News

Technomic: Chains continue to grow through franchising

August 10, 2011

As the economy keeps moving at a slow pace, restaurant brands continue to tap into franchising as an avenue for growth.

According to a new report by Technomic and Restaurant Finance Monitor, "2011 Top 400 Restaurant Franchise Company Report," the recession caused franchisors to provide more incentives such as credit support and fee reductions to lure investors. Those practices have continued as traditional sources of credit are still difficult to obtain.

Technomic's report concludes: "Franchising continues to be a way for chains to grow unit counts with less capital expenditure, allowing the franchisor to focus on system-wide branding initiatives while franchisees deal with operations at the unit level. It is an attractive scenario for many entrepreneurs as well. They can take advantage of the brand strength and resources of these national brands while reducing their own start-up and operating costs."

Other findings in the report include:

• The Top 400 restaurant franchise companies generated an estimated $33 billion in sales in 2010 and accounted for almost 10 percent of the total commercial restaurant industry's $361 billion sales;
• Total units from the Top 400 came to 27,117, comprising nearly 5 percent of the commercial restaurant industry's units;
• NPC International continued to dominate franchise sales with $934.8 million in 2010. As the largest Pizza Hut franchisee, it operated 1,136 restaurants at the end of last year, a slight decrease (-1.1 percent) from 2009;
• Eighty-seven percent of McDonald's sales came from franchised stores for a total of $28.1 billion in 2010, whereas Subway's system is 100-percent franchised, meaning that all $10.6 billion was generated by franchisees. The next largest chain in terms of total U.S. franchise sales was Burger King with $7.6 billion.

The report's comprehensive appendices sort the Top 400 companies alphabetically and offer concept breakdowns by franchise company and brand, regions of company operations, and selected franchise cost-structure analysis for leading restaurant brands. A listing of franchise company headquarters and selected contacts is also included.

The full report can be purchased online.

For more information on franchising and growth, click here.