Report: Chain restaurants growing through franchising

Sept. 17, 2012

A new report by Technomic and Restaurant Finance Monitor finds that the franchising of restaurant brands continues to be a major growth avenue pursued by chains and that, as credit markets continue to loosen up, more franchisees are expanding.

Many operators are signing new franchise agreements to open new stores or acquiring pre-existing locations to expand their footprints, while at the same time enhancing brand development and marketing.

"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 Darren Tristano, Technomic's executive vice president. "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."

Additionally, many operators are now taking advantage of franchising because of national brand strength and resources, as well as reduction of their own start-up and operating costs.

These findings are part of the 2012 Top 400 Restaurant Franchise Company Report, produced by Technomic in conjunction with Restaurant Finance Monitor. Other findings include:

  • The Top 400 restaurant franchise companies generated an estimated $34 billion in sales in 2011 and accounted for almost 10 percent of the total commercial restaurant industry's sales of $370 billion;
  • Total units from the Top 400 came to 27,206, comprising nearly 5 percent of the commercial restaurant industry's units;
  • NPC International continued to dominate franchise sales at $938 million in 2011. As the largest Pizza Hut franchisee, it operated 1,151 restaurants at the end of last year, an increase of 1.3 percent from 2010;
  • Eighty-seven percent of McDonald's sales came from franchised stores for a total of $29.7 billion in 2011, whereas Subway's system is 100-percent franchised, meaning that all $11.4 billion was generated by franchisees. The next largest chain in terms of total U.S. franchise sales was Burger King at $7.4 billion.

The 2012 Top 400 Restaurant Franchise Company Report sorts the companies alphabetically and offers concept breakdowns by franchise company and brand, regions of company operations and selected franchise cost-structure analysis for leading restaurant brands.

Read more about franchising.

Topics: Financing and capital improvements , Franchising & Growth , Operations Management , Trends / Statistics

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