Franchisors love rankings. Visit any well-known franchisor’s website, and you are bound to see a laundry list of rankings purporting to provide third-party validation of the franchisor’s superiority in its niche, if not in the franchise industry as a whole. Similarly, a Google search for “franchise rankings” provides links to web pages and articles with titles like:
- Top 100 Global Franchises
- 2018 Franchise 500 Ranking
- Top 100 Franchises – Rankings of Global Franchises 2018
- Rankings of the Best Franchises
- America’s Best and Worst Franchises to Buy
- Top 50 Franchises in the World
- Top 100 Franchises of 2018
As a prospective franchisee, how much stock, if any, should you put in a particular opportunity’s ranking as a “top franchise”?
Understanding Franchise Rankings
When considering what value to place on a ranking, it is always important to consider the source. As a general rule, legitimate media outlets (such as Forbes.com and Entrepreneur.com) will be more reliable than websites that exist solely to sell advertising (often for their own “top-ranked” franchise opportunities). A site that seeks to have some legitimacy behind its rankings should disclose the source of its data and its methodology as well. For example, in compiling its list of “America’s Best and Worst Franchises to Buy,” Forbes.com relied on five years’ worth of statistical data compiled by FRANdata examining system sustainability, system demand, value for investment, franchisor support and franchisor stability.
On the other hand, the Forbes.com list also relies on data that are a minimum of two years old, and this can be a lifetime in the world of franchising.
Then, there is the question of how a site is determining what constitutes a “top” franchise. Is the site simply considering the number of franchised outlets that are currently open? Is it focusing on “value” factors (such as initial investment costs and royalty rates)? Or, is it actually conducting comparative analyses to arrive at quantitative or qualitative conclusions? One of these is not necessarily “better” than the other; but, it is important to understand why one franchise opportunity is being ranked ahead of another.
Also, keep in mind that some “rankings” in the franchise industry are pay-for-play. With these sites, franchisors must pay a fee in order to be considered for ranking, and the rankings are often based on the amount paid. Additionally, some rankings – even well-known rankings like Entrepreneur’s Franchise 500 – require franchisors to apply for inclusion. So, a franchisor that does not care about rankings will not show up regardless of the quality of its system and franchise opportunity.
In short, when evaluating franchise opportunities, take rankings with a grain of salt. Base your decision on your own qualitative and quantitative analysis, and take your time to gather as much reliable information as possible.
Are You Considering a Franchise Opportunity?
If you are considering a franchise opportunity, the Goldstein Law Firm can help you make an informed decision and negotiate the terms of your franchise agreement with your franchisor. To learn more about our flat-fee services, please call (202) 293-3947 or request a free initial consultation online today.