The TOP 100 GLOBAL FRANCHISES
This study ranks the top 100 global franchise companies from the many thousands of franchises around the world. The ranking is based on objective and measurable criteria including system size based on numbers of units, sales revenue for the system, stability and growth of the system, number of years in operation and market expansion. The ranking is also based on the implementation of best practice in the areas of franchisee support and training, environmental policy and social responsibility. Consideration was given as well to the availability of financing to franchisees, and whether it was direct financing, SBA approved or third party financing. The information was gathered from Franchise Disclosure Documents (FDDs), email surveys, telephone interviews and published industry sources.
The Top 100 Global Franchises is a ranking of world class companies that have invested significantly over the years in international expansion strategies. The ongoing dismantling of trade barriers is resulting in the world economy becoming more globalized. Because of globalization, franchises are able to achieve better economies of scale. This scale provides the leading franchises with the resources necessary to grow and develop in foreign markets. One of the main obstacles to developing international operations is local knowledge of taste, customs and most importantly language. The opportunity of a master licensee holder in a foreign territory can partially address this but for franchises who rush this opportunity the results can be devastating and put the franchise back many years. The Top 100 Global Franchises in this survey have excelled at international expansion, investing time and resources to acquire linguistic capabilities while combining them with cultural sensitivities. In this way The Top 100 Global Franchises are role models for early stage franchises. The growth path of the leading companies provides a valuable learning curve for smaller franchise companies who can build on the success and mistakes of the Top 100 Franchises.
The franchising industry is an important contributor to the economy of the United States in terms of output and employment. The direct economic contribution of franchised businesses is $835 billion or around 4 percent of the U.S. private sector economy while over 9.5 million people are employed by franchises1. It is also expected for the year 2010 that the franchise sector will produce more then 2 trillion dollars in the U.S. The role of franchising in distributing products to customers worldwide has grown considerably over the past 50 years. A 2007 survey of members conducted by the International Franchise Association’s International Committee revealed that almost two thirds of respondents currently operate in international locations while almost 75% reported that they plan to either start or accelerate international ventures. The regions most often targeted by US franchises were the Middle East, Western Europe, Central and South America and Eastern Europe. Changes in the federal franchise regulations set by the Federal Trade Commission have also made it less expensive and easier for non-US based franchises to enter the US market.
While franchising is associated with the United States the franchise business model has been adopted globally and there are now major non-US based franchise companies in operation. Nearly 15% of the Franchise Direct Top 100 Global Franchises is comprised of non-US based franchise systems. The ranking includes for example, NaturHouse the Spanish health and nutrition franchise, the Kumon children’s educational franchise which originates in Japan, Cartridge World, the Australian printer cartridge refilling franchise, and Expense Reduction Analysts the UK originated consulting franchise.
The Top Ten Global Franchises
|Franchise Name||Business Description||Country of Origin|
|McDonald’s||Quick service restaurant, Hamburgers, Milkshakes||USA|
|Subway||Quick service restaurant, Submarine sandwiches||USA|
|International Hotel Group||Hotels||USA|
|Pizza Hut||Quick service restaurant, Pizza, pasta, wings||USA|
|KFC||Quick service restaurant, Chicken||USA|
|Burger King||Quick service restaurant, Fast food, Hamburgers, Milkshakes||USA|
|A&W Restaurants||Quick service restaurant, Burgers, hot dogs||USA|
|Ace Hardware Corp.||Hardware & home improvement store||USA|
|NaturHouse||Health and Beauty||Spain|
View the full lisiting of the Top 100 Global Franchises.
Quick Service Restaurants Dominate
The Quick Service Restaurant (QSR) industry dominates the Franchise Direct Top 100 Global Franchises. Quick service restaurants account for six out of the top ten of the franchises and 20% of the total 100 franchises. Despite the economic recession, the quick service restaurant industry is proving resilient. Unlike many other industry sectors it is forecast to experience growth during 2009 and 2010. The convenience and value offered by quick service restaurants make the management of consumers’ day to day living easier and ensures their continued patronage.
Key Success Factors of the Top Global Franchises
The top global franchises share a number of characteristics which have contributed to their success. These include the following:
1. Strong and internationally recognized brands
The worlds leading franchises boast brands that are recognized around the globe and consumers easily associate the brand name and logo with their products and services. For example, with 32,000 units in over 60% of the world’s countries, McDonald’s Golden Arches and its mascot Ronald McDonald have gained universal recognition. Likewise, with 15,000 units, KFC’s Colonel Sander’s Mascot is recognized around the world. The 7-Eleven trademarks or International Hotel Group’s Holiday Inn and Crowne Plaza also have strong brand recognition.
Brand building within a franchise is assisted by advertising fees which each franchise is obliged to pay the franchisor. These fees provide a constantly growing advertisement fund from which the franchisor can establish global advertising campaigns.
Effective brand management helps the top franchise operations maintain the integrity and consistency of their brands. Wherever the franchise is located worldwide the same quality of product and service is delivered and the same message is communicated.
This need for businesses to gain customer attention through brand recognition and advertising has aided in the rapid growth of Signarama. Signarama, at number 59 of Franchise Directs Top 100 Global Franchises, has been at the forefront of the growth of the sign industry and have been successfully franchising the full-service sign center concept for more than 20 years. They have used their many years of experience to develop a business model that has led thousands of Signarama franchisees to success.
2. Well defined business model
“In 2010 Franchising will be the most successful way of market expansion.”2(J. Naisbitt)
The business model of the Top 100 Franchise companies is well defined and easy to replicate. There is a focus on reliable systems covering every aspect of the operation of the franchise. The business model also has a distinct competitive advantage as it combines strong branding, quality training and entrepreneurial freedom. For example Subway, which is recognized brand around the world, believes strongly in empowering their franchisees. Two slots are kept open on each store's menu board for individual franchisee creations. The simplicity of the Subway business model also means that unlike many of their competitors their restaurant sites are adaptable to any location. There are now over 6,000 Subway restaurants located in non traditional settings i.e. inside Wal-Mart stores, convenience stores, supermarkets, hospitals, schools, military bases and recreational facilities. By encouraging their franchisees to locate in non- traditional settings start-up costs are kept lower. This strategy has also contributed significantly to the rapid growth of the Subway franchise system.
3. Comprehensive training and ongoing support
The leading franchise companies recognize the importance of intensive training, follow up support and continuous learning. Strong technical and business training ensures customers receive excellent service and quality of products. It also ensures the success of each franchise unit. McDonald’s realized from the beginning that the secret to success lies in quality management and competent employees and this can only be achieved through an exceptional training program. It is also the only quick service restaurant to receive college credit recommendations from the American Council on Education (ACE), the United States’ oldest and most recognized unifying body for higher education, for their courses at Hamburger University.
The initial training provided by a franchisor is very important as it enables people without the necessary skills to enter into a chosen industry. With the leading franchise companies there is invariably a fully developed network support infrastructure in place for the ongoing support and training of franchisees and their employees For example Subway provides food service training, business guidance and follow-up support from an extensive network of regional and headquarters personnel.
Precision Tune Auto Care, at position 67 of Franchise Directs Top 100 Global Franchises also offers management training that includes financial modeling, business planning, customer communications, building and creating relationships, leadership skills, marketing and advertising, as well as proper operating procedures at Precision University. When technicians stumble upon a particularly difficult situation, certified trainers are available via the Technical Hotline to offer solutions and ongoing support. Quality training and skill development linked to constant support systems for franchisees is what differentiates the Top 100 Franchises.
4. Adaptability and Innovation
The most successful franchises are innovative and adaptable to a changing marketplace. The leading quick service restaurant chains for example, constantly offer new choices including healthier options, new toppings, new breads, fillings etc. In 2003, Pizza Hut introduced WingStreet Restaurants due to the rising popularity of chicken wings. Five years later they introduced restaurant quality pastas as people became more health conscious. Also, many of Subway’s non-traditional restaurants serve a comprehensive, low-fat breakfast program.
Expansion into international markets can be successful if the target market is researched and a plausible strategy is implemented. A franchise needs to be able to adapt and change to the cultural differences in a new market and to be aware of current trends. For example, in Saudi Arabia, no pork products are served as it is prohibited by Islamic law. All meat sold is halal so McDonalds serves the McArabia which contains no pork products. In Indiana, there are strict religious laws about food preparation. McDonalds have implemented a system where meat and vegetarian meals are prepared in separate areas of the restaurant and chefs preparing vegetarian dishes wear distinctive green aprons to adhere to the local laws. While within Europe, strict EU food regulations made it difficult and expensive for US companies from the food industry to successfully enter the market.
We can also see how the franchise industry can adapt to new trends by introducing new concepts and new ideas for businesses. For example, in response to the ageing of the population there are more franchises set up that provide in-home non-medical companionship and domestic care services for the elderly. Two of these companies have made it into the Top 100 Global Franchises; Home Instead at no. 72 and Homewatch International at position 61.
The Greening of the Franchise Industry
Today, as part of their corporate citizenship, leading franchise companies are “going green” through the implementation of eco-friendly policies and initiatives. They recognize that this is not only good for the environment but it is also good for business. It creates goodwill, enhances public image and strengthens the brand equity of the company. It also reduces costs through efficiencies. For example Ben & Jerry’s have introduced a new kind of clean, green freezer to the United States. These new freezers use alternative refrigerants that, unlike current freezer gases, do not contribute to global warming nor the deterioration of the earth’s ozone layer if released to the atmosphere.
The Subway restaurant chain has made a commitment to do its part to save energy and help protect the environment by taking the Pledge to Change the World and encouraging others to do the same. The first Subway Eco-Store opened on November 9, 2007 in Kissimmee, Florida. Pizza Hut is installing high-efficiency, Energy Star-rated fryers in its restaurants and has a new pizza oven with an energy-management system that reduces gas usage by up to 15 percent.
The IFA’s most recent Franchise Business Leader Survey found that despite the recession and the challenges it holds for every industry around the world, franchise business leaders remain cautiously optimistic about the prospects for their own business. Once the recent credit crisis eases they see many opportunities for growth. It was also noted that the industry has emerged from previous recessions in an even stronger position. In general, franchising works very well for franchisors, franchisees, and customers alike, which is why it has grown to the extent that it has. The fundamentals of the franchise business model are strong and the entrepreneurial spirit which drives the industry will ensure that it continues to thrive. Franchising is one of the drivers that will help lead US companies out of this recession. The Top 100 companies will be to the forefront of this growth as they open new units around the globe.
1The Franchise Business Economic Outlook for 2009 and The Economic Impact of Franchised Businesses
Volume 2 (2005), prepared by PricewaterhouseCoopers, for the IFA Educational
2J. Naisbitt, Megatrends 2000: Ten New Directions for the 1990's. By Cornish, Edward, Publication: The Futurist, May 1 1990
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