Restaurant chains aiming to expand their national footprints even more through franchising should continually focus on the unit economics within the footprint of each store. This increasingly profitable business model will then entice growth-minded franchisees with an increasingly profitable business model. The industry's fastest-growing brands are doing precisely that, according to the Top 100 Franchisor Restaurant Chain Benchmarking Report, a landmark new study from Technomic Inc.
Slightly less than half of the 100 largest restaurant franchisors boast a sales-to-investment ratio at or above the report's average of 1.4, and collectively they increased their unit count 3.3 percent in 2014, the report found. By contrast, the remaining brands with below-average sales-to-investment ratios only managed unit growth of 0.9 percent. That dynamic will remain a key trend for the restaurant industry, which has pivoted aggressively to franchise-led growth via development deals and refranchising agreements with operators able to fund new locations and remodels of existing restaurants.
"The fast-casual sector and standout quick-service brands like Chick-fil-A certainly have compelling appeal for consumers, but this report is able to show the leading returns on investment they provide to franchisees and quantify that factor's role in some chains' high-octane growth," says Darren Tristano, executive vice president at Technomic. "What franchisors offer their operator partners is just as important as what they offer their guests. Our latest study shows a strong correlation between ensuring franchisee profitability and expanding rapidly."