Deciding on the best franchise to own in 2024? It boils down to profitability, scalability, and brand integrity. This guide lays out top franchise options that excel in these areas, backed by financial data and industry forecasts. Equip yourself with the knowledge to choose a franchise that aligns with your investment goals and market trends.
Key Takeaways
The profitability of franchises varies widely, with some models offering high average unit volumes like Express Employment Professionals at $6.4 million, and others offering quick returns such as Chick-Fil-A , where the average, stand-alone Chick-fil-A now generates over $9 million in revenues per year, not including mall units. AUVs for the entire system were $7.5 million last year. Chick-fil-A's ability to generate growing volumes from a relatively limited number of restaurants has been a key ingredient in its success.
Evaluating a franchise opportunity requires careful examination of initial investment and franchise fees, ongoing costs such as royalties, the level of support and training provided by the franchisor, and the brand’s reputation and market presence.
There are low-cost and high-potential franchise options available across various industries, including home-based, mobile, and service-based franchises, with initial investments as low as a few thousand dollars and diverse business models.
When it comes to choosing a franchise, profitability and growth potential are key. The franchise industry is on an uptick, with quick service restaurants forecasted to grow at a Compound Annual Growth Rate (CAGR) of 4.9%, and franchising GDP expected to reach $521.3 billion, creating 8.7 million jobs by 2023.
Some of the most profitable franchises include:
Express Employment Professionals: Units open for over 60 months boast $6,421,874 in Average Unit Volumes.
RE/MAX: A leading real estate franchise, operating over 9,175 franchises globally, with an average of 13.3 transactions per agent annually.
Best Choice Roofing achieves average franchise sales of $3.80M compared to an investment cost of $110K-$193K.
Food and Beverage Franchises
Food and beverage franchises have always been a popular choice among aspiring franchise owners. Take McDonald’s for instance, with its global presence of 40,000 franchises, it generates an average monthly revenue of $2,812,500. However, it’s not just about the Golden Arches.
Chick-Fil-A, with its 2,928 franchises, the average, stand-alone Chick-fil-A now generates over $9 million in revenues per year, not including mall units. AUVs for the entire system were $7.5 million last year. Chick-fil-A's ability to generate growing volumes from a relatively limited number of restaurants has been a key ingredient in its success.
Retail and Service Franchises
Retail and service franchises also offer significant opportunities for entrepreneurs. Consider 7-Eleven, a ubiquitous retail franchise with more than 68,236 stores globally. Its franchise model has led to considerable bottom-line growth and made it a top choice among franchisees.
On the service side, Ace Hardware has over 5,000 stores worldwide and boasts a historical track record of sustained growth and profitability. The UPS Store is another example of a service-based franchise with a strong business model and high revenue, affirming the financial prowess of service-oriented franchises.
Health and Fitness Franchises
Health and fitness franchises are another profitable segment, with companies like Anytime Fitness and Planet Fitness leading the pack. Such franchises benefit from multiple revenue streams, which improve financial stability and offer potential for growth.
With the rise in health consciousness among consumers, these franchises are poised for success.
Evaluating Franchise Opportunities: Key Factors to Consider
While the prospect of owning a franchise can be exciting, it’s crucial to evaluate each opportunity carefully. The typical initial investment range for franchise opportunities is between $150,000 and $2,000,000. But it’s not just about the investment. You also need to consider ongoing fees, such as royalty fees, which directly impact the monthly cash flow of the business.
Moreover, a franchise’s success can be influenced by the level of support provided by the franchisor and the reputation of the brand. This makes it imperative to examine the franchisor’s training programs, ongoing support, and brand image.
Initial Investment and Franchise Fees
The initial investment and franchise fees can vary significantly among franchises. Some may include requirements for liquid assets and a minimum net worth. The initial franchise fee, which is a payment made to the franchisor for the right to use the business name, model, and intellectual property, can range from $10,000 to a million dollars.
For instance, The UPS Store may require up to $476,993 as an initial investment, while a Snap-on franchise could necessitate a maximum of $465,436. Contrastingly, American Business Systems, a medical billing company, has a lower barrier with an initial investment of just $28,990 and no ongoing royalty fees. Therefore, it’s essential to understand the financial commitments involved in owning a franchise, including initial franchise fees and maintaining sufficient liquid capital for business operations.
Ongoing Fees and Royalties
While the initial investment is a significant factor, it’s equally important to consider ongoing fees and royalties. Most franchisees pay ongoing royalty fees to the franchisor as a percentage of gross sales, typically ranging from 5 to 9 percent. Additionally, franchisees may be required to contribute to an Advertising Fund or Brand Fund, calculated as a percentage of gross sales usually between 1 and 4 percent.
However, not all franchises charge ongoing royalties. Some may have a fixed fee regardless of sales levels, or no fee at all. Certain franchises, such as Healthy YOU Vending, even offer models with no ongoing royalty fees, allowing franchisees to retain more of their revenue.
Franchisor Support and Training
The level of support and training provided by the franchisor can make a significant difference in the success of your franchise. Comprehensive training programs educate franchisees on brand values, mission, target market, and strategic objectives, while ensuring adherence to brand standards and procedures across all locations.
In addition to initial training, franchisors provide ongoing support to franchisees that facilitates operational success. This includes tools and training needed to stay up-to-date with industry trends, new technologies, and evolving customer preferences. Moreover, franchisees contribute to the support system by sharing resources and best practices, which augments the franchisor’s training and fosters a valuable community for learning and growth.
Brand Reputation and Market Presence
Brand reputation and market presence play a critical role in franchise success. A strong brand reputation builds customer trust and loyalty, which can significantly influence a franchise’s bottom line. To build brand presence in new markets, franchisees invest in a Market Introduction Program, which boosts awareness.
The reputation of a brand can be influenced by various factors, such as the quality of products or services, customer service, and the overall customer experience. Therefore, choosing a franchise with a strong reputation and significant market presence can provide a competitive advantage.
Low-Cost Franchise Opportunities: Affordable Options for Entrepreneurs
While traditional franchises can require significant investments, there are also plenty of low-cost franchise opportunities. Some examples include:
Dream Vacations, which offers an affordable entry point for entrepreneurs with minimal upfront costs
Frios Gourmet Pops, which offers a low-cost, simple, mobile franchise system that sells prepackaged popsicles
Wise Coatings, which focuses on concrete floor coating and also offers a low-cost franchise model
Dream Vacations requires only a few thousand dollars upfront, while other companies like Frios Gourmet Pops require similar minimal investments. These low-cost franchises not only offer affordable entry points but also present potential for growth and success in their respective industries.
Home-Based Franchises
Home-based franchises offer a unique opportunity for aspiring business owners. Companies like Cruise Planners and Dream Vacations are examples of such opportunities, offering the flexibility to run a business from the comfort of home. The initial investment required for these franchises can be quite low, ranging from $2,295 to $23,465 for Cruise Planners and $1,795 to $21,000 for Dream Vacations.
What’s more, Dream Vacations offers discounts for veterans, adding an additional incentive for certain demographics to engage in home-based franchise opportunities. This makes home-based franchises an accessible and affordable option for many aspiring entrepreneurs.
Mobile Franchises
Mobile franchises offer the unique advantage of low overhead costs and ease of operation. Take Frios Gourmet Pops , for instance. Frios offers a low-cost, simple, mobile franchise system that sells prepackaged popsicles. The flexibility and low cost of entry allows more people to realize their dream of owning their own business. Their tie-dye wrapped vans create a unique experience for their customers across the country. Frios franchisees are able to work multiple events in a day as well as have wholesale accounts in their territory.
The initial investment required for starting a Frios Gourmet Pops franchise ranges between $40,925 - $71,775, making it a viable option for those looking to start a business with a smaller budget. Mobile franchises, therefore, offer a unique business model that combines affordability with flexibility.
Service-Based Franchises
Service-based franchises offer potential for growth and profitability in the franchising sector. JAN-PRO, a commercial cleaning service franchise, requires an initial investment ranging from $127,500 - $250,000, making it accessible for a variety of investors. Another service-based franchise, MaidThis, requires a total investment between $49,000 - $70,000, targeting a lean, low-cost cleaning franchise model that specializes in both residential and vacation rental/Airbnb® cleanings. They are the first and only vacation rental cleaning franchise that exists.
Service-based franchises offer a unique advantage as they cater to a consistent demand for services, irrespective of economic conditions. As such, companies like JAN-PRO and MaidThis present a compelling opportunity for those seeking to invest in a resilient and proven business model.
Tips for Ensuring Franchise Success
While choosing a profitable franchise is crucial, it’s equally important to understand how to ensure its success. There are several key factors that can significantly contribute to the success of your franchise. Having a passion for the franchise’s product or service is one such factor, indicating a good fit and significantly contributing to the success of the franchisee in that business. By considering these factors, you can identify successful franchises and make a well-informed decision.
Another crucial factor is participation in a franchisee support network, which provides extensive business support. This allows franchise owners to benefit from collective expertise and collaborative problem-solving, which can be instrumental in enhancing franchisee satisfaction and the likelihood of a franchise’s success.
Research and Due Diligence
Before investing in a franchise, it’s crucial to conduct thorough research and due diligence. Investigating the franchise model’s profitability mechanisms, such as membership systems, can help forecast long-term success. Prospective franchisees must thoroughly examine legal documents, preferably with the assistance of attorneys and accountants, to inform their decisions.
A detailed review of the Franchise Disclosure Document is a key due diligence step to discover information that the franchisor may not have disclosed. Conducting comprehensive due diligence is crucial to understand a franchise’s:
Financial health
Offered support and training
Market potential
Existing competition
Networking and Learning from Other Franchisees
Networking with other franchisees can provide valuable insights and contribute significantly to your franchise’s success. This networking gives you access to a collective pool of expertise and experience, which can be instrumental in sharing successful business strategies and specific skills essential for the growth of the franchise.
Establishing connections within the franchise network can:
Foster a sense of camaraderie
Open the door to potential business partnerships and opportunities
Provide valuable first-hand knowledge regarding the practicalities of operating the franchise
Offer insights into potential challenges and benefits that might not be immediately clear from the franchisor’s promotional materials
Engaging with existing franchisees can be a valuable way to gain this knowledge and build relationships within the franchise community.
Adherence to Franchise System and Guidelines
To ensure the success of your franchise, consistent adherence to the franchisor’s established business model and practices is crucial. This includes maintaining uniformity in:
product quality
customer service
marketing materials
signage
overall brand image
Franchisees must avoid making unauthorized changes to products, advertising, or services in their own business, as this could lead to franchise termination.
While franchising offers the opportunity to own a business, it’s important to remember that franchisees usually have limited autonomy and must adhere to the franchisor’s established system and standards as outlined in the franchise agreement.
Ongoing Education and Adaptability
In the ever-changing world of business, continuous learning and adaptability are vital for franchisees to remain competitive. By staying abreast of market trends and integrating innovative strategies into their operations, franchisees can ensure their business continues to thrive.
Whether it’s understanding new technologies, adjusting to changing consumer behaviors, or staying updated on industry regulations, ongoing education and adaptability can significantly contribute to the long-term success of your franchise business.
Summary
In conclusion, franchising offers a unique opportunity for entrepreneurs to venture into business with the backing of established brands. Whether you’re looking at food and beverage franchises, retail and service franchises, health and fitness franchises, or low-cost opportunities like home-based, mobile, or service-based franchises, the key to success lies in careful evaluation, comprehensive research, networking, adherence to established guidelines, and a continuous learning mindset. Remember, the success of your franchise is not just determined by the brand you choose, but also your dedication, commitment, and hard work.
Frequently Asked Questions
How profitable are franchises?
Franchises can be profitable, with profit margins typically ranging up to 20%. However, profitability varies among different franchise businesses.
What should I consider when evaluating franchise opportunities?
When evaluating franchise opportunities, it's crucial to consider the initial investment, ongoing fees, franchisor support, and brand reputation to make an informed decision. Consider all these factors carefully before making a commitment.
What are some low-cost franchise opportunities?
Consider looking into franchises such as Pink's Window Service, Bumble Roofing, and Bloomin Blinds for low-cost opportunities with potential for growth.
What are some tips for ensuring franchise success?
To ensure franchise success, it's crucial to have a passion for the product or service, network with other franchisees, follow franchise guidelines, and focus on ongoing education and adaptability. These factors can significantly impact the success of your franchise.
How important is franchisor support and training in franchise success?
Franchisor support and training are crucial for franchise success. They help franchisees understand the brand values and standards, leading to adherence and ultimately success.