US restaurants relying on franchising for growth

Posted by Editorial on 19th August 2008

A report from foodservice consultants Technomic has found that many top restaurant chains grew their 2007 sales through signing more franchisees, instead of relying on same-store sales increases.
“Restaurant chains are facing an increasingly challenging environment and higher costs,” notes Darren Tristano, Executive Vice President of Technomic Information Services. “Expansion through franchising transfers some of the downside risk of a slowing economy to the franchisees, while the franchisees benefit from managing a restaurant brand that is tried and true both operationally and with its consumer base.”

Technomic teamed with Restaurant Finance Monitor to produce the Technomic/Restaurant Finance Monitor Top 400 Restaurant Franchise Company Report. Select findings included:

* The Top 400 restaurant franchisees generated $31 billion in sales in 2007, about 8.5 per cent of the total restaurant industry’s $364 billion.

* NPC International, a major franchisee of Pizza Hut, was the largest franchise company in 2007, with sales of $679 million, up 12.9 percent over 2006.

* Burger King, Taco Bell and McDonald’s were the restaurant brands most often franchised.

Franchising has also had its pitfalls in America this year with a growing number of casual dining franchises struggling as high food prices and low consumer confidence take their toll. This has, however, provided an opportunity for restaurants who have managed to withstand the downturn with the potential to increase their market share and prosper as soon as economic prosperity returns.