From the January 2000 issue of Entrepreneur

Within this Web site and within the pages of the January 2000 edition of Entrepreneur Magazine, you will find Entrepreneur's 21st Annual Franchise 500®.

The initial Entrepreneur Franchise 500® in 1980 was the first ranking of franchises in the industry. Though we've since noticed a smattering of imitators, Entrepreneur's Franchise 500® remains the most comprehensive rating of franchises in the world. Over the years, we've polished and perfected our ranking procedure, giving us a formula that accurately identifies today's top franchise opportunities for you.

Only franchise companies that submitted complete Uniform Franchise Offering Circulars (UFOCs) or Alberta, Canada, disclosure documents were eligible to receive a listing in the magazine or Web site. And only those companies that have a U.S. or Alberta, Canada, disclosure document and whose information Entrepreneur verified from the disclosure documents were eligible for ranking-giving us the top 500 franchises.

Franchisors whose questionnaires were verified by Entrepreneur are listed, in order of their ranking, in the shaded areas. If a company qualified for a ranking within the top 500, its position is listed to the left of its name. Companies that submitted unverifiable data are listed alphabetically beneath those that were verified.

We consider numerous factors in our ranking, some of which are weighed more heavily than others. The most important features include financial strength and stability, and the system's growth rate and size. We also consider the number of years a company has been in business and the length of time it's been franchising, start-up costs, litigation history, percentage of terminations and whether the company provides financing. All financial data is audited by an independent CPA firm.

These factors are objective, quantifiable measures of a franchise operation. We do not measure subjective elements such as franchisee satisfaction or management style, since these are judgments only you can make based on your own needs and experiences. All companies, regardless of size, are judged by the same criteria.

The remaining information is self-explanatory. "Where Registered" shows in which of the states (CA, HI, IL, IN, MD, MI, MN, ND, NY, RI, SD, VA, WA and WI) where franchisors are required by law to register before they can sell franchises, a franchise company is either registered or planning to register this year. "Available U.S. Regions" and "Seeking Foreign?" show where franchisors are planning to expand.

The franchisor's growth over the past three years is shown by the number of both franchised and company-owned units for 1997, 1998 and 1999. Another key column lists the total start-up costs necessary to open the franchise (including the initial franchise fee). This figure is affected by real estate and construction costs (if applicable), inventory, location, type of business and many other variables. For easy reference, the initial franchise fee is listed separately as well. Additional costs such as royalty fees, usually expressed as a percentage of monthly gross sales, are also listed separately.

Some companies provide financing of their franchise fees or their total start-up costs, or even offer equipment leasing options. The "Type of Financing" category details the kind of financing provided by each franchise company. We've also noted whether the franchise can be operated from home and which companies are seeking multiple units only.

Remember that the Franchise 500® is not intended to endorse, advertise or recommend any particular franchise(s). It is solely a research tool you can use to compare franchise operations. You should always conduct your own independent investigation before you invest money in a franchise. Read the UFOC and related materials carefully, get help from an attorney and CPA in reviewing any legal documents, talk to as many existing franchisees as possible, and visit their outlets. The best way to protect yourself is to do your homework.


Research compiled by Liza Potter and Maria Anton with assistance from Lee Houston and Bowen Park; financial analysis by David R. Juedes, CPA.