Restaurant franchise industry booming

Jessica SarterFranchise Finance

Franchising has been an increasingly popular choice for entrepreneurs in the post-recessionary years, as this option yields significant benefits and lacks some of the common risks associated with starting a small business from scratch. In addition to reports of increased franchise lending in the last few months, franchisees have been refining strategies to make the most of what they have.

One example of this was in the 2011 earnings report of American Restaurant Concepts, which the franchisor released earlier this week. The company, which is the operator of Dick’s Wings and Grill restaurants, said that revenues grew by nearly 20 percent last year. Further, the company’s franchisees spent 40 percent less on operation costs, demonstrating marked improvements in business practices.

The franchisor’s CEO, Michael Rosenberger, expressed his strong sentiments for the company’s successful year.

“I am very pleased with our financial results for 2011,” he said. “We implemented numerous actions during the latter half of 2011 that were pivotal to the increase in revenue and decrease in cash outflows that we achieved during the year. Our achievements further underscore our sound business model, despite the challenging economic conditions our country is experiencing.”

This specific company’s success was mirrored, and maybe even overshadowed, by other restaurant franchises.

The Franchise Times, a magazine that focuses on the industry, recently released its latest rankings of the top 200 restaurant franchises in the country. The publication purported that the restaurant franchise industry has proven to be recession-proof, as revenues in the United States have only gone up over the past few years.

The report, titled the Franchise Times Restaurant 200, found that total revenues reached slightly below $24 billion last year, representing 3.2 percent year-over-year growth and an all-time record for the industry. Notable performances in the rankings included NPC International, which controls Pizza Hut, and Carrols Restaurant Group, the company responsible for Burger King.

The former represented 20 percent of all locations included within the rankings and held the number-one spot, while the latter doubled its size in 2011 and was seventh in the ratings.

The firm noted that both revenues and the number of locations have seen “uninterrupted growth” for three years now, despite the hardships of the recession.

Joel Caws, writing for Business 2 Community, recently explained some of the advantages of starting a franchise. In the article, the author listed immediate brand recognition upon launching a new franchise location, added support from the franchisor and a significantly larger marketing network as being extremely beneficial to franchisees.

Caws added that the franchisor’s work regarding the creation of a strong business model takes many of the common startup business risks out of the equation, allowing new owners to focus on more advanced and intricate strategies.

Finally, the latest IFA/BoeFly Franchise Lending Index revealed that loan disbursements in the industry increased 5.73 percent from May to June of this year. This further represented 4.5 percent year-over-year growth in franchise lending, though Steve Caldeira of the International Franchise Association said the industry still has a ways to go.

“It’s good to see this modest improvement, but we are not out of the woods yet on credit access for our members,” Caldeira asserted. “The franchise industry’s ability to create jobs depends on access to capital, and therefore, the BoeFly/IFA Franchise Lending Index continues to help us keep our focus on this critically important issue.”

BoeFly is a valuable resource to any small business owner looking to obtain franchise financing. The firm, which has more than 2,200 participating lenders, matches borrowers with the financial institution best suited to their business needs.

Additionally, the firm released an infographic and accompanying content last month filled with guidance on the franchise loan acquisition process.