Franchise 500

Entrepreneur, Jan, 1999 by Mariia Anton, Liza Potter, Victoria Neal, Meredith Russell, David R. Juedes

On the following pages, you will find Entrepreneur's 20th Annual Franchise 500[R].

The initial Entrepreneur Franchise 500[R] in 1980 was the first ranking of franchises in the industry. Though we've since noticed a smattering of imitators, Entrepreneur's Franchise 500[R] is still the best and most comprehensive rating of franchises in the world. Over the years, we've polished and perfected our ranking procedure, giving us a formula that accurately identifies today's top franchise opportunities for you.

This year, only franchise companies that submitted complete U.S. Uniform Franchise Offering Circulars (UFOCs) or Alberta, Canada, disclosure documents were eligible to receive a listing in the magazine. And only those companies that have a U.S. or Alberta, Canada, disclosure document and whose information Entrepreneur verified from the disclosure documents are eligible to be ranked - giving us the top 500 franchises.

Franchisors whose questionnaires were verified by Entrepreneur are listed, in order of their ratings, in the shaded areas of the listing. If a company qualified for a ranking within the top 500, its position is listed to the left of its name. Companies that submitted unverifiable data are listed alphabetically beneath those that were verified.

In our ranking, we consider numerous factors, some of which are weighed more heavily than others. The most important ones include financial strength and stability, growth rate, and size of the system. We also consider the number of years a company has been in business, the length of time it's been franchising, start-up costs, litigation history, percentage of franchise terminations and whether the company provides financing. Financial data was audited by an independent CPA firm.

These factors are objective, quantifiable measures of a franchise operation. We do not measure subjective elements such as franchisee satisfaction or management style, since these are judgments only you can make based on your own needs and experiences. All companies, regardless of size, are judged by the same criteria.

The remaining information is basically self-explanatory. "Where Registered" shows in which of the 13 states (CA, HI, IL, IN, MD, MN, NY, ND, RI, SD, VA, WI and WA) where franchisors are required by law to register before they can sell franchises, a franchise company is either registered or planning to register this year. "Available U.S. Regions" and "Seeking Foreign?" show what areas franchisors are planning to expand to.

The franchisor's growth over the past three years is shown by the number of both franchised and company-owned units for 1996, 1997 and 1998. Another key column lists the total start-up costs necessary to open the franchise (including the initial franchise fee). This figure is affected by real estate and construction costs (if applicable), inventory, location, type of business and many other variables. For easy reference, the initial franchise fee is listed separately as well. Additional costs such as royalty fees, usually expressed as a percentage of monthly gross sales, are also listed separately.

Some companies provide financing of their franchise fees or their total start-up costs, or even offer equipment leasing options for franchisees. The "Type of Financing" category details the kind of franchising provided by each franchise company. We've also noted whether the franchise can be operated from home and which companies are seeking multiple units only.

Remember that the Franchise 500[R] is not intended to endorse, advertise or recommend any particular franchise(s). It is solely a research tool you can use to compare franchise operations. Entrepreneur stresses that you should always conduct your own independent investigation before you invest money in a franchise. Read the UFOC and related materials carefully; get help from an attorney and CPA in reviewing any legal documents; talk to as many existing franchisees as possible, and visit their outlets. The best way to protect yourself is to do your homework.

[TABULAR DATA OMITTED]

Research compiled by Maria Anton and Liza Potter with assistance from Victoria Neal and Meredith Russell; financial analysis by David R. Juedes, CPA.