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Franchise Times Top 500 Ranks the Largest Brands in Franchising

13 Oct 2022 - With many of the measures meant to slow down the coronavirus pandemic coming to an end and a sense of normalcy returning, 2021 marked a rebound year for hundreds of franchises.

Those comebacks are reflected across the Franchise Times Top 500, the annual ranking of the largest U.S.-based franchise systems by worldwide sales. This year’s ranking had plenty of variety when it came to performance, as some companies had sales exceeding pre-pandemic levels, while others had increases without a full recovery.

While this year’s ranking revealed plenty of change, though, some things stayed the same. A clear example is the trio at the top, with McDonald’s, 7-Eleven and KFC once again finishing first, second and third.

McDonald’s maintained its No. 1 ranking with $112.5 billion in sales and 40,031 global units. Both were an improvement upon the 2020 marks of $93.3 billion and 39,198 units. McDonald’s also outdid its pre-pandemic performance of 2019, when systemwide sales were $100.1 billion.

Burger King, which took back its No. 4 spot after slipping to No. 5 last year when its sales declined to $20 billion, did so thanks to its 17 percent sales increase, to $23.4 billion

The success of McDonald’s and Burger King, as well as others, led to QSR hamburger franchises making a big collective rise last year. After falling 5.3 percent in 2020, sales for the segment grew by 18.3 percent, to $176 billion. That’s well above the $157.2 billion total from 2019, and the gains make it not only the largest restaurant segment, but the biggest Top 500 category.

The burger boom extended to the “better” brands, too. The total sales for the segment increased 30.4 percent to $3.75 billion, compared to the 2.7 percent bump recorded in 2020. A sizable chunk of that sales growth, $515 million of it, came from Five Guys, which boosted sales 22.7 percent, to $2.8 billion.

Beyond burgers

Chicken-centric companies also had a strong showing, with some building upon already steady growth and others bouncing back. KFC was an example of the latter, as sales dropped from $27.9 billion in 2019 to $26.2 billion in 2020, before rebounding to $31.3 billion in 2021.

No. 8 Chick-fil-A, meanwhile, continues to have banner year after banner year. The company’s sales went from an estimated $12.7 billion in 2019, up to $14.1 billion in 2020, and then to $17.1 billion in 2021. That’s $17.1 billion from a footprint of 2,709, about 10 times smaller than KFC.

Popeyes, meanwhile, took a step back in the rankings, dropping from No. 19 to No. 23. Its sales, however, continued to grow, up 7.3 percent, to $5.5 billion.

Also moving back in the rankings but increasing its sales is No. 12 Taco Bell, which slips a spot. It grew sales 13.1 percent, from $11.7 billion in 2020 to $13.2 billion in 2021. The sales growth is indicative of the strength of the Mexican segment, which increased 12.9 percent overall.

Some restaurant companies are still working toward their pre-pandemic levels. IHOP and Denny’s, for example, brought in $3.1 billion and $2.8 billion, respectively, increasing their sales over 2020. Yet they both were behind 2019 marks, with IHOP falling short by $342 million and Denny’s trailing by $59 million.

Restaurant companies in general were well represented among the largest 200 franchises in this year’s ranking. Combined, the highest ranked 200 franchise systems in the Top 500 had $732.6

billion in sales, a 17.5 percent increase from 2020. Restaurants also made up more than half of the companies in the top 10, which in total had $368 billion in sales for 2021, a 14.1 percent increase from the $323 billion recorded for 2020.

Service industries skyrocket

Another sector bouncing back was the hotel and travel industry. In 2020, sales for the hotel category fell 47.9 percent, to $50.9 billion. 2021 marked a complete turnaround, with hotels up 49.1 percent overall, to $73.4 billion in sales.

The big gains were across the board, too, with every hotel brand in the Top 500 list increasing sales by double-digit percentages in 2021. Also noteworthy was Dream Vacations, a travel agent franchise growing sales by 124 percent, from $19 million in 2020 to $42 million in 2021.

People were spending in an array of other sectors last year. Personal service companies—those in that wide-ranging category that includes beauty, fitness, massage, pet and kids education and entertainment concepts—finished 2021 with $23.5 billion in sales, an increase of 32.6 percent.

A notable grower in the category was Woodhouse Day Spa, with its sales up 102.5 percent, to $141 million. Swim schools and trampoline park brands also had success, with triple-digit percentage sales increases.

Consumers were also getting their vehicles serviced more often last year. Sales for the automotive aftermarket category rose 17.3 percent, to $15.1 billion in 2021, a big surge compared to the 1.3 percent increase in 2020.

The biggest Top 500 ranking mover comes from the automotive category, as car wash franchise Tommy’s Express shoots up 103 spots to No. 236, with sales growing by 289.9 percent to $250 million.

Real estate was another hot category in 2021, with sales for all brands jumping 30.9 percent, to $40.2 billion. Re/Max alone had $16.1 billion in sales, exceeding the pre-pandemic mark of $10.4 billion in 2019.

Home services surged in 2021, with sales increasing by 23.2 percent across 49 brands. In total, home service companies had $11.4 billion in system sales.

Unit growth stronger abroad

There was only a slight uptick in the number of franchised units in the U.S. for the largest 200 brands, a 0.3 percent increase from 267,454 to 268,388. When combining company and franchise locations for the top 200, the number of units in the U.S. increased from 306,048 to 310,845. Unit growth for the top 200 was stronger at the international level, increasing from 227,575 to 239,308, up 5.2 percent.

For the top 10, the number of franchised units in the U.S. fell from 74,282 to 69,795, a decrease of 6 percent. Even with corporate-owned locations increasing from 8,515 to 11,889, the number of combined U.S. units in 2021 came to 81,684, below 2020’s 82,797. For those top 10 outside the U.S., franchised units grew from 157,925 in 2020 to 161,040 in 2021, a 2 percent boost. Combined with company units, the total number was up 2 percent, from 164,279 to 167,346.

How we rank the Top 500 franchises

The Franchise Times Top 500 is an annual ranking of the 500 largest franchise systems in the United States by global systemwide sales, based on the previous year’s performance.

In a five-month research process and building upon a database that began in 1999, our research team uses a combination of companies’ voluntary reports and publicly available data, including the franchises’ most recent franchise disclosure documents and Securities and Exchange Commission filings.

To qualify, a company must be a legal U.S. franchise. Franchisees must own at least 10 percent of the company’s total units. The company must also be based in the United States, or have at least 10 percent of its total units in the United States.

Systemwide sales is defined as the total sales for both franchise and company units. Those sales figures should represent sales to customers, and not corporate sales to franchisees or prospective franchisees, such as royalty revenue or franchise fees. Other revenue not directly related to franchising should not be included.

If two companies reported the same systemwide sales, the higher ranking is given to the company with the most units. Preference is also given to companies that voluntarily report their systemwide sales, rather than those companies for which we must estimate the sales figures.

Franchise Times’ estimated revenue for hotels is based on a formula multiplying the chain’s revenue per available room (RevPAR) by the number of rooms and the number of days in the year. RevPAR comes from the company, or from industry estimates.

We estimate real estate companies based on 2.5 percent of their reported sales volume. Real estate companies report sales based on total volume of homes sold. So if a home is sold for $200,000, it would be listed as $200,000 in revenue. Franchise Times’ estimate would count $5,000 in revenue earned as a commission from the sale.

We estimate travel agencies based on 12.5 percent of their total sales volume. Like real estate companies, travel agencies report sales volume based on the value of the vacations sold, rather than their commissions.