Understanding the Ranking
On the following pages, you’ll find Entrepreneur’s 38th annual Franchise 500 ranking. We always put together what we know to be the first, best, and most comprehensive franchise ranking in the world, but we also understand that being the best doesn’t mean we can’t be better. The franchise world is constantly evolving, and so are our rankings.
Our formula is based on the same factors as before: system size, growth, and financial strength and stability. But we’ve developed new ways to measure and analyze them. And we’ve continued to add factors that have become increasingly important in today’s economy—like, say, social media presence, which certainly wasn’t relevant 38 years ago. Here’s a breakdown:
The Five Pillars of the Franchise 500®
Some key factors that go into our evaluation.
COSTS & FEES
- Franchise fee
- Total investment
- Royalty fees
SIZE & GROWTH
- Open & operating units
- Growth rate
- Closures
SUPPORT
- Training times
- Marketing support
- Operational support
- Franchisor infrastructure
- Financing availability
- Litigation
BRAND STRENGTH
- Social media presence
- System size
- Years in business
- Years franchising
FINANCIAL STRENGTH & STABILITY
- Franchisor’s audited financial statements
Pillars and factors are not listed in order of importance.
So how was the ranking put together? Beginning in July 2016, we asked franchisors to fill out our online form and submit a copy of their full current Franchise Disclosure Document (FDD) or Canadian Disclosure Document. A whopping 988 companies supplied all the required information, and their submissions were vetted by our editorial team before being entered for data analysis.
To be eligible for our ranking, a franchisor must have had a minimum of 10 units open and operating as of July 31, 2016, with at least one franchise located in either the U.S. or Canada. The company must also be seeking new franchisees in the U.S. or Canada. It could not be in Chapter 11 bankruptcy proceedings. Once eligible, each company was then scored based on more than 150 data points, and the 500 companies with the highest cumulative scores became the Franchise 500.
Please remember that 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 Media 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 an accountant to review legal and 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.
