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UNH Franchising Index Ends 2016 with Q4 Rebound
 
Published Thursday, March 16, 2017

The UNH Rosenberg Center's Franchise 50 Index, which tracks publicly traded companies in the U.S. engaged in business format franchising, jumped 5.5 percent in the fourth quarter of 2016. This rebound was primarily due to the restaurant and lodging industries, which performed well in Q4 but lagged other industries for most of the year, negatively impacting the performance of the index in 2016.

The index, first published in 2002, is the first stock index that tracks the financial market performance of the US franchising sector. It is a stock portfolio composed of 50 U.S. public franchising companies that are representative of the U.S. business format franchising sector. The index is updated quarterly.

Most of the components of the index performed well in the fourth quarter, with 39 out of 50 components having positive returns, and 26 of these 39 showing double-digit quarterly returns. Only 11 components lost value this quarter, and of these, only four experienced double-digit losses.

The best index performer this quarter was Ruth’s Hospitality Group, the developer, operator and franchisor of the Ruth’s Chris Steak House fine dining restaurant brand. It climbed 29.8 percent, driven by solid financial and operational results.

The worst index performer was Hertz Global Holdings, the car rental company that operates the Hertz, Dollar, Thrifty and Firefly car rental brands. It lost 46.3 percent of its market value. On November 9, 2016, its stock price tumbled 22.5 percent after it announced much lower profits than expected, resulting mainly from lower revenues and a drop in the value of its cars. It also cut back its annual profit outlook. Hertz lost further value in December after it announced the replacement of its president and CEO.

This quarter, the RCF 50 Index (+5.5 percent) outperformed the S&P 500 Index (+3.3 percent) for the first time since 2015. The S&P 500 Index had been reaching historic highs over the last few quarters, while the RCF 50 Index experienced negative returns for several quarters in 2015 and 2016, dragged down by under-performance by the franchised sectors of the restaurant and lodging industries, and investors rotating into high tech and other large companies.


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