Tweet

What are the Most Profitable Franchises?

Guest post by: Carl Moore

Article Overview: The Mysterious Franchise Profit Report Once someone decides that buying a franchise makes sense, it’s only logical to try and find the most profitable franchise to purchase. After all, given a choice between Franchise A that returns 10 percent per year and Franchise B that returns 15 percent per year, the results should be obvious, right? Well, maybe not. First of all, very few corporations elect to divulge earnings by their franchisees – actually, only about 25 percent of franchisors publish “earnings claims” in the franchise disclosure documents (FDD) they are required by law to provide to prospective franchise owners.

What are the Most Profitable Franchises?

Analyzing the Most Profitable Franchises

Even without hard numbers staring you in the face, there are many possible indicators to examine when looking to buy a most profitable franchise. At the bottom of that list - but certainly the process that will provide you the most accurate information - is to simply call up some franchise owners and ask them. "Hi, I'm thinking about buying an XYZ franchise. Since you own one, perhaps you could tell me how much you make in a year?" Maybe you'll get a reply, and maybe you won't, but the worst thing that can happen is they'll hang up on you. Maybe a private, in-person chat would serve you better. But there are other things to look for first, before you put your ego and your friendly demeanor on the line like that. Publications and Rankings

Two major industry journals each publish their own rankings of the top franchises each year. Both Inc. and Entrepreneur magazines enjoy a reputation for honest analysis and fairly extensive details regarding each company on their respective lists. The most profitable franchises are not necessarily those that rank the highest, and the best choice you can make for a franchise that suits your talents, experience, interest, and financial capacity is not necessarily at the top, either. Entrepreneur rates 500 franchises annually, using the following criteria: financial strength, number of years in business, startup costs, growth rate, number of franchises in operation, and overall corporate stability. Franchise companies are also listed in their respective industry categories, as well as on a master list. This means that you not only get a feeling for how that fast food franchise stacks up against that auto repair business, but also which auto repair business leads the pack against its direct competition.

Adding to the Raw Numbers

Rankings alone cannot tell the whole story when it comes to divining the most profitable franchise, but looking at a company's place on a list over the course of multiple years can be very telling. For example, some franchises are consistently at the top of their category, year after year. Others may have fallen a few steps off the pace. While this is not necessarily a bad sign - a hot upstart can always knock a long-term franchise off the pedestal in any given year - consistent slippage over the past few years could be a red flag. And one other factor needs to be remembered. Sales are not profits! A franchise that costs you $500,000 to open may generate net sales of $50,000 its first year. That works out to a 10 percent return on investment (ROI). But what if you only spent $200,000 to open a similar franchise that generates $25,000 its first year. Sure, your earnings are halved, but your ROI is 12.5 percent. Over the long haul, that may be a better deal.

Related Articles
  Franchising FAQs
  Restaurant Franchising
  CHOOSING A FRANCHISE BUSINESS
  Low Cost Franchises Offer Way to Own Your Own Business
  Vending Franchises Can Be Money Makers
  Reasons to Consider Franchising
  Franchise Clique, Industry Leader, is Signing New Business Every Day
  SME's - why is franchising not more popular in Africa
  Most Profitable Franchises to Start Today
  Senior Care Franchises Poised for Exponential Growth
  Low Investment Franchise Opportunities
  Benefits of Franchising
  Seven Questions to Ask when Starting a Franchise
  Franchising in Indonesia
  Why buy an existing business?
  Evaluating the franchisor
  Australian Franchise Directory Challenges Decrease in Franchise Enquiries
  New Franchise Direct study finds opportunities brewing in the coffee franchise sector
  Business Niche: Where do you place?
  Top 100 Global Franchises for 2009

Article Tags: Business Loans Construction Loans SBA HUD USDA, buying a franchise, profitable franchises



Related Forum Posts
franchisebrief.com good clean design - I actually really like the design - it's clean and not busy. The information is easy to find. You mentioned you didn't want to monetize from the site thru the use of adwords but what about JV'ing with all or most of the Franchises you are referring people to. Is that possible in the Franchise industry?
Re: Franchise Support. What is it to you? - To be honest I have never been a big believer in Franchises. Which of them did you have the best and worst experience with, when you called in as an "interested buyer"?
Clothing Franchises - I believe that there are quite a few franchises for larger brands such as Diesel, Lacoste and Bennetton etc... but I am not sure how these contracts work. In New Zealand, Canada & Switzerland Clothing Franchises are for smaller designer brands & Outdoor clothing -- such as Bivouac, the great Outdoors etc Ian
Re: Most and Least Profitable Businesses to Start - I can say something about the "Least Profitable Businesses to Start" when someone thinks about creating a product before knowing what the market really wants. This happens more often than people realize. People often get trapped into coming up with something it might work but if the market doesn't want that kind of stuff, no matter how innovative the idea may be, it'll turn bad. Like I might be able to come up a way to "... store all of my spam emails into one junk box and keep it stored on the web forever!" -- hey, who wants that kind of stuff.
Never give an excuse - [quote="Sebastien":3d3trrkv]I had an issue once with the Tacone franchise. I called a local location about 5 times and left voicemails every time to have someone call me back because I wanted them to cater a little get together I had. Nobody ever returned my call. I went straight to the website (the franchisor site) and complained that if they were not interested in doing business with me, SubMarina or another sandwich shop would probably be glad to. About an hour later I had a call from the Tacone franchise Area Developer in San Diego, telling me he just took over this territory and he was aware of problems at this particular location. He was really apologetic and knew there was a problem. I thanked him for calling me back so quickly and told him I would probably never buy from them anyways (I am a very snobby customer. When I pay for something, I like to be taken care of). A day later, I get a phone call from the local franchisee (whom I actually knew since we had done business together), explaining how busy he was that he couldn't return my call earlier. I was so chocked! What kind of business is that? I thanked him and told him I will never buy Tacone again. Well, I ended up buying Tacone again because it's so good but I never want back to this one location.[/quote:3d3trrkv] Hi Sebastien, I see where you're coming from and I've stopped going to a particular Kelsey's franchise because of their slow service. We waited more than 50 minutes for our entrees and the manager could only tell us that they were "busy". Well to add to your point, retail expert Doug Fleener says "Profitable Retailers always put the customer first. First before the tasks associated with operating the business. First before profits...First in everything the company does...No one is really interested in how busy you are. In fact, giving an excuse can be insulting. When you say, 'I'm just so busy,' it implies that the other person isn't" ("The Profitable Retailer" 69 & 70). The Tacone franchise you originally called should've arranged for at least someone else to touch base with you if they were too busy themselves to do it or suggested a better time to discuss business.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Self Employed Business Ideas

3 Key Factors For Raising Capital

What Type of Business Should I Start?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.