We're proud to bring you Entrepreneur's 35th Annual Franchise 500®. Here's a behind-the-scenes look at how the first, best and most comprehensive franchise ranking in the world comes together.
The process began in July 2013, when we asked franchisors to participate in this year's survey. Each submission was vetted before being entered for data analysis, with 853 companies making the first cut. Of those, the top 500 companies made the Franchise 500® ranking, based on financial and statistical data from July 2011 through July 2013.
Only franchise companies that supply a full Franchise Disclosure Document (FDD) or Canadian Disclosure Document and whose information is verified by Entrepreneur can receive a listing in this issue. To be eligible for the Franchise 500® ranking, a franchisor must have a minimum of 10 units, with at least one located in the U.S. The company must be seeking new franchisees in the U.S., and it cannot be in Chapter 11 at the time the ranking is compiled. (The exception to these rules is Canada-based companies that are expanding only 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 a company has been in business and the length of time it has been franchising, startup costs, litigation, percentage of terminations and whether the company provides financing. An independent CPA analyzes financial data. We do not measure subjective elements such as franchisee satisfaction or management style. 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®.
The Franchise 500® is not intended to endorse, advertise or recommend any particular franchise. 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 FDD and related materials carefully, get help from a franchise attorney and a CPA in reviewing any legal or financial documents, and 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 Tracy Stapp Herold with assistance from Natalie Echeverria, Ryan Peyton, Monica Santana and Samantha Wong; financial analysis by David R. Juedes, CPA; graphic design by Megan Roy and Nancy Roy.