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What separates the brands in the Franchise 500 from all the rest?
The numbers tell an interesting story.
Here’s the thing: Although this issue is mostly devoted to the brands that make our ranking, there are a lot of franchise brands that don’t. A total of 1,321 brands applied this year — that’s 144 more than last year! — and we then painstakingly reviewed, confirmed, and crunched all their data, to identify the 500 strongest. Here’s what we found as a result:
The 1,321 brands that applied represent a worldwide total of 646,484 units open and operating as of July 31, 2022 (which is the marker of when we measure data). But if you only look at companies that made the Franchise 500 ranking, you’ll see that they represented 590,971 of those units. In other words, although only 38% of all applicants made our ranking, the ones that made it represent 91% of all global units.
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The brands in our Top 500 are also larger and growing faster than the average franchise. If you look at all applicants, the average franchise brand had 489.4 units open and grew by 13.2 units in the previous year. But if you look only at brands who made the ranking, they had an average of 1,181.9 units open and grew by 32.3 units. The top 500 are also more global — 42.5% of their franchise units are located outside the U.S., compared to just 40.5% if you factor in all applicants.
In short, here’s what we make of this: In franchising, momentum carries. When a brand finds its stride and its franchisees succeed, that brand seems more likely to grow faster, stronger, and wider than its smaller competitors. In fact, nearly 37% of the brands on our Franchise 500 have been franchising for more than 31 years — and only 5% of brands in the ranking have been franchising five years or less. That’s the advantage of experience.
But of course, longevity alone doesn’t guarantee success — because there are no guarantees in business. In fact, the franchise industry as a whole slowed down a little between 2021 and 2022, with total unit growth just 2.8%, compared to 3.1% two years prior. But that won’t (and shouldn’t!) stop new brands from innovating and franchising. Of the total applicants this year, 7.1% of them started franchising in the year 2022! And 27.8% have been franchising for just five years or less. That’s a lot of fresh ideas — and, in time, future Franchise 500 rankings holders.
The franchise industry is also constantly shifting in response to changes in our culture, economy, and consumer needs. Those shifts create winners and losers, and you can see that play out in our rankings this year.
For example, after a bruising few years through the pandemic, quick-service restaurants continue to recover. There are 101 ranked in this year’s Top 500, versus 97 last year. (Not to mention, six of the top 10 — and 29 of the Top 100 — are QSR brands.) While older, larger brands are ranked highly, many newer brands are experiencing strong growth and moving up in the ranking as well, particularly in the subcategories of coffee, sandwiches, smoothies/juices, and teas.
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The health and wellness category is also thriving, especially in the subcategories of assisted stretching, chiropractic services, CBD, and eye care. The same is true of the maintenance category — which contains hot subcategories like drywall repair, electrical services, and pest control — where 78 franchises ranked this year, versus 72 last year. Pets also did very well, with 12 franchises ranked this year versus eight last year, with the greatest growth showing up in our dog training and pet stores subcategories.
So, what comes next? Only time will tell. But we know this: Longstanding franchises have a great head start, but innovative startups have nimbleness on their side. The results will speak for themselves.
