New Franchise Times ranking finds top restaurant franchisees are beating the recession

MINNEAPOLIS, July 31, 2012 /PRNewswire/ -- Large restaurant franchisees post-recession are evolving into more sophisticated, investor-owned companies that wield considerable clout with their franchisor, according to an analysis of the Franchise Times Restaurant 200, the exclusive annual ranking of the nation's largest restaurant franchisees.

Collectively, the Franchise Times Restaurant 200 posted revenue of $23.9 billion in 2011, up 3.2 percent from the year before. The companies owned 18,408 units, up 3 percent, continuing an almost uninterrupted string of growth for the largest operators in the 20-year history of the ranking, compiled in conjunction with Franchise Times' sister publication, The Restaurant Finance Monitor.

"Franchising is changing," said Mary Jo Larson, vice-president of Franchise Times Corp. in Minneapolis and publisher of the ranking. "A lot of older systems are increasingly relying on bigger franchisees to operate their systems. Many of these franchisees are owned by private equity groups and more sophisticated investors that have a lot more influence with the franchisor than the traditional mom-and-pop shop."

The largest operators have long built and bought new restaurants at a rate faster than smaller operators because they have more access to capital and are in demand. These large franchisees also have a direct line to franchisor executives, thus giving them more influence. The largest franchisee on the ranking, Pittsburg, Kansas-based NPC International, has 1,151 Pizza Hut units—about 20 percent of the system.

Then there is No. 7, Carrols Restaurant Group, which in April agreed to buy 278 more units from its franchisor, Burger King, doubling its size. It also has been pre-approved to own as many as 1,000.

A closer look at the ranking finds that franchisees are more specialized. Two years ago, 104 of the 200 franchisees owned two or more concepts, continuing a long trend toward multi-concept ownership. This year, that number is down to 88.

Private equity groups continue to play a growing role in the ranking, often replacing longtime operators. Perhaps no company was as active as Argonne Capital, the Atlanta-based private equity group that last year bought 40 Applebee's restaurants from the chain's founder, Bill Palmer, thus forming Neighborhood Restaurant Group (No. 74). Neighborhood has since bought another company on the ranking, No. 46 Casual Restaurant Concepts, owned by longtime operator Franklin Carson.

The acquisition trend even reached NPC International, No. 1 on the Franchise Times Restaurant 200 since 2005; NPC now has new owners but the same management. "It's amazing," said NPC's CEO Jim Schwartz. "Over the years you acquire 50 here, 50 there, and the next thing you know you're almost at 1,200."

ABOUT THE FRANCHISE TIMES RESTAURANT 200: The exclusive ranking of the nation's top 200 restaurant franchisees is an annual research project conducted by Franchise Times and the Restaurant Finance Monitor. Researchers examine financial information supplied by franchisees, annual reports, Securities and Exchange Commission documents, franchise disclosure documents and other sources to rank franchisees by annual revenue.

ABOUT FRANCHISE TIMES: Franchise Times magazine is owned by Franchise Times Corp., based in Minneapolis, MN, which also publishes Foodservice News and The Restaurant Finance Monitor. Known as the news and information source for the franchise community, Franchise Times publishes a ten-times a year magazine in addition to several directories and rankings, such as the Franchise Times Top 200, a listing of the top franchisors in the U.S., based on sales.

SOURCE Franchise Times Corp.