RIFC 50 Index

Despite a generally challenging food sector, Dutch Brothers (BROS), the franchisor and operator of drive-through coffee shops, continues to deliver an outstanding financial performance as it jumped 110.5% this quarter, making it the best performer of the Index. Dutch Brothers continues to grow revenue quickly and to exceed growth and profit expectations.

The Lodging sector performed much better than the Food sector this quarter as it gained 7.3% in market value. In this sector, Wyndham Worldwide (WH) was the best performing component this quarter with a 24.4% gain.

For the full year 2024, the RIFC 50 Index gained 5.4%, propelled by the Lodging sector. Whereas the Food sector was up only 0.2% and the Services sector was up only 0.5%, the Lodging sector jumped 21.9% in 2024. Hilton Hotels (HLT) was the best performer in 2024 in the Lodging sector, gaining over 31% in market value.

The S&P 500 Index had a positive return this quarter with a 2.1% gain. As in recent quarters, this outperformance over the RIFC 50 Index was mostly due to the Magnificent Seven mega high-tech companies Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) and the enthusiasm of investors for companies with Artificial Intelligence capabilities.

Over 1-year, 5-years, and 10-years, the RIFC 50 Index returned +5.4%, +45.3%, and 81.1% respectively, while it returned +478.4% since its inception in 2000. Over these same time periods, the S&P 500 Index returned, respectively, +23.3%, +82.6%, +185.7%, and +321.8%. 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.

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. 

• RIFC 50 Index outperformed S&P 500 Index this quarter (+8.8% vs. +5.5%) – as the mega high-tech companies in the S&P 500 (Magnificent 7) did not have outsize performances as in previous several quarters

• RIFC 50 Index is still outperforming S&P 500 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.

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.