Thanks to a timely series of articles by Forbes.com, whose aired a list of the best and worst ten franchise companies in each of three distinct categories, based on the initial investment required to get into business.
Why is that timely? Because in a few weeks I’ll be presenting a webinar for business lenders on how to underwrite loans for franchise businesses. Check it out and register by clicking on Coleman Report.
In a good article by Tom Post, the business case for franchising is easy to discern.
Franchising has made an extraordinary impact on small business ownership in the U.S. According to a IHS Global Insight report prepared for the International Franchise Association, this year an estimated 770,000 franchise establishments will employ 8.5 million Americans and create $840 billion in output. And that sum is about 3.5% of the total U.S. GDP.
Franchising is a vital part of the American entrepreneurial landscape. In collaboration with FRANdata, Forbes created the first-ever critical list of the best and worst franchise companies in each of three cost categories: Up to $150,000, $150,001 to $500,000 and over $500,000.
FRANdata created the evaluation methodology that’s fully described in an accompanying article. Written by Peter Schwarzer, their director of research, it’s a thorough process they’ve employed to ensure that this project is not just another sales volume ranking, total unit count domination or other kind of ‘beauty contest.’ Read more about how this ranking was determined here.
So who makes the cut (or gets cut)? You can read a detailed profile about one best and most recommended franchises (#2) “Right at Home” by clicking on the link.
See a graph listing the 10 Best Franchises in each category below.
Likewise, check out a profile of one of the worst (#4), Curves, which has already drawn plenty of attention from disgruntled small business owners and their SBA lenders.
See a graph listing the 10 Worst Franchises in each category below.
If want a detailed listing of all of the worst franchises, check out a website called “Unhappy Franchisees,” where they’ve been invited to post a response. All 30 names are named there.
If your bank lends to franchise companies, all of these articles will make worthwhile reading, even if you aren’t lending to these specific companies. Learning about how many franchises do very well while others do very poorly can be instructive about how business lenders might react to future requests for funding.
Graph listing the 10 Best Franchises according to Forbes.com
Graph listing the 10 Worst Franchises according to Forbes.com