The highly anticipated mother of all franchise lists, Entrepreneur magazine’s Franchise 500 for 2012, was just released a few hours ago. This self-proclaimed “first, best and most comprehensive franchise ranking in the world” is the only one that really matters to most franchise companies, and ranking well gives franchisors ultimate bragging rights for the next 12 months.
How many of you have read Entrepreneur magazine’s ranking methodology? Prior to today, I certainly had not. But no self-respecting franchise blogger can get away with reporting this story without at least mentioning how the list was put together.
To be eligible for inclusion, a franchise company:
- must have a full Franchise Disclosure Document (FDD) or Canadian Disclosure Document, whose information is verified by Entrepreneur
- must have a minimum of 10 units, with at least one in the U.S.
- must be seeking new franchisees in the U.S.
- cannot be in Chapter 11 at the time the ranking is compiled
- The exception to these rules is Canada-based companies that are expanding only in Canada.
“Objective, quantifiable measures of the franchise operation” are plugged into Entrepreneur magazine’s proprietary Franchise 500 formula, with each eligible company receiving a cumulative score. The magazine does not measure subjective elements such as franchisee satisfaction or management style.
The factors that carry the most weight are:
- financial strength and stability
- growth rate
- size of the system
In addition, Entrepreneur magazine also considered:
- the number of years a company has been in business and the length of time it has been franchising
- startup costs
- litigation
- percentage of terminations
- whether the company provides financing
For such a well-respected list, the selection process is surprisingly ambiguous. No details were provided on the exact formula used to calculate each franchise’s cumulative score. Furthermore, the actual scores obtained by each franchise were not disclosed.
With such a heavy focus on quantitative factors, the list produced some unexpected results. Three of the most controversial franchise companies on the blogosphere — those with the most vocal disgruntled franchisees — placed surprisingly well. Matco Tools placed #26, Edible Arrangements ranked #42, and Cold Stone Creamery landed at #50.
The commercial cleaning franchises, which have also been getting a bit of a bum rap on some franchise venting forums, dominated this year’s list yet again, with 5 companies making it to the Top 50 (Stratus Building Solutions at #12, CleanNet USA at #30, System4 at #38, Vanguard Cleaning Systems at #39, and ServiceMaster Clean at #40).
Another surprising aspect was the underperformance of the popular and fast growing frozen yogurt franchises relative to traditional ice cream brands. The highest ranking frozen yogurt franchise was Yogurtland at #207, followed by Yogen Fruz at #235, Menchie’s at #253, Orange Leaf Frozen Yogurt at #359, and Red Mango at #424. This pales in comparison to the stellar performance of ice cream chains like Dairy Queen (#23), Baskin Robbins (#48), and Cold Stone Creamery (#50), to name a few.
There’s so much more I wish to discuss about Entrepreneur magazine’s Franchise 500 list for 2012, but I’ll keep this opening salvo brief. Please review the complete list and let me know what you think. I’ll be doing more posts on this topic in the coming days, so please check back.
In the meantime, here are the Top 50 Franchises in Entrepreneur magazine’s Franchise 500 for 2012:
1. Hampton Hotels
2. Subway
3. 7-Eleven
4. Servpro
5. Days Inn
6. McDonald’s
7. Denny’s
8. H & R Block
9. Pizza Hut
10. Dunkin Donuts
11. Anytime Fitness
12. Stratus Building Solutions
13. Jazzercise
14. Supercuts
15. Jiffy Lube
16. ampm
17. KFC
18. Kumon Math & Reading Centers
19. Miracle-Ear
20. Taco Bell
21. Aaron’s Sales and Lease Ownership
22. Jimmy John’s Gourmet Sandwich Shops
23. Dairy Queen
24. Circle K
25. Liberty Tax Service
26. Matco Tools
27. Papa Murphy’s
28. Snap-on Tools
29. Ace Hardware
30. CleanNet USA
31. Papa John’s
32. Hardee’s
33. GNC
34. Church’s Chicken
35. Great Clips
36. Snap Fitness
37. The UPS Store/Mailboxes Etc.
38. System4
39. Vanguard Cleaning Systems
40. ServiceMaster Clean
41. Super 8
42. Edible Arrangements
43. The Maids
44. Cruise Planners/American Express
45. CruiseOne
46. Chem-Dry Carpet Drapery and Upholstery Cleaning
47. Carl’s Jr.
48. Baskin-Robbins
49. Heaven’s Best Carpet and Upholstery Cleaning
50. Cold Stone Creamery
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