Refranchising, Access to Capital Help Nation’s Largest Restaurant Franchisees Grow by Double Digits

Things seem to be looking up for at least one group of franchisees. According to the Monitor 200, the annual ranking of the 200 largest restaurant franchisees in the nation published by the Restaurant Finance Monitor, the nation’s 200 largest restaurant franchisees grew total sales and units operated by double digits in 2012. This elite groups of franchisees generated combined total sales of $26.3 billion and operated 20,331 total units in 2012, both up more than 10 percent from 2011, and up 20 percent from the depths of the recession in 2009.

This year’s ranking crowns a new No. 1: San Francisco-based Flynn Restaurant Group. The Applebee’s franchisee made a pair of huge acquisitions last year, including the purchase of a Taco Bell operator, to become the first franchisee to report sales of more than $1 billion. Flynn has more than doubled in size since 2009, and now has more than 500 restaurants in 23 states.

NPC International, which had been the largest franchisee since 2006, fell to No. 2, with just less than $1 billion in sales. Based in Overland Park, Kansas, the company operates more than 1,200 Pizza Huts and recently bought 37 Wendy’s locations in the Kansas City market.

The nation’s largest franchisees tend to operate large brands, mostly among casual dining and quick-service restaurants including Applebee’s, Burger King, Wendy’s, KFC, Taco Bell, Pizza Hut, and McDonald’s. Lenders are increasingly more comfortable making franchise loans to this group, providing these franchisees with the fuel needed to expand.

Large franchisee groups also had plenty of acquisition opportunities from franchisors. Refranchising strategies (i.e. selling corporate-owned restaurants to franchisees) by franchisors like Applebee’s, Yum, and Burger King have fueled rapid growth by a number of the largest operators.