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Restaurant Chains Travel Franchise Path Toward Growth

Restaurant chains consider new franchise agreements to be a main avenue for growth, according to report from foodservice consultant Technomic.

"A focus on growing the franchise system allows franchisors to spend less on restaurant-level operations and redirect capital toward systemwide marketing and brand initiatives," says Darren Tristano, EVP at Technomic.

In response to the recession, many franchisors have offered their franchisees incentives like enhanced credit support, fee reductions, and temporarily reduced royalty rates. Others have worked with franchisees to drive down supply chain costs.

The findings are part of the 2010 Technomic/Restaurant Finance Monitor Top 400 Restaurant Franchise Company Report. Other findings include:

• The Top 400 restaurant franchisors generated roughly $31.8 billion in sales in 2009, up 1.6 percent (nominally). They represented about 8.8 percent of the total commercial restaurant industry's sales of $359.7 billion. Units rose about 4.5 percent to 25,889 stores.

• NPC International, a major franchisee of Pizza Hut, was once again the top franchise company with sales of $845 million, up 22.5 percent nominally over 2008.

• Chains with the greatest sales from franchisees were McDonald's, Subway and Burger King, with franchise sales of $26 billion, $10 billion, and $7.7 billion respectively.