Franchise Times Top 200+
The 10 largest franchised brands collectively lost systemwide sales for the first time in the history of the Franchise Times Top 200+, our exclusive annual research project. But 190 other big franchisors turned in their strongest sales increase in at least five years. Learn who’s up, who’s down and what’s behind the numbers.
Sales at the top 10 franchise brands declined last year for the first time in the history of the Franchise Times Top 200+, collectively slumping 2.6 percent after 16 straight years of gains. But the other 190 big brands were on fire—up nearly 7 percent in the best show of franchising force in more than five years.
In total, the 200 largest franchise brands grew sales by 2.2 percent or $12.5 billion last year—respectable, if not spectacular. The largest 10 brands, however, lost a combined total of $7.3 billion in sales during 2015, according to our exclusive research project.
McDonald’s provides this year’s marquee statistic with a massive, $5 billion-plus sales drop as the Chicago-based giant dragged down average sales numbers for the top 10 and quick-service restaurant categories. That, combined with an estimated $3 billion sales drop at 7-Eleven, $1.1 billion in lost sales at Subway, an $800-million decline at KFC, and $200 million dip at Pizza Hut collectively paints a bleak picture for the very largest franchised companies based on year-end 2015 sales.
Many of these multinational franchisors in the top 10 added a significant number of new units—largely outside of the United States—suggesting that franchising’s most prominent companies have topped out at home and are accelerating an already massive pivot toward international markets.
While year-over-year sales dropped at several leading brands, the picture brightened further down the list as franchised brands reached new heights with record-breaking sales, significant gains in unit counts and an ongoing push into new corners of the globe.
Outside the eye-popping declines posted by the largest brands, our Top 200+ ranking confirms that, unequivocally, franchised brands continue to grab an ever-growing share of the American economy. This year’s top 200 companies produced a combined $596.1 billion in systemwide sales during 2015.
Based on total worldwide system sales, our ranking rewards systems for how much they sell in a given year, rather than how many units they build. With Hertz dropping out of the Top 200+ and replaced by RE/MAX, the five remaining brands in the top 10 all saw healthy increases during 2015. Burger King added $287 million in new sales, Ace Hardware was up $557 million, RE/MAX added $1.18 billion, Wendy’s gained $405 million and Marriott Hotels and Resorts added $400 million to its top line.
For the third consecutive year, the top 10’s sales lagged the sales growth gain in the wider top 200. The 200 largest franchises increased their worldwide sales 2.2 percent to $596.1 billion—slightly ahead of last year’s respective 2.1 percent and $583.5 billion.
In terms of unit growth, the top 200 added 15,050 new locations during 2015 for a worldwide total of 497,335—a 3.1 percent jump. That’s down slightly from the 3.3 percent unit growth in 2014. Brands No. 11 through No. 200 added 8,918 new units—a clear majority, 5,709, were in the United States.
Even with sales declines, McDonald’s, 7-Eleven and KFC retain their spots as the three largest franchised brands. Burger King and Subway swapped spots, with BK moving up to No. 4. This was the second year in our list’s 17-year history that Subway and McDonald’s failed to deliver year-over-year sales increases. 7-Eleven’s sales declined only twice before last year’s flat results.
Increased cost and labor pressures at some individual companies point to stretched disposable incomes for American consumers as well as an increase in competition. At restaurants, in particular, some of the sales gains are empty calories reflecting menu price increases rather than growth in customer traffic levels. As some of the largest U.S.-based franchises have topped out in their home country, many are now adding the bulk of their new locations overseas—an acceleration of trends seen in recent years.
RE/MAX rode the crest of a strengthening U.S. housing market to post the largest sales gain within the top 10 as home sales and prices continued rising in most markets throughout the country. Similarly, $557 million and $400 million sales gains at Ace Hardware and Marriott underscore recent peaks in consumer confidence and business travel fueling diverse sectors of the $18.5 trillion U.S. economy.
Outside of the 10 largest franchises, Domino’s, at No. 11, was another bright spot with $9.9 billion in sales, up a billion from its year-end 2014 numbers. Hyatt added another $600 million and Holiday Inn Express was up $500 million in a strong hospitality market, while Chick-fil-A rose in the ranking with an extra $1 billion in annual sales. Keller Williams rose two spots to No. 22, with $1.15 billion in additional sales.
During 2015, the top 10 largest franchised brands added a total of 6,139 new locations—approximately 6,225 of which were overseas, while reducing its U.S. locations by 86.
Of 7-Eleven’s nearly 2,910 new units in 2015, 2,751 were outside of the United States. KFC added 675 new international units, but the system’s total units only increased by 532 locations. The same strategy is driving growth at McDonald’s, Subway and Burger King.
In addition, many brands are adding franchisee-owned units at a much greater rate than company-owned locations. For every one new company unit in the top 200, the largest franchised brands added 13 franchisee-controlled units as this industry trend gains steam.
Looking at the overall top 200, 85.7 percent of all locations are franchised, versus 14.3 percent that are company held, numbers that have only changed slightly since 2013.
Read on for full listings, Nos. 1 through 500, plus 12 industry breakouts, four top 10 charts and additional tidbits about franchising’s brightest, all part of the Franchise Times Top 200+.
The Franchise Times Top 200 is an annual ranking of the 200 largest franchise systems in the U.S. by global systemwide sales, based on the previous year’s performance. This year, for the fourth time in a row, we also ranked the next 300 systems for a total of 500.
We use a combination of companies’ voluntary reports and publicly available data, including the franchises’ most recent franchise disclosure documents and Securities and Exchange Commission filings.
To qualify, a company must be a legal U.S. franchise. Franchisees must own at least 15 percent of the company’s total units. The company must also be based in the United States, or have at least 10 percent of their total units in the United States.
Systemwide sales is defined as the total sales for both franchise and company units. Those sales figures should represent sales to customers, and not corporate sales to franchisees or prospective franchisees, such as royalty revenue or franchise fees. Other revenue not directly related to franchising should not be included.
If two companies reported the same systemwide sales, the higher ranking is given to the company with the most units. Preference is also given to companies that voluntarily report their systemwide sales, rather than those companies for which we must estimate the sales figures.
Franchise Times’ estimated revenue for hotels is based on a formula multiplying the chain’s revenue per available room (RevPAR) by the number of rooms and the number of days in the year. RevPAR comes from the company, or from industry estimates.
We estimate real estate companies based on 2.5 percent of their reported sales volume. Real estate companies report sales based on total volume of homes sold. So if a home is sold for $200,000, it would be listed as $200,000 in revenue. FT’s estimate would count $5,000 in revenue earned as a commission from the sale.
We estimate travel agencies based on 12.5 percent of their total sales volume. Like real estate companies, travel agencies report sales volume based on the value of the vacations sold, rather than their commissions. For more information, contact Matt Haskin at firstname.lastname@example.org