Understanding the Ranking
We are proud to present Entrepreneur’s 40th annual Franchise 500®. From regulations to trends to demographics, the franchise industry has experienced its fair share of change since that very first Franchise 500 was published way back in 1980. But the industry keeps going strong, offering companies of all different stripes an effective mode of expansion, and affording thousands of aspiring entrepreneurs the opportunity to open their own business within an established brand. And Entrepreneur continues to celebrate them all with what is still the world’s first, best, and most comprehensive franchise ranking.
Just as the franchise world has changed over the last four decades, our proprietary formula continues to evolve as well, so we can best evaluate the strength of the franchise opportunities offered today. Here’s a peek into our ranking criteria and process.
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
- System size
- Years in business
- Years franchising
FINANCIAL STRENGTH & STABILITY
- Franchisor's audited financial statements
Note: Pillars and factors are not listed in order of importance.
The first step in determining the ranking is gathering the data. Beginning in July 2018, we asked franchisors to fill out our online form and submit a copy of their current Franchise Disclosure Document (FDD) or Canadian Disclosure Document. The response was impressive, with 1,094 companies supplying all the required information. Submissions were then vetted by our editorial team before being entered for data analysis.
To be eligible to rank, a franchisor must be seeking new franchisees in the U.S. or Canada and must have had a minimum of 10 units open and operating as of July 31, 2018, with at least one franchise located in North America. Each eligible franchisor was scored based on more than 150 data points, and those with the highest cumulative scores became the Franchise 500.
Note: The Franchise 500 is not intended to endorse, advertise, or recommend any particular franchise. It is solely a tool to compare franchise operations. You should always conduct your own careful research before investing in a franchise. Read the FDD and related materials, get help from a franchise attorney and an accountant to review legal and financial documents, talk to as many existing and former franchisees as possible, and visit their outlets. Do your homework to protect yourself and find the opportunity that’s best for you.
Research compiled by Tracy Stapp Herold and Michael Frazier, with assistance from J.R. Jimenez, Sean Strain, Karina Martinez, Dianna Mendoza, and Niko Ruiz; technical assistance from Angel Cool.
