Franchising continues to be a major growth strategy pursued by restaurant operators in the US, according to a new report from Chicago-based industry research firm Technomic.
The 2012 Top 400 Restaurant Franchise Company Report says that franchising can be an attractive scenario for operators, with many taking advantage of their national brand strength and resources while reducing their own start-up and operating costs. “Plus, with recent closures, more prime locations are available for new restaurants,” the report adds.
The top 400 restaurant franchise companies generated an estimated $34bn in sales in 2011, against the total commercial restaurant industry’s sales of $370bn, the report says. Total units from the top 400 came to 27,206, comprising nearly 5% of the total.
“Restaurant companies are shifting towards a franchise growth model by selling company-owned stores to raise money and reduce capital expenditures, focusing more on the brand and less on operations,” said Technomic executive vice president Darren Tristano.
“The fast-casual and quick-service segments in particular are seeing higher levels of appeal based on lower costs of entry and strong unit economic models.”
The company with the greatest franchise sales is McDonald’s, which has 87% of its sales from franchised stores, totaling $29.7bn in 2011. Subway, which is 100% franchised, generates $11.4bn, and Burger King $7.4bn.
The biggest franchisee is NPC International, with sales of $938m in 2011. As the largest Pizza Hut franchisee, it operated 1,151 restaurants at the end of last year, up 1.3% from 2010.