16 of the Most Profitable Franchises (2024)

FAQs

What is the number 1 most profitable franchise? ›

There's no real consensus on exact franchise success statistics out there, but for years franchises, brokers, and other websites have claimed a 90% to 95% success rate for franchisors.

Brand recognition and consistency are key elements to a successful franchise. Customers build trust and loyalty as they interact with the franchise, making it more likely they become repeat customers.

Franchise royalties range from 4% of your revenue all the way up to 12% or more. The amount has to do with the type of franchise business.

The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.

On average, typical franchisees make about 80,000 dollars a year, not considering tax and expenses. Only a small part of franchise owners make over $200,000 annually, more than fifty percent of franchisees make about $50,000. The industry you're operating in impacts the amount of profit as well.

Just like independent businesses, cashflow problems are one of the major causes of franchise failures. You can be profitable, but problems with cashflow will still sink you. Simply put, cash flow is the amount of money going out versus the amount of money coming in.

A widely publicized statistic from a 1987 International Franchise Association (IFA) study showed that franchises have a failure rate of 5% (which would equate to an unbelievable success rate of 95%).

What Is The Typical Length Of A Franchise Agreement? The typical length of a franchise agreement is between five and 20 years. A common reason for this general length of time is often the size of the franchisee's initial investment, though market conditions and the type of franchise can also be factors.

What makes a good franchise is an agile yet strong and supportive infrastructure. All franchisees need initial training when they start. Even if they have experience, they'll still need to learn the ropes of your operating model.

Is being a franchise owner good money? ›

Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

One common misconception when it comes to operating a franchise is that once you sign on the dotted line and open for business, the customers and revenue will start flowing. This is typically not the case. It normally takes a year or two to become profitable.

The average annual income return from the business will be equal to at least 30-50% per year of the total initial investment for the franchise unit. This total investment we're referring to includes all debt and working capital reserves needed to start the business.

Franchises – Part Investment, Part Business Venture

When you buy into a franchise, it's really a hybrid of investing and starting a business. The investing side is the upfront capital that's required to buy into the franchise.

Running your own franchise is still hard work, and there are drawbacks to opening a business that requires operating by someone else's rules.

McDonald's has been the world's largest franchise for decades. That trend continues in 2023. With over 38,000 locations worldwide, McDonald's has a significant presence in more than 100 countries.

While operating a Chick-fil-A restaurant requires a relatively modest $10,000 initial financial commitment ($15,000 CAD in Canada), it requires a holistic commitment to own and operate the business in a hands-on manner.

Like starting any business, buying a franchise involves risk. Although most franchisees are satisfied and successful, some do suffer financial losses. That's why you must be particularly wary of any company that “guarantees” profit or certain success.

What are 3 disadvantages of owning a franchise? ›

A franchisor may place a number of restrictions on a franchisee's business sale. The franchisor wants to identify franchisees who can manage each franchise successfully. Purchasers need financial resources to pay for the franchise, and they must invest the time required to learn the business.

Disadvantages to franchisees include high costs and royalty payments, strict product rules, lack of support from uninterested franchisors, lack of flexibility in where to locate and how to trade, and other start-up challenges. Entering into an agreement with an interested franchisor is important.

Capital Risk

Any business venture comes with some financial risk. When you buy a franchise, you need to ensure you have enough capital to pay the required startup fees along with training costs, equipment and property.

Limited Control. Because franchises already have a prearranged formula and a defined brand, the most significant disadvantage is limited control.

Franchise agreements can end either by some form of termination or by expiring by their own terms. When most franchise agreements expire, the franchisee will generally have an opportunity to renew the franchise agreement.

A franchise agreement is a fixed term contract and there is no early right to exit unless the parties agree.

There are at least a few options: (1) determine whether or not you have any leverage you can use against the franchisor so that it will allow you to exit the business; (2) sell the business to a third party or existing franchisee; (3) sell the business back to the franchisor; or (4) find out if the franchisor is ...

Brand consistency and service consistency across multiple franchise outlets are key factors in running a successful franchise business. Establish strong standard business processes and practices which will enforce consistency across all of the franchise outlets.

Success rate - Franchises have a better rate of success than a start-up business. Operational assistance - As easy as this "They do the numbers" Easier to secure finance for a franchise - It may cost less to buy a franchise than to start from scratch.

What does it take to be a successful franchise owner? ›

Franchises offer great business opportunities for new entrepreneurs looking to start a business at less risk and lower startup costs. Nonetheless, in order to be successful in the franchising world, you need to possess strong work ethic, excellent customer service, strong leadership, and attention to detail.

How much does it cost to start your own franchise? Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000.

An initial franchise fee of $25,000. An inventory down payment between $20,000 and $40,000, plus an initial cash register fund. Land and building improvements, which vary by site.

A leading cause of a franchisee failure is the franchisee being undercapitalized. A lack of sufficient working capital can be the result of a slow start-up or the franchise operation requiring more working capital than the amount disclosed in the franchise disclosure document.

Buying a franchise doesn't have to mean making a full-time commitment. Believe it or not, there are many franchises that can be run on a part-time basis, especially when you first start out.

Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.

Using the definition above, yes, a franchise can definitely be passive income! In fact, many franchises are set up with the goal of passive income in mind. That's why some franchisees end up owning multiple locations of the same franchise, with a separate staff and minimal oversight to run each one.

If you consider yourself a “true” entrepreneur and prefer to do everything under your terms, then you're probably better off building a business from scratch. However, if you want to run a business in your market but prefer assistance to help you build your business, then consider opening a franchise instead.

Is owning a franchise an asset? ›

Intangible Assets

The franchise you purchase becomes an intangible asset that goes on your business balance sheet and is recorded as a noncurrent asset, according to Reference for Business. This is generally written off as an expense on your balance sheet and affects your bottom line when it comes to taxation.

How Much Does a Dunkin' Donuts Franchisee Make? The annual sales of a Dunks location range from about $620,000 to $1.3 million* depending on the type of franchise you own – freestanding store, in-line shopping center, or a non-traditional location in a gas station or convenience store.

How much does an Owner make at McDonald's in the United States? The estimated average pay for Owner at this company in the United States is $20.23 per hour, which is 17% above the national average.

The company grows rapidly and attracts more and more entrepreneurs to become a part of their network. There are more than 30,000 stores around the world. On average the 7-Eleven franchise profit is about $1-1.9 million a year. As a 7-Eleven franchise owner you get about 48% of annual profit margin from total sales.

Franchising fee: It costs between $25,000 and close to $50,000 for the initial franchise fee. This, too, will vary depending on the details of your specific Taco Bell franchise. Net worth: The current net-worth requirement is around $1.5 million worth of assets.

The average licensing cost required to open a Starbucks is a $315,000 licensing fee and a net worth requirement of at least $700,000.

On average, a typical Subway store will gross about $420,000 a year, based on Subway's own figures and industry estimates. While that may sound like a lot of money, $420,000 is a small per unit revenue compared with other restaurant franchise opportunities.

What Does a Subway® Franchise Cost? To buy a franchise with Subway®, you'll need to have at least liquid capital of $40,000 and a minimum net worth of $80,000. Franchisees can expect to make a total investment of $150,050 - $328,700.

What does the initial franchisee fee cover? Does it include start-up supplies and training? The standard franchise fee in the U.S. and Canada is $50,000 for a franchise agreement with a term of 20 years.

What fast food chain makes the most money? ›

McDonald's Corporation is the largest fast-food chain. As of 2022, Starbucks is the largest restaurant company by revenue, with 35,000 stores globally.

The largest fast food chain in the US is McDonald's, with a revenue of $23.18 billion and a market share of 43.8%. As of 2021, the US fast food industry has a market size of $366.9 billion.

With a Chick Fil A franchise owner's salary range typically falling between $150,000 and $250,000 annually, the investment in this popular fast-food chain can prove to be highly profitable.

Startup costs for Chick-fil-A franchises are relatively low. That's because, unlike other franchises, Chick-fil-A actually purchases the real estate and all of the equipment required to open the business, and then leases them to you via monthly rent payments.

Chick-fil-A's franchise cost is low because the franchisor pays many startup costs and retains ownership of real estate, inventory and equipment. While this makes for a more accessible franchise business opportunity, the trick is getting in.