Research by Matt Haskin and Michael Nelson
Inflation declined at a frustratingly slow pace in 2023, while the U.S. Federal Reserve raised interest rates to the highest level since 2007. Yet for the majority of franchising’s biggest brands, sales gains indicate last year was a success.
Across the 200 largest franchise brands within the Top 400, total sales came to $707.1 billion globally, an increase from $666.9 billion in 2022. By category, nearly all grew sales, with just two, real estate and business services, experiencing a decline.
The widespread sales growth occurred over a 12-month span where inflation started at 6.4 percent and ended at 3.4 percent. A good sign for next year’s results is the inflation rate slowly but steadily continued to decline in 2024, falling below 2.9 percent in July, the lowest since March 2021.
Restaurant ranking leaders
With the most systemwide sales growth during 2023, McDonald’s kept its No. 1 ranking by generating an additional $11.3 billion to reach $129.5 billion in total sales. The company led a quick-service burger segment that pulled in $199.5 billion in sales, up 8.3 percent from 2022.
A major chunk of those burger sales came from the big three: McDonald’s, No. 4 Burger King and No. 11 Wendy’s, which combined for more than $170 billion. Percentage-wise, the largest gainer in the category was No. 35 Culver’s, which exceeded $3 billion with a 16 percent sales jump.
Restaurant brands collectively generated $457.2 billion in sales for 2023, up 8.3 percent from the $422 billion in 2022. The category’s ongoing growth was reflected at the top of the ranking, with seven of the top 10 brands being restaurants, and all holding on to their rankings from last year. This was despite the inflation rate for food away from home starting 2023 at 8.2 percent, though it fell to 5.2 percent by year’s end.
Along with QSR burgers, another strong segment in the restaurant category was chicken, with $76 billion in sales, up from $67.9 billion. No. 3 KFC led the category with $33.8 billion in sales, followed by No. 6 Chick-fil-A with an estimated $22.3 billion. KFC also added the most units across the Top 400, with a net new store gain of 2,140 locations to reach 29,900.
A noticeable jump for the chicken category came in the wing space, with $4.3 billion in sales, a 22 percent boost. Leading the pack was No. 33 Wingstop, which grew its systemwide sales 27.1 percent to $3.5 billion.
Dave’s Hot Chicken, at No. 165, was another success story in the category overall, with sales jumping 40.1 percent to $406 million. Even more impressive was the brand’s unit growth, skyrocketing 76.5 percent as it added 78 restaurants to reach 180 overall.
Off-premises and dine-in pizza also produced good results in 2023, with the latter having a higher percentage jump in sales growth. The dine-in pizza segment grew 8.7 percent to reach nearly $3 billion. Brands with a delivery-first bent, meanwhile, grew by 3.8 percent to reach $39.7 billion.
The major value players in the category, No. 8 Domino’s and No. 13 Pizza Hut, both reversed their systemwide sales declines from 2022. Domino’s pushed its sales up 4.2 percent to reach $18.3 billion, while Pizza Hut grew its sales 3.6 percent to hit $13.3 billion. Both brands also increased their number of locations, with Domino’s adding 711 net new units and Pizza Hut another 832.
Missing from this year’s ranking is Little Caesars, which did not submit its sales and unit data. The brand last year was No. 21 on the list with an estimated $5 billion in total sales.
Some tougher times
The category experiencing a far more difficult year in 2023, meanwhile, was real estate. As mentioned, it was one of two sectors of Top 400 brands that saw a decline overall, with sales dropping 16.8 percent, from $33.3 billion to $27.7 billion. Units also fell, with locations declining from 15,479 to 15,116.
The category had to deal with a few factors that put brands in a tougher position. The interest rate set by the Federal Reserve was already high to start the year, at 4.33 percent, and the central bank increased it a few times over the year, eventually setting it at 5.33 percent in August, where it has stayed since.
Housing prices have also been higher for the last two years, staying well above $410,000 nationwide. Leaders in the franchised real estate space, however, noted economic challenges weren’t the only reasons for the decline. The category was also dealing with the aftermath of an anomaly from a year earlier.
In 2021, the number of housing transactions reached 6.3 million, well above the average which sits between 5.3 million and 5.5 million. In 2023, the number fell below 4 million. Kuba Jewgieniew, the CEO of No. 92 Realty One Group, said he expects the number to stabilize as the industry goes through a “snap-back” in 2024.
The other category that struggled in 2023 was business services, coming in at $7.8 billion, down from just over $8 billion in 2022. That decline was reflected in the segment’s largest subcategory, employment and staffing, which had $5.2 billion in sales, $579 million less than the previous year.
There was a positive in the category with the coworking segment. Two brands, Office Evolution and Venture, X, both under United Franchise Group, combined for sales of $83 million in 2023, up 27.7 percent from $65 million the prior year.
Education, fitness help lift category
In a wide-ranging category that has fitness, hair care, education, swim schools, junk removal, pet care and wellness franchises in its lineup, personal services again made major gains in 2023, with overall sales of $27.7 billion, up 11.9 percent.
The 15 kids education and learning franchises on the ranking, which range from early childhood concepts and tutoring brands to music education services, were up 14.5 percent overall, generating sales of $5.25 billion last year.
The Goddard School, ranked No. 63, added $200 million in total sales for 2023, up 16.7 percent to $1.4 billion, making it the largest in the segment. Other strong kids education performances came from No. 64 Primrose Schools, up 11.6 percent to $1.3 billion, and Kiddie Academy, which saw a notable $624 million in systemwide sales to come in at No. 126.
Fitness franchises likewise helped power the personal services category, as the 14 brands on the list combined for $9.8 billion in sales, up 16.7 percent. Total units increased 6.1 percent, to 12,858 locations.
No. 25 Planet Fitness, the largest brand in the Top 400 fitness segment, showed demand for low-cost gyms remains strong as it grew systemwide sales by 15.4 percent, to $4.5 billion. Its total unit count expanded to 2,575, including 120 international locations. Big sales increases elsewhere in the segment came from No. 248 Burn Boot Camp, up 25.3 percent, and the brand on our cover, No. 79 Crunch Fitness, up 23.3 percent.
Retail starts shining
Positive news came out of the retail segment, the highest-earning category after restaurants. Sales grew by 3.9 percent, from $146.3 billion to $151.9 billion. Leading the charge was No. 2 7-Eleven with systemwide sales of $97.9 billion, followed by No. 5 Ace Hardware at $23.3 billion and No. 9 Circle K at $17.7 billion.
A retailer also had the second highest percentage jump in unit growth, with No. 88 Wireless Zone increasing its store count by 61.1 percent, from 447 to 720.
Netting the highest sales growth in the segment, meanwhile, was No. 101 Nothing Bundt Cakes, with total sales of $741 million, a 20 percent rise. The brand also had sizable unit growth, with a 17.2 percent boost from 477 to 559.
Unit growth across the 200 largest brands in the Top 400 was more modest, coming to 1.1 percent in the U.S. and 3.8 percent for international markets. In the U.S., units increased from 274,144 to 277,244, and in global markets for the 200 biggest franchises the total store count came to 254,806, up from 245,415. In total, all brands on this year’s ranking accounted for 594,319 global units.
How we rank the Top 400 franchises
The Franchise Times Top 400 is an annual ranking of the largest franchise systems in the United States by global systemwide sales, based on the previous year’s performance.
In a five-month research process and building upon a database that began in 1999, our research team uses a combination of companies’ voluntary reports and publicly available data, including the franchises’ most recent franchise disclosure documents and Securities and Exchange Commission filings.
To qualify, a company must be a legal U.S. franchise. Franchisees must own at least 10 percent of the company’s total units. The company must also be based in the United States, or have at least 10 percent of its total units in the United States.
Systemwide sales is defined as the total sales for both franchise and company units. Those sales figures should represent sales to customers, and not corporate sales to franchisees or prospective franchisees, such as royalty revenue or franchise fees. Other revenue not directly related to franchising should not be included.
If two companies reported the same systemwide sales, the higher ranking is given to the company with the most units. Preference is also given to companies that voluntarily report their systemwide sales, rather than those companies for which we must estimate the sales figures.
Franchise Times’ estimated revenue for real estate companies is based on 2.5 percent of their reported sales volume. Real estate companies report sales based on total volume of homes sold. So, if a home is sold for $200,000, it would be listed as $200,000 in revenue. Franchise Times’ estimate would count $5,000 in revenue earned as a commission from the sale.
We estimate travel agencies based on 12.5 percent of their total sales volume. Like real estate companies, travel agencies report sales volume based on the value of the vacations sold, rather than their commissions.
Research begins for next year’s project in late April. To submit your brand’s numbers or for more information, contact Franchise Times General Manager Matt Haskin, who leads the research effort for the Top 400, at mhaskin@franchisetimes.com.
