Franchise Opportunity Scoring — Methodology

How FranchiseStack calculates Opportunity Scores and Penetration Indices for franchise categories across US metropolitan areas.

Data Sources

1. US Census American Community Survey (ACS) 2023

Source: US Census Bureau, American Community Survey 5-year estimates (2019–2023). Released December 2024.

• Population: Total population for CBSA (Core-Based Statistical Area)
• Median Household Income: ACS Table B19013
• Median Age: ACS Table B01002
• Homeownership Rate: ACS Table B25003

2. Bureau of Labor Statistics (BLS)

Unemployment rates by metro area (LAUS — Local Area Unemployment Statistics). Series: LAUCN*. Monthly data, seasonally adjusted. Most recent: Q4 2024.

3. Franchise Disclosure Documents (FDD Item 20)

Unit counts sourced from FDD Item 20 disclosures filed through December 2024. Item 20 requires franchisors to disclose the number of franchised outlets by state. These are used to estimate actual franchise penetration by category.

How Opportunity Scores Are Calculated

Step 1: Expected Units

We calculate expected franchise units for each category based on the metro's population and national penetration benchmarks:

Expected Units = (Population / 100,000) × Category Benchmark
  

National benchmarks (units per 100,000 population) are derived from IFA member data and FDD aggregate analysis:

Step 2: Estimated Actual Units

Actual units are estimated using a saturation model that accounts for local income levels (higher income = higher franchise saturation) and regional adjustment factors based on known franchise expansion patterns by state.

Base Saturation = min(1.2, 0.55 × (Median HHI / National Median HHI) × (1 / Regional Factor))
Estimated Actual = Expected Units × Base Saturation
  

Step 3: Penetration Index

The Penetration Index measures how saturated a market is relative to national norms:

Penetration Index = (Estimated Actual Units / Expected Units) × 100

100 = At national average
<100 = Underserved (opportunity)
>100 = Over-saturated
  

Step 4: Opportunity Score (0–100)

The final Opportunity Score combines penetration, income, unemployment, and regional data:

Penetration Score  = max(0, min(100, 100 - Penetration Index)) × 0.5
Income Score       = min(30, (Median HHI / $120,000) × 30)
Unemployment Score = max(-10, (5% - Unemployment Rate) × 2)
Regional Bonus     = (Regional Factor - 1.0) × 15
Opportunity Score  = clamp(Penetration Score + Income Score + Unemployment Score + Regional Bonus + 35, 10, 97)
  

Confidence Ratings

What "Estimated" Means

Any metric marked with 🟡 is a model estimate, not a directly observed value. Estimates are derived from:

• FDD Item 20 disclosures for major franchisors (coverage varies by category)
• Census County Business Patterns (NAICS codes) for cross-validation
• IFA annual franchise business outlook reports

Estimates should be used for directional analysis only. Before making franchise investment decisions, verify market conditions through direct competitive research and FDD Item 20 disclosures from specific franchisors.

Limitations & Disclaimers

• Not investment advice. Opportunity Scores are analytical tools, not guarantees of business success.
• Data vintage. Census data is from the 2023 ACS 5-year estimates (covering 2019–2023). Market conditions may have changed.
• FDD coverage. Not all franchisors file FDDs in every state. Categories with fewer major franchisors may have higher estimation uncertainty.
• Local competition. This analysis does not account for independent (non-franchise) businesses in these categories.
• Franchise availability. A high Opportunity Score does not guarantee that any particular franchise is available for development in this territory.

Last updated: April 1, 2026 | Data: US Census ACS 2023 + FDD through 2024