In the News
FLEETING GROWTHby Darrell Johnson, CEO of FRANdata on 6/3/2008
The concepts that make the Fast 55 list provide many insights into the success of the franchise business model. Here are a few observations from the 2008 list:
• Of the 10 companies leading this year's list, only one was in the top 10 last year, compared to six the year before • This year's top 10 are in 10 different industries • Health & Fitness and Retail Food were the most popular industries for fast growth
The Fast 55 has been produced for five consecutive years. For the first time in those five years a sit-down restaurant concept came out on top and was the only sit-down restaurant concept to make this year's list. Capitalizing on the appeal of sushi restaurants in recent years, Ace Sushi had a tremendous 3,530 percent average unit growth rate since it began franchising in 2004. In second place was Sotheby's International Realty with 1,697 percent average-unit growth.
Franchise systems from the real estate, computer products, retail food and retail store industries round out the top five and all are new to the list this year.
We have to look at the No. 6- ranked concept, Paul Mitchell (Hair Care) to find a repeat winner in the top 10 from last year. Across the entire list, there are just 13 repeat winners this year, compared to 28 last year.
It is important to understand the two criteria used to develop this list. First, only brands that have been franchising for five years or less are considered. Second, brands must show positive unit growth each year.
Brands on this list clearly have moved into a multi-year period of rapid growth. Some of the brand changes from one year's list to the next is the result of the time limitation for consideration. However, the fact that there are fewer repeat names this year compared to prior years suggests that, increasingly, brands are having relatively short periods of rapid growth followed by periods of consolidation. Among other things, this reinforces the fact that almost all franchise systems go through distinct life cycle phases, regardless of the industry.
The industry diversification represented in this year's list is impressive. Health & Fitness tied with Retail Food for the most concepts at seven each. Last year Health & Fitness led all industries with nine concepts represented, followed by Maintenance Services with six (two years ago Maintenance Services was the leader with eight).
At the sector level (FRANdata tracks 230 sectors) within each industry, there is very little duplication in 2008. More than 40 sectors in 18 industries were represented. Franchise companies listed on the FAST 55 had average unit growth ranging from 260 percent to 3,530 percent. The average was over 600 percent—aggressive expansion by any standard.
Definition of the Day: The Fast 55 In order to make the Fast 55, a ranking of the fastest growing, young franchises, a franchise company must meet these two criteria:
1) They must be a brand that has been franchising for five years or less. 2) They must exhibit positive franchise unit growth for each year during this period.