Big franchise companies keep getting bigger

The 400 largest franchise companies in the U.S. are growing even larger—adding locations at three times the rate of the chain-restaurant industry as a whole, according to recent data from research company Technomic.

The nation’s largest franchise operators increased their collective restaurant count by 6.5 percent during 2014, compared to 2.1 percent for all units of the brands listed in Technomic’s Top 500 Chain Restaurant Report.

While many of these companies are leveraging operational excellence to open new stores organically, much of the growth over the past few years has come via acquisition, the research company says.

Technomic expects the growth-by-acquisition trend to continue throughout the next several years, as many franchisors have indicated plans to continue similar rates of refranchising to remain “asset light.”

"The companies tracked in the Top 400 Restaurant Franchise Report are taking advantage of a seismic shift in the restaurant industry toward franchise-led expansion and investment,” Technomic Executive Vice President Darren Tristano said, “and many of them are getting big enough to wield the purchasing power and territorial reach of a super-regional restaurant brand.”

Sales at the largest franchisees are outpacing the chain-restaurant industry as well, with collective sales growing by 8.2 percent in 2014, compared to the 4 percent growth seen by all of the brands in Technomic’s Top 500.

"Low interest rates and the availability of capital have made it an excellent time for multiunit franchisees to grow by acquisition," John Hamburger, president of Minneapolis-based Franchise Times Corp. and the Restaurant Finance Monitor, said in a news release. "Franchisees have never had it so good in the capital markets."

As of late, chain restaurants are performing better than the restaurant industry as a whole—increasing in location size by 1 percent, while overall restaurant count decreased by 1 percent, NPD Group data says.
 

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