While I’m an avid follower of lists of all kinds, I hardly ever take the time to read the methodology behind them as I tend to accept things at face value. But in my new role as a franchise blogger and as someone who has attempted to put together a list of my own, I’m curious how more established media organizations come up with their annual rankings of the year’s best.
AllBusiness.com, an online resource for small business and a wholly-owned subsidiary of Dun & Bradstreet (a company that provides information on businesses and corporations for use in credit decisions, B2B marketing and supply chain management), recently released their list of 100 AllBusiness AllStar Franchises for 2012. Their criteria for selecting the winners are: franchise unit growth rate, financial strength, system size, years in business and years franchising, and Web (brand) visibility.
- Growth rank received the highest weighting. AllBusiness looked at the change in the number of franchise units over three years, with U.S.-based growth more heavily weighted than international or conversion-unit growth, and the most recent year’s growth more heavily weighted than growth in earlier years.
- Financial strength rank is based on D&B’s predictive Commercial Credit and Financial Stress Scores (The latter score was given a higher weighting).
- System size rank measures the size of the franchise system. AllBusiness assigned points based on different weightings for the number of U.S.-based franchise units (heaviest weighting), company-owned units, and non-U.S.-based units (lightest weighting).
- Longevity rank compares how long a franchise company has been around. AllBusiness assigned points based on the number of years a franchise company has been in business and how many years it has been franchising (The latter number was given a higher weighting).
- Web visibility rank is based on a franchise website’s Google PageRank and Alexa Traffic Rank.
The focus of this AllBusiness ranking is the stability of the franchisor, without any consideration given to the health of its franchisees. Implicit in this methodology is the view that a franchisor can only succeed for a sustained period of time if its franchisees are also doing well. While there is good reason for this line of thinking, the list heavily favors franchise companies that are already big and established, while up-and-coming brands with excellent unit economics are shut out completely.
Moreover, a franchise that is growing rapidly may be great for the franchisor, but overexpansion can be devastating for the individual unit. Cold Stone Creamery and Quizno’s are two brands that have suffered in recent years because they grew too fast (in my opinion).
Should a prospective owner select a franchise opportunity based solely on the health of the franchisor? I don’t think so. While this is a critical factor, it certainly doesn’t paint the entire picture. (In fairness to AllBusiness, all lists have their inherent limitations, and this particular list is superior to most because it’s based on objective and clearly defined metrics.) Let’s treat this list as a small piece of a much larger puzzle, and use it accordingly.
Here are the Top 25 AllBusiness AllStar Franchises of 2012. To read the entire list, please click here.
Great point that most franchise rankings DON’T take franchisee performance and franchisee satisfaction into account. That’s why Franchise Business Review bases all our research and annual franchise rankings solely on the feedback from franchisees.Overall satisfaction scores tied to key areas like training and support, franchisee involvement, company values, and financial performance (at the franchisee/unit level) are at the core of our rankings. The only true measure of a franchise business model is how well the system is working for the franchise operators.
Eric Stites
Founder and CEO
http://www.FranchiseBusinessReview.com
Hi Eric,
Thank you for your comment, and welcome to my blog! So honored to have you here. I’m a big fan of your website. I like your unique approach to franchise rankings by focusing on franchisee satisfaction. Very excited to read who makes it to next year’s lists! Thanks for visiting and hope to see you here again.
Best regards,
Ambrosio
Eric, I really like your approach. What is your objective evaluation of Kumon North America, thinking of it from the franchisee standpoint? I would very much like to discuss this with you. Ambrosio has been kind enough to feature my views several times on this blog so feel free to have a look at those blogs if you wish.
Best wishes,
Nicole
You have hit the nail on the head! Looking back I was too naive and trusting. Franchisees at the time were very guarded or nervous when asked questions about numbers and profitability. From an outsider with the information around at the time I jumped in thinking it was a good investment of my time and money.
Although I love what I do, I have two children I need to send to college. I feel for anyone investing in a system that is so one-sided with very limited profitability. Kumon has been growing, but I do believe at the expense of current, hardworking franchisees.
Please keep evaluating things from the franchisees point of view. People need to know the truth before buying-in.
Connie Schmidt Kirman
Kumon Center of Howell
Connie, you are a powerhouse. I have learned so much from you about community networking and developing a very challenging market from scratch. Your class has really grown well this year and that is the fruit of all your labours for the past few years. It would be awesome if you could figure out how to work only six days a week, though, and build your profitability to a sustainable level for the needs of your family.
Warm regards,
Nicole