Though good news is scarce in today's economy, thousands of franchisees have found steady success in franchising. And with any laid off from or quitting their corporate jobs, thousands ore are lining up in hopes of finding their calling among the franchises you'll see in Entrepreneur's 23rd Annual Franchise 500[R].
The initial Franchise 500[R] in 1980 was the first ranking of franchises in the industry. Though we've since noticed a smattering of imitators, Entrepreneur's Franchise 500[R] is still the best and most comprehensive rating of franchises in the world. Over the years, we have polished and perfected our ranking procedure, giving us a formula that accurately identifies today's top franchise opportunities for you.
Only franchise companies that submitted full Uniform Franchise Offering Circulars or Alberta, Canada, disclosure documents were eligible to receive a listing in the magazine. And only those companies that have a U.S. or Alberta, Canada, disclosure document and whose information Entrepreneur verified from the disclosure documents are eligible to be ranked--giving us the top 500 franchises.
Franchisors ranked in the Franchise 500[R] are listed in red. The rankings are to the left of their names. Companies whose information was verified by Entrepreneur, but that were not ranked in the top 500, are listed in descending order under those that received a top 500 ranking. Any companies that submitted unverifiable data are listed with the words "Not Ranked" next to their names.
We consider numerous factors in our ranking, so e of which are weighed more heavily than others. The most important ones include financial strength and stability, growth rate and size of the system. We also consider the number of years in business and length of time franchising, start-up costs, litigation, percentage of terminations and whether the company provides financing. Financial data was audited by an independent CPA firm. Every company with verifiable data receives a cumulative score. The franchises with the highest "cumes" become the Franchise 500[R],
These factors are objective, quantifiable measures of a franchise operation. We do not measure subjective elements such as franchisee satisfaction or management style, because these are judgments only you can make based on your own needs and experiences. All companies, regardless of size, are judged by the same criteria.
The franchisor's growth over the past three years is shown by the number of both franchised and company-owned units for 1999, 2000 and 2001. Another key column lists the total start-up costs necessary to open the franchise (including the initial franchise fee). This figure is affected by real estate and construction costs (if applicable), inventory, location, type of business and many other variables. For easy reference, the initial franchise fee is listed separately as well. Additional costs such as royalty fees, usually expressed as a percentage of monthly gross sales, are also listed separately. The remaining information is self-explanatory. "Where Registered" shows where a franchisor has either registered to sell or plans to register to sell this year in states where it is required (CA, HI, IL, IN, MD, MI, MN, NY, ND, RI, SD, VA, WI and WA). "Available U.S. Regions" and "Seeking Foreign?" show where franchisors are planning to expand.
Some companies provide financing of their franchise fees or their total start-up costs, or even offer equipment leasing options for franchisees. The "Type of Financing" category details the kind of franchising provided by each franchise company. We've also noted whether the franchise can be operated from home and which companies are seeking multiple units only.
Remember that the Franchise 500[R] is not intended to endorse, advertise or recommend any particular franchise. It is solely a research tool you can use to compare franchise operations. Entrepreneur stresses that you should always conduct your own independent investigation before you invest money in a franchise. Read the UFOC and related materials carefully; get help from an attorney and a CPA in reviewing any legal documents; talk to as many existing franchisees as possible, and visit their outlets. The best way to protect yourself is to do your homework.
Research compiled by Maria Anton Conley, Zoy Parkinson Smith and Marina Brown; financial analysis by David R. Juedes, CPA; graphic design by Matt Samarin; additional assistance from Marla Markman, Liza Dembiec, Steve Cooper, Adam Ludwin, Stephanie Soong and Dave Pomije.
