the largest multi-unit franchisees based on their 2008 revenues.
The Monitor has tracked the revenue and unit performance of the largest multi-unit restaurant franchisees in the United States for more than 16 years. We started out by tracking the Top 100 franchisees, and then in the third year became really ambitious and made it the Top 200-it didn't seem right to stop at No. 100 when there were so many significant companies from 101 on up.
Over the past 10 years, the list has transformed from one dominated primarily by QSR chains to one that is almost equally weighted between QSR and casual dining.
According to our research, there were 105 restaurant operators in the Top 200 who operated casual dining restaurants in 2008, compared with 78 casual dining companies in 1998.
The overall size of the Top 200 companies in terms of operating units rose only slightly between 1998 and 2008. There were 14,632 units operated by franchisees in 1998 compared to 16,489 units in 2008, primarily because more multi-unit operators developed or acquired casual dining restaurants such as Applebee's, T.G.I. Friday's and Chili's.
And while casual dining has suffered in the last two years, there are still 1,800 more units on the list this year than 10 years ago. There were 4,020 casual dining restaurants operated by the Top 200 franchise companies in 1998, which represented 27 percent of the total units operated by the group. Those numbers jumped to 5,896 casual dining restaurants in 2008, or 36 percent of the total units operated by the Top 200.
In terms of the Applebee's system alone, there were a total of 29 Applebee's franchisees that made this year's Top 200 ranking. They operated 1,374 Applebee's restaurants in 2008 compared with 14 Applebee's franchisees operating 427 units in 1998. The growth in the number of these large, multi-unit franchisees over a 10-year period was significant to the growth of the Applebee's system. No other franchise system came even close. The 29 Applebee's franchisees on this year's Top 200 ranking operate more than 70 percent of the entire Applebee's system, the largest franchise concentration of any of the Top 200 companies.
Over a 10-year period, the revenue of the Top 200 franchisees has grown steadily to $21.3 billion, up from $13.6 billion in 1998. Not surprisingly, considering the economic downturn and the weighting of casual dining units in the ranking, the revenue of the Top 200 companies took a hit in 2008, declining to $21.3 billion in revenues from $21.5 billion in 2007.
Even the number of units declined year to year as franchisees culled their lowest performing locations. In total, the number of units operated by the Top 200 fell to 16,489 units, down 2.5 percent from 16,915 units in 2007.
Diversification has been important to the Top 200 franchise companies. In 2008, there were 106 Top 200 companies that operated a second franchised concept, compared to 76 restaurant companies that operated more than one restaurant concept in 1998. Of those, a total of 52 companies operate a third concept.
Most of the franchisees in the Top 200 ranking generally choose top brands such as McDonald's, Burger King, Taco Bell, T.G.I. Friday's, Applebee's, Wendy's, Arby's, Pizza Hut and KFC. These are the so-called "tier one" concepts, which suggests that they are easier for companies to finance.
The big ones also get bigger. The YUM! Brands system alone accounts for 5,687 units, or 34 percent of the entire number of units in the Top 200 ranking. The No. 1 company on the Top 200 is Kansas-based NPC International, YUM!'s largest franchisee, operating 1,098 Pizza Huts.
There is no doubt the old adage "strength in numbers" rings true this year. A great franchise has staying power, even in a downturn. Don't expect the Top 200 companies to go hog wild and build a tremendous amount of new units in 2009.