Every year for the past 40, Entrepreneur Magazine has presented its annual Franchise 500 list.
Headquartered in Irvine, California, the magazine uses an ever-evolving formula to rank the
strength of the franchise opportunities offered today.
The first step in determining the ranking was to gather information, which starts in July.
Franchisors are asked to fill out Entrepreneur’s online form and submit a copy of their current
Franchise Disclosure Document (FDD) or Canadian Disclosure Document. This past year,
submissions came from 1,094 companies who then were vetted by Entrepreneur’s editorial
team before being entered for data analysis.
This year, to be eligible for Franchise 500, franchisors must have at least 10 units open in North
America as of the end of last July with new franchises being sought in the U.S. or Canada.
Eligible franchisors were scored based on more than 150 data points. Those with the highest
cumulative scores became the Franchise 500.
The Franchise 500 does not officially endorse, advertise, or recommend any particular
franchise, it is simply professed to be a tool to compare franchise operations. It also shows
industry trends from year to year.
Companies are judged on several objective, quantifiable measures of a franchise operation,
including financial strength and stability, growth rate and size of the system. The number of
years a company has been in business and the length of time it’s been franchising, as well as
startup costs, litigation, percentage of terminations and whether the company provides
financing are also taken into consideration. Financial data is analyzed by an independent CPA.
Other key factors that go into the Franchise 500 evaluation include:
COSTS & FEES
SIZE & GROWTH
Open & operating units
Years in business
FINANCIAL STRENGTH & STABILITY
Franchisor’s audited financial statements
Once chosen, franchises are listed according to industry categories. Ranked companies are shown with their rank listed to the left of their names. Franchise companies that are not ranked in the Franchise 500 also are listed in alphabetical order under “Not Ranked.”
Entrepreneur Magazine was first published in 1977, and is headquartered in Irvine, California. Its mission is to inspire, inform and celebrate entrepreneurs.
If you’re considering business ownership, this is definitely ONE tool in your toolbox to consider when researching franchise viability. Keep in mind, though, there’s over 3500 franchise systems in the US and only about 1000 submitted to be considered.
Also, being on this list does NOT mean the business is a silver bullet in your area, or to an owner with your background and skillset. Again, this is one great tool – but let’s use it as one piece of the bigger picture, shall we?