From the January 2006 issue of Entrepreneur

Every now and again, a team has a banner year: Think the 2004 Boston Red Sox or the San Francisco 49ers in the 1989 Super Bowl. But only in franchising can the entire league report a winning season. This year was a banner year for not only one company or even one category--franchising as a whole had an exceptional year. Apparently, a swarm of people have been buying franchises, bringing growth to almost every category. Franchising, by all accounts, is booming.

To help you get a piece of the pie while it's hot, we've spent the past few months doing research and analysis--not to mention the almost three decades we've invested in perfecting our ranking procedure and top-secret formula. The result: Entrepreneur's 27th Annual Franchise 500®, the world's first, best and most comprehensive ranking of franchises.

Only franchise companies that submit full Uniform Franchise Offering Circulars (UFOCs) or Canadian disclosure documents and whose information is verified by Entrepreneur can receive a listing in this issue. To be eligible for the Franchise 500® rankings, a franchise company must have a minimum of 10 units with at least one being a U.S.-based franchise, it must be seeking new franchisees in the U.S., and it cannot be in chapter 11 at the time the rankings were compiled. (An exception to this rule is Canadian-based companies that are only expanding in Canada.)

All companies, regardless of size, are judged by the same criteria: objective, quantifiable measures of a franchise operation. The most important factors include financial strength and stability, growth rate and size of the system. We also consider the number of years in business and length of time franchising, startup costs, litigation, percentage of terminations and whether the company provides financing. Financial data is audited by an independent CPA. 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. The objective factors are plugged into our exclusive Franchise 500® formula, with each eligible company receiving a cumulative score. The 500 franchises with the highest cumulative scores become the Franchise 500®.

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

Research compiled by Maria Anton Conley, Tracy Stapp and Alysia Kim; financial analysis by David R. Juedes, CPA; magazine graphic design by Matt Samarin; data compilation assistance from Paul Scott; additional assistance from Stephanie Luu, Amanda Pennington, Genevieve Jenkins, Jill Juedes, Danielle Cohen and Ricky Kreitner.