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Franchise Times Top 200

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One newcomer to biggest 25, plus more notable debuts & news

With ‘other-worldly’ unit count expansion at  7-Eleven, the long-time No. 2 company on the Franchise Times 200 is poised to overtake McDonald’s next year. Who else is rising or falling? Read on.

Over the past couple of years, companies on the Franchise Times Top 200 have built sales without adding more units. Last year, the largest franchises managed to do both.

The 200 largest franchises by sales volume saw sales increase 6.3 percent, on average, according to our ranking. And they began adding units again last year, too: Average unit count grew by 3.4 percent in 2012. In 2011, unit count grew by less than 1 percent, on average. 

As usual, there was a wide variation in our ranking, with some companies seeing sales declines nearing 20 percent. But many companies saw overall sales increases of 20 percent.

The result: This year’s ranking isn’t as top-heavy. We noted a year ago the largest companies on the Franchise Times Top 200 have grown increasingly dominant since we first published the ranking in 2000. Last year, the 10 largest franchises accounted for 50.2 percent of overall sales for the 200. 

But this year that percentage fell. Yes, the 10 largest franchises remain a dominant group, but they accounted for 49.9 percent of total sales. In other words: The rest of the franchise world has started catching up with the McDonald’s and 7-Elevens of the world. 

Well, they’re catching up figuratively, anyway. Nobody is going to catch up with those two companies anytime soon. Combined, the world’s two most dominant franchises accounted for 30 percent of the ranking’s total sales. And 7-Eleven, No. 2, is nearly four times the size of No. 3, KFC. 

But 7-Eleven could catch up to long-time top-dog McDonald’s as early as next year’s ranking. 

McDonald’s, the Chicago-based burger giant, reported $88.3 billion in total system sales last year. Its sales grew 2.7 percent, and unit count grew 2.9 percent. 7-Eleven, the giant convenience store chain based in Japan (but owned by the Japanese company 7-and-I Holdings), reported 10.7 percent sales growth last year. With $84.8 billion in system sales, it is now less than $4 billion behind McDonald’s. 

If the companies matched their respective rates of growth this year, 7-Eleven would have already overtaken McDonald’s as the world’s largest franchise.

7-Eleven’s growth has come through its other-worldly unit count expansion. The venerable corner store has become the most ubiquitous retailer of any sort in the world. Last year, it reached 49,503 locations worldwide and this year became the first franchise to reach 50,000 units. Only 7,719 of its locations are in the U.S.

The 10 largest didn’t change much, save for Hertz’s two-spot move from No. 8 to No. 6, thanks largely to its acquisition of Dollar Thrifty. And there is only one newcomer to the largest 25—No. 24 Chick-fil-A. Kansas City-based H&R Block, meanwhile, fell from No. 22 to No. 27.

But smaller companies did make their moves and started closing the gap with the big kids for the first time since we started recording the world’s largest franchise systems 13 years ago. Twenty-five of the 200 companies on our ranking reported sales growth exceeding 15 percent. Companies are more aggressive in adding new units, buoyed by economic optimism and fed by an abundance of readily available, low-cost debt. And many franchises continue to find fertile ground in international markets.

Last year, 36.2 percent of all units in companies on the Top 200 were outside the U.S., compared with just 34 percent last year and 24 percent back in 2000. 

Perhaps the best example comes from Cinnabon, the Atlanta-based cinnamon roll chain. In 2011, 47 percent of its units were outside the U.S. Last year, 56 percent of its units were in other countries. Due largely to that international expansion, Cinnabon’s sales grew 29 percent and the company debuted on our ranking this year at No. 188.

Perhaps no sector in the franchise world was as successful as the sub sandwich category. Such restaurants are dwarfed by market giant Subway, the fourth largest franchise in the world and the largest restaurant chain by unit count—which recently crossed the 40,000 unit mark. 

Subway’s sales grew 9 percent last year. But many of its competitors have found places to put their sandwich shops and customers to come in their doors. Jimmy John’s, the Champaign, Illinois-based sub chain, reported 30.2 percent sales growth, and 17.4 percent growth in unit count, to jump to No. 77 on our ranking.

Not to be outdone, Jacksonville, Florida-based Firehouse Subs added 19.8 percent more units and reported system sales growth exceeding 35 percent. It is now No. 161 on our ranking. They were followed by No. 176 Jersey Mike’s, which had 15.2 percent unit growth and 19.3 percent sales improvement. 

Such concepts are filling in the void left by Quiznos, the Denver-based chain that is now ranked 94th, down from 84 a year ago after sales and unit count both fell by more than 10 percent last year. But there is some evidence the growing sandwich competitors could even be taking a bite out of Subway, which is reportedly struggling with sales weakness this year.

Other sectors did well, too, including fitness chains like Planet Fitness (No. 109), Anytime Fitness (No. 134) and Snap Fitness (No. 157) and another personal lifestyle concept, No. 88 Massage Envy, also reported strong sales improvement last year. Apparently, people need a workout, and a massage, after filling up on sandwiches and cinnamon rolls. 

Articles by Jonathan Maze
Research by Matt Haskin, Abbi Nawrocki and David Sheaffer

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