The Franchise Times recently released its annual list of the 400 largest U.S.-based franchise systems. Unlike many other “top franchises” lists and franchise reviews, the Franchise Times Top 400 focuses solely on systemwide sales. As the publication explains:
“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.”
As the 2021 Franchise Times Top 400 is based on data from 2020, it provides some notable insights on the COVID-19 pandemic’s effects on franchising. Here are some of the highlights:
The Top 5 Largest Franchises Remain Unchanged
While the COVID-19 pandemic impacted different industries – and different franchises within different industries – differently, the top five largest franchises remain unchanged. McDonald’s, 7-Eleven and KFC held on to the top three spots, while Ace Hardware and Burger King flipped spots to fourth and fifth, respectively. McDonald’s, KFC and Burger King all saw their sales decline in 2020, while 7-Eleven and Ace Hardware saw their sales grow during the first year of the pandemic.
Franchise Numbers Declined in 2020
Among the top half of the Franchise Times Top 400, the total number of franchised outlets dropped by 1,874, or 0.7 percent, in 2020. Notably, company-owned locations grew by 2.6 percent over the same one-year period. Subway saw the largest drop in franchised outlets, reporting 3,864 fewer outlets at the end of 2020 than at the end of 2019.
The COVID-19 Pandemic Hit Hotels the Hardest
The sales data that the Franchise Times collected to prepare its list show that the COVID-19 pandemic hit the travel sector the hardest. As the publication reports, “hotels saw an incredible decline. Sales for the category sank 47.9 percent last year, a decline from $98 billion in 2019 to $50.9 billion.”
Fitness and physical activity franchises were also hit hard. The Franchise Times reports that franchises in the fitness sector saw an overall sales decline of 23.8 percent, while trampoline parks (“[a] small segment that had grown explosively in prior years”) saw a decline of 46.1 percent.
“Everyone Ate a Ton of Pizza”
While foot franchises have also been hit especially hard by the pandemic, the Franchise Times reports that the delivery pizza segment was up 4.8 percent in 2020 compared to 2019. However, similar to other restaurant concepts, franchised dine-in pizza restaurants saw a double-digit decline in total sales in 2020.
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