RIFC 50 Index

The food franchising business sector was particularly hard hit, losing on the aggregate 6.8 percent in market value. However, not all food franchisors this quarter experienced negative performances. Dutch Brothers (BROS), the franchisor and operator of drive-through coffee shops, delivered an outstanding performance with a 76 percent return, making it the best performer of the RIFC 50 Index this quarter. The company reported a 10 percent growth in same-store sales, the opening of 45 new locations, record quarterly revenues, and profits that exceeded expectations.

On the other hand, car rental franchisor Hertz Global Holdings (HTZ) experienced a steep 54.6 percent drop in its market value, making it the worst performer of the RIFC 50 index this quarter. This April Hertz reported disappointing financial results and a plan to dispose of tens of thousands of electric vehicles in its rental car fleet.

It is interesting to note that, by contrast to the RIFC 50 Index, the S&P 500 Index had a positive return this quarter, with a 3.9 percent gain. However, this outperformance was mostly due to a handful of mega high-tech companies (the “Magnificent Seven” - Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) and the enthusiasm of investors for companies with Artificial Intelligence capabilities.

Outside of this narrow set of businesses, most other sectors of the US economy have been negatively impacted by the relatively high level of inflation. For example, the S&P Retail Select Industry Index, a subset of the S&P 500 Index focused on retail companies, dropped 4.8 percent this quarter. Most franchise companies, including the vast majority of the components of the RIFC 50 Index, operate in the food, leisure, personal care, and other consumer discretionary business sectors and are highly sensitive to increasing prices and costs.

Over 1-year, 5-years, and 10-years, the RIFC 50 Index returned -0.1%, +34.4%, and 72.7%, while it returned +434.0% since its inception in 2000. Over these same time periods, the S&P 500 Index returned, respectively, +22.7%, +85.6%, +178.6%, and +291.6%. It is to be noted that the exceptional performance of the S&P 500 Index in recent years has been mostly the results of a handful of mega high-tech companies that are not part of the franchise business sector.

Note:The RIFC 50 Index is updated quarterly. For more information, contact Dr. E. Hachemi Aliouche, Director, Rosenberg International Franchise Center.

• The best performer this quarter was restaurant operator and franchisor Wingstop with a 42.8 percent jump in its market value

• The RIFC 50 Index has underperformed the S&P 500 Index recently and over the last 5 years and 10 years due mostly to the strong market performance of the mega high-technology companies, such as Apple, Microsoft and Amazon that have propelled it up.

• The RIFC 50 Index is still outperforming the S&P 500 Index on a longer-term basis (since inception in 2000).

Note: The RIFC 50 Index is updated quarterly. For more information, contact Dr. E. Hachemi Aliouche, Director, Rosenberg International Franchise Center. 

A strong US job market, robust consumer spending, and investor confidence that the Federal Reserve was finished raising interest rates contributed to market gains in most US business sectors, and particularly in the franchise business sector.

The franchised food business sector was particularly strong this quarter, as illustrated by the remarkable performance of Index component Dutch Bros., the operator and franchisor of drive-thru coffee shops. Dutch Bros gained over 80 percent in market value this quarter. Dutch Bros is expanding aggressively, adding 160 new stores in 2023, with plans to grow to 4,000 stores over time from 831 units at the end of 2023.

The RIFC 50 Index’ performance in the last quarter of 2023 was on par with that of the S&P 500 Index (11.1 percent vs. 11.2 percent), though the S&P 500 Index’ strong performance was mostly due to a handful of mega hi-tech stocks (the so called “Magnificent Seven”). Due in large part to the outsize performance of the “Magnificent Seven” mega high-tech companies, the S&P 500 Index outperformed the RIFC 50 Index (24.2 percent vs. 14.3 percent) in 2023. The RIFC 50 Index is up 31.5 percent over the last 3 years, and 60.6 percent and 92.5 percent over the last 5 years and 10 years respectively. It is up 448.5 percent since its inception in 2000.

RIFC 50 Index and S&P 500 Index: Total Returns

Note: The RIFC 50 Index is updated quarterly. For more information,  contact Dr. E. Hachemi Aliouche, Director, Rosenberg International Franchise Center. 

TIts 11.5 percent gain year-to-date confirms the strong recovery of the franchising business sector. The Aaron Company, a leader in the lease ownership business sector, had the best performance this quarter, jumping 45.8 percent in market value, driven by better than expected financial and operational results. On the other hand, fitness operator and franchisor F45 Training Holdings, continues to struggle, losing another 56.9 percent in market value this quarter after repeatedly missing financial expectations.

The RIFC 50 Index is up 6.5 percent this quarter, 11.5 percent YTD, 21.5 percent over the last 12 months, and 61.1 percent over the last 3 years. It is up 49.8 percent and 105.7 percent over the last 5 years and 10 years respectively, and up 434.7percent since its inception in 2000. The RIFC 50 Index significantly outperformed the S&P 500 Index over the last 3 years when the Covid pandemic was widespread, signalling that the franchise business sector may be more resilient than most other sectors of the US economy. However, more recently, the outsize performance of the mega-cap technology companies such as Apple and Nvidia has pushed the S&P 500 Index ahead.

Note:The RIFC 50 Index is updated quarterly. For more information, contact Dr. E. Hachemi Aliouche, Director, Rosenberg International Franchise Center.