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Study: Franchising Offers Vital Growth Avenue for Chain Restaurants

As the restaurant industry seeks growth during a sluggish economic recovery, a new report by Technomic and Restaurant Finance Monitor finds that franchising of restaurant brands continues to be a major avenue pursued by chains. As a result of the recession, franchisors began commonly offering incentives such as credit support and fee reductions to lure investors; those practices have continued as traditional sources of credit for many potential franchisees.
"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."
The findings are part of the 2011 Top 400 Restaurant Franchise Company Report, produced by Technomic in conjunction with Restaurant Finance Monitor.  Other findings 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 2011 Top 400 Restaurant Franchise Company Report is designed to help operators and suppliers identify the leading restaurant franchise companies in order to develop sales and marketing strategies; discover the brands behind the Top 400 franchise companies; understand where franchising opportunities exist within restaurant brands; and benchmark sales, units and growth against industry leaders.
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.
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