What are the Most Profitable Franchises?

Guest post by: Carl Moore
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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.

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About the Author: Carl Moore

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CFO Capital Partners is a group of seasoned business professionals that have come together to offer a variety of services suited to fit the needs of those seeking Corporate and Real Estate Capital. We act as Independent Business Transaction Intermediary serving both Buyers and Sellers, also specializing in the Mergers & Acquisitions of businesses in the mid-market arena, nationally and internationally. Business Transfers, Selling of Businesses, acting as Finders - all fall within our province. We also work with Cooperating Intermediary and Investment Bankers nationwide as well as in Latin America, Europe and Asia. Carl Moore/ Managing Director "We Bring Experience to the Meeting" CFO Capital Partners 437 FoxTract Rd., 1st Floor Bridgeport, NY 13030 O: 315.633.9081 * Efax: 775.248.6603 Carl@CFOCapitalPartners.com * www.CFOCapitalPartners.com Loan Programs for downloads Go To: http://www.cfocapitalpartners.com/ProjectFinancingPrograms.html
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