The Franchising Sector Weathers a Challenging 2018
The franchising sector, like most sectors of the US economy, faced strong headwinds in the last quarter of 2018, causing the RIFC 50 Index to lose 9.5% of its market value in 2018. The macro environment in the United States and overseas deteriorated significantly in the last quarter 2018 as fears of a trade war between the United States and China increased, the Federal Reserve signaled a more restrictive monetary policy implying higher interest rates, an economic recession became a near-term possibility, and political gridlock took hold in Washington. Most financial markets dropped sharply as a result, with the S&P 500 Index dropping 14% and the Nasdaq Composite losing 17.5% of its value. The RIFC 50 Index dropped 8.9% in the 4th quarter 2018.
Though 2018 proved to be brutally challenging for most companies (35 out of the 50 RIFC components suffered market declines, many double-digit), several RIFC 50 Index components managed to avoid losses, and some in fact thrived. For example, restaurant operator and franchisor Wingstop (WINGS) added over 80% to its market value in 2018, while fitness centers operator and franchisor Planet Fitness’ (PLNT) market value jumped by over 50%.
RIFC 50 Index components continued to be snapped up by other companies. In 2018, hotel operator and franchisor La Quinta was acquired by hotel franchisor Wyndham Hotels & Resorts, while Jamba Juice was bought by Focus Brands, and Sonic acquired by Inspire Brands, the owner of the Arby’s and Buffalo Wild Wings brands.
The RICF 50 Index, initially published in 2002 by UNH’s Rosenberg International Franchise Center (RIFC), is the first stock index to track the financial market performance of the U.S. franchising sector. It is a stock portfolio comprised of 50 U.S. public franchising companies representative of the U.S. business format franchising sector. Index tracking begins with the year 2000 and is updated quarterly. Since its inception in 2002, it is up 241.5% while the S&P 500 Index is up 79.8% over the same period.