Understanding the Ranking
Welcome to Entrepreneur’s 41st annual Franchise 500® ranking. For more than four decades, we’ve been studying the franchise industry and honing our proprietary formula in order to bring you the world’s first, best, and most comprehensive franchise ranking. And with each year, the ranking becomes increasingly competitive, as more and more companies see the value of expansion through franchising and throw their hats into the ring. Our list shows just how varied the franchise world has become, offering prospective franchisees a myriad of choices, from more traditional options, like restaurants, maintenance services, and gyms to the latest trends, like ax throwing, cryotherapy, and CBD.
So just how do we go about evaluating and ranking such a diverse pool of opportunities? Here’s a look behind the scenes.
The Five Pillars of the Franchise 500®
Some key factors that go into our evaluation:
COSTS & FEES
- Franchise fee
- Total investment
- Royalty fees
SUPPORT
- Training times
- Marketing support
- Operational support
- Franchisor infrastructure
- Financing availability
- Litigation
SIZE & GROWTH
- Open & operating units
- Growth rate
- Closures
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 ranking process begins with gathering the data. Starting in July 2019, we asked franchisors to fill out our online form and submit a copy of their current franchise disclosure document (FDD) or Canadian disclosure document. We had a record-breaking year, with 1,105 companies supplying all the required information. Submissions were 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, 2019, 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. Protect yourself by doing your homework to find the opportunity that’s best for you.
Research compiled by Tracy Stapp Herold and Michael Frazier, with assistance from Sean Strain, Ayesha Diwan, Karina Martinez, Dianna Mendoza, and Niko Ruiz; technical assistance from Angel Cool.
