What is the RIFC 50 Index?

You undoubtedly know there are a lot of franchises out there. As an investor, how do you tell which are performing strongly and which are doing just … pretty well?

It’s a simple question with a complex answer, and one of the best data points available is the RIFC 50 index. Produced four times a year (once each quarter), the RIFC 50 is a stock portfolio of 50 U.S. public franchising companies that represent the broader market of franchises. 

In this article, you’ll learn about: 

• The practical applications of a franchise-focused index
• The anatomy of the RIFC 50 index
• Indices related to the RIFC 50 that track the pulse of the franchise market

Why a franchise-focused index?

Investors who are unfamiliar with the RIFC 50 may wonder about the reasoning behind it. Why does it exist? What does it hope to accomplish or tell us about the state of different franchises?

Index performance mirrors franchise performance in challenging times

Much like an index of company stocks, a franchise-focused index mirrors franchise performance in uncertain economic times.

So, you can always look to the RIFC 50 index to gauge the performance of any franchise during a recession, periods of high inflation, or other economic downturns, such as supply chain issues that affect a specific market segment.

A collection of recognizable and successful franchises

Moreover, the franchise-specific index is a shortcut to identifying successful franchises. 

Many franchises in the index are recognizable to the beginning investor, so the index helps establish a shared, accessible vocabulary for new franchise investors.

That’s commendable and useful, but also highly utilitarian: it helps experienced investors get a quick read on the market.

What is the RIFC?

RIFC is short for the Rosenberg International Franchise Center, which is part of the University of New Hampshire’s Peter T. Paul College of Business and Economics. The Center was established in 2002 with a donation from Robert M. Rosenberg, whose name is synonymous with “franchising.” Rosenberg created the International Franchise Association in 1960, was the CEO of Dunkin’ Donuts for 35 years, and also served on the Board of Directors for both Sonic Corp and Domino’s Pizza.

Traditional performance of the RIFC 50

Since it was first published more than 20 years ago, the RIFC 50 Index has always outperformed the S&P 500. Interestingly, the shape of their performance is similar, but the values on the RIFC index are higher.

We therefore conclude that a given franchise will, on average, have a higher rate of return than a given non-franchise stock.

And here are some hard numbers to back that up: The RIFC 50 is up 434.7% since 2000. Compare that with the S&P 500 Index, which is only up 219.1% in the same time period.

Selection criteria for the RIFC

What makes it into the RIFC 50 Index?

The Index looks at 50 top-performing franchises; so, like the S&P 500, it’s a measure of the top performers.

Also like the S&P 500, the distance between the best and the worst performers within the cutoff criteria can vary. So, the RIFC 50 Index is still a good pulse point for the franchise sector as a whole, with the same points and caveats as the S&P 500. 

What is the RIFC International Franchise Attractiveness Index?

Along with the RIFC 50, the Rosenberg Center creates two other publications: the RIFC International Franchise Attractiveness Index and the RIFC Global Social Index. 

The RIFC International Franchise Attractiveness Index ranks 131 countries according to how attractive they are as international franchise expansion market targets for U.S.-based franchises. For investors looking to expand a U.S.-based franchise internationally, this index provides a good order for the countries that should be attempted first.

And, contrary to what might seem intuitive, Canada, despite its geographical proximity, cultural similarities, and logistical ease, is not always the Index’s top recommendation.

How it’s made

The International Franchise Attractiveness Index is made with quantitative, not qualitative data. The data is a combination of peer-reviewed research and surveys of franchise executives.

From that starting point, the team behind the Index produces two different index rankings: Balanced Growth and Aggressive Growth.

The Balanced Growth Index is relevant for companies that seek balanced potential risks and returns from their international franchise expansion opportunities. In other words, this Index is for the franchises that prefer a slow and steady, safe approach to growth.

Conversely, the Aggressive Growth Index is best for more risk-tolerant companies. These franchisors are willing to capitalize on large opportunities in international markets despite the higher political, legal, regulatory, and/or economic risks that expert analyses have identified.

Many variables that the Index uses are not directly observable, since they’re qualitative. 

So although the model includes data points like market size, market growth, and purchasing power as international market potential signals, and includes market risk signals as well as geographical and cultural distances from the U.S. to approximate the cost or complexity of setting up and maintaining operations, it’s not a clear formula to the outside observer.

What is the RIFC Global Social Franchise Index?

Similar to the RIFC International Franchise Attractiveness Index, the RIFC Global Social Franchise Index ranks 131 countries. Instead of focusing on expansion attractiveness, however, the RIFC Global Social Franchise Index focuses on the impacts social entrepreneurship – and social franchising – can have on the well-being of that country’s citizens. 

The index considers metrics like education, average income, population size and density, citizen health conditions, and the risks of operating in a particular country. 

What it measures

The rationale behind this index is that franchising and entrepreneurship can be forces for social good. The lower a country falls on the United Nations’s Human Development Index – used as a proxy for “the well-being of a country’s citizens” – and the greater the population of that country, the more of an impact social franchising and the resulting social entrepreneurship can have.

So, while the RIFC International Franchise Attractiveness Index orders countries by how profitable they can be, the Global Social Franchise Index orders countries by how positive the impact a franchise can have by expanding there, irrespective of profits.

Less developed countries that did not share the post-WWII economic growth of North America and Western Europe rank toward the top of this index, with the majority in Africa or war-affected environments like the Middle East.

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