Restaurant Refranchising

2008 was a big year for restaurant franchises to refranchise many of their corporate-owned units, according to a recent report from food service consultants Technomic. Top brands such as Applebee's, Pizza Hut, and KFC converted stores to franchisee operations.

The move didn't come without incentives as franchisors offered their franchisees enhanced credit support and easier terms. Some chains reduced or waived franchise, marketing and store-opening fees, offered small loans and payment deferrals, and temporarily reduced royalty rates as incentives to encourage successful franchisees to purchase additional locations during the credit crunch.

"The shift toward a heavily franchised business model presents new opportunities for suppliers," says Darren Tristano, EVP at Technomic. "Strong, successful franchisees will be expanding their market presence and growing sales by acquiring formerly corporate-owned units. Suppliers who focus on building and strengthening their relationships with these franchisors can participate in that growth."

These findings and more were reported in the 2009 Technomic/Restaurant Finance Monitor Top 400 Restaurant Franchise Company Report, a joint product of Technomic and Restaurant Finance Monitor. The publication ranks the 200 leading restaurant franchise companies by sales. In addition, Technomic reports on the Future 200--a ranking of the 201 through 400 leading restaurant franchise companies.

This year's report also noted:

• The Top 400 restaurant franchisees generated $31.4 billion in sales in 2008, which accounted for 8.6 percent of the total restaurant industry's $365.6 billion.
• Pizza Hut had the most franchised units within the Top 400 companies with 3,627, followed by Burger King and Taco Bell, with 2,758 and 2,391 units respectively. Among full-service restaurants franchisors Applebee's had the most franchised units at 1,423.
• NPC International was the largest franchise company in 2008. A major franchisee of Pizza Hut, NPC had sales of $690 million, up 1.5 percent over 2007.