Our Franchise 500 List: the Definitive Ranking of 2018's Strongest Franchises
This story appears in the January 2018 issue of Entrepreneur. Subscribe »
Franchising is a marriage of contrasts. It requires entrepreneurial ingenuity but also a strict adherence to systems. It must be unique enough to draw attention but simple enough to replicate unit after unit. Franchisees must serve their local community while being part of a national chain. And critically, franchises must innovate to attract new customers while remaining predictable and reliable enough to keep the old ones happy.
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For this reason, our annual Franchise 500 list tends to evolve by degrees. It is our continuing effort to best understand and evaluate the franchise marketplace, and we look at fundamental factors — unit growth, investment cost, brand stability and more — as well as factors like social media presence. And this means, over the years, that new categories shift in and out. Franchises come and go. But some stalwarts remain dominant for decades, having mastered that savvy balance between innovation and reliability.
This year, in fact, we have a convenient comparison to the past: It’s the first time in 25 years that more than 1,000 companies applied to be part of our ranking. To be exact, we received 1,023 entries this time. And in those 25 years, some things remain remarkably consistent. Our top 10 spots then and now are occupied by some of the same brands — Dunkin’ Donuts, The UPS Store (then known as Mail Boxes Etc.) and McDonald’s. The Golden Arches are actually number one this year, and were number four back then. (Subway topped our list in 1993; today it’s at number 105.)
But the fuller list isn’t so consistent. In 1993, there were franchise categories that are now practically extinct: formalwear rentals and sales, computer training centers, mobile carpet stores, video learning centers, ceiling cleaning, glamour photography and videocassette rentals. And today’s list contains categories that previously didn’t exist: property management, physical therapy, lash and brow services, massage and spa services, salon suites, paint-and-sip studios, trampoline parks, laboratory services and electronics repairs.
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In fact, the 1,023 applicants we received this year tell an important story about franchising today. The big takeaway: The industry is strong. The top 500 franchises added a net total of 24,899 franchises from mid-2016 to mid-2017, a 5.6 percent increase. More than 60 percent of that growth was outside the U.S. And yet, 206 of the top 500 franchises have zero presence outside the country — including one of our top 10 companies. Some franchises will never aspire to leave America’s borders, of course, but for others it speaks to the vast expansion potential that awaits.
We also heard from an impressive number of new franchises. Of those that applied, 225 of them — almost 22 percent! — are companies that started franchising just in the past five years. But here’s the downside to entering such a thriving industry: Competition is tough. Only 21 of these newcomers ranked in the top 500. The highest is uBreakiFix, at number 18. The youngest is Lendio, which began franchising in 2016 and is ranked at 201.
This year’s categories also tell a story of where franchising thrives, and where it’s going next. The food category is consistent as ever; it remains franchising’s hottest. Out of the top 500, 116 serve food and 93 are quick-service. (In the top 10, half are quick-service — and three out of those five serve hamburgers!) The list’s food franchises offer largely what you’d expect, with hamburgers, chicken, sandwiches, pizza and smoothies/juices well-represented. Frozen custard is also having a renaissance, and fresh categories like poke are on the verge of breaking in.
Other booming categories tell a story about today’s consumer — how they’re always on the move and looking for help. For example, the childcare sector is also taking off, with five companies ranked in the top 100. Children’s fitness is robust as well, with 14 companies ranked; four of them are swim schools. Health services, particularly physical therapy, are rising up in the rankings. So are franchises in fitness, hair care and senior care.
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What’s especially new? Look to recreation: Paint-and-sip studios and trampoline parks make a strong showing. These may be trend-based businesses, but they speak to a particular potential. People want somewhere to go that breaks them out of their routine. There’s opportunity there — and we suspect future lists will see new entrants just like these.
But the most important takeaway from our Franchise 500 list is this: Even though our list may contain some of the same companies from 25 years ago, those companies don’t look the same as they once did. Among the many, many changes from 1993: McDonald’s commercials revolved around Ronald McDonald, not real people “lovin’ it.” Dunkin’ Donuts was four years away from debuting its Coffee Coolatta (which it would then discontinue in 2017!). And The UPS Store was…well, it was called Mail Boxes Etc. In sum, yes, some things in franchising remain the same — but only because they also evolve with the times. The greatest brands on this list know how to strike that balance, the marriage of contrasts. It’s what enables any company from the past to thrive into the future.
Check 2018’s Franchise 500 list here.