This story appears in the January 2018 issue of Entrepreneur. Subscribe »
Welcome to Entrepreneur’s 39th annual Franchise 500.
That’s right, we’ve been putting together the world’s first, best and most comprehensive franchise ranking for almost four decades. And this year’s turned out to be one of our most competitive ever. In fact, for the first time in 25 years, more than 1,000 companies applied to be a part of the list. That means if you’re interested in buying a franchise, you’ve got more options than ever, from the established industries still dominating the top of the rankings, like restaurants, hair care and real estate, to emerging trends quickly climbing their way up, like smartphone repairs, trampoline parks and paint-and-sip studios.
Related: 5 Affordable Franchises You Can Start for Less Than $10,000
So how do we determine which companies come out on top? Using our proprietary ranking formula, which is always evolving to keep up with the ever-changing franchise world. Here’s a quick overview of what we consider:
Before we can determine the rankings, though, we have to gather the data. Beginning in July 2017, we asked franchisors to fill out our online form and submit a copy of their current Franchise Disclosure Document (FDD) or Canadian Disclosure Document. A total of 1,023 companies supplied the required information. Submissions were then vetted by our editorial team before being entered for data analysis.
To be eligible, a franchisor must be seeking new franchisees in the U.S. or Canada and must have had a minimum of 10 units open and operating as of July 31, 2017, with at least one franchise located in North America. Companies in Chapter 11 bankruptcy proceedings were not eligible. Then, each eligible franchisor was scored based on more than 150 data points, and those with the highest cumulative scores became the Franchise 500.
Related: The 6 Most Common Franchisor Mistakes
Companies are listed on the following pages by their industry categories. Ranked companies appear with their position listed to the left of their names. As an additional tool, we also list the 523 franchise companies that did not rank in the Franchise 500 but still passed our vetting process. Look for them listed in alphabetical order under “Not ranked” in their respective categories.
Note: The Franchise 500 is not intended to endorse, advertise or recommend any particular franchise. It is solely a tool to compare franchise operations. Entrepreneur Media stresses that you should always conduct your own independent investigation before investing in a franchise. Read the FDD and related materials, get help from a franchise attorney and an accountant to review legal and financial documents, talk to as many existing and former franchisees as possible and visit their outlets. To protect yourself, do your homework.
Year began/franchising since
This shows how long a company has been in business and how long it has been franchising. Both are good to know when you’re trying to decide whether you should go with an established system or a newer concept.
Available U.S. regions and seeking international?
Check out these columns if you want to know whether a franchise system is expanding in your area and whether a company requires franchisees to buy master licenses or multiple units.
No. of franchises/Company-owned
Find a franchise company’s size and how quickly it’s growing. Here we list the numbers of franchises and company-owned units open and operating worldwide as of July 31, 2015, 2016, and 2017.
Startup costs/Franchise fee
Look here for the total investment to open a franchise (without financing). This figure can be impacted by real estate and construction costs, equipment, inventory, location, type of business and other variables. Note: The startup costs include the initial franchise fee; however, for easy reference, the franchise fee is listed separately as well.
Related: The Rules and Regulations of Being a Franchisor
Many franchisors require franchisees to pay an ongoing royalty fee. Specific fees are listed in this column, typically expressed as a percentage of monthly gross sales.
More than three-quarters of the franchisors in our listing offer in-house financing or have relationships with third-party financing sources to which they refer qualified franchisees.
Identifies franchises that can be run from home or from a mobile unit, with no retail store, outside office, or warehouse space required.
Kiosk/Express unit available?
Some franchises offer kiosk opportunities or smaller express units that typically cost less than full-size units.
Check out 2018’s Franchise 500 list here.