Franchising is an appealing option for entrepreneurs who want to start out a business without spending years constructing a brand new concept from the bottom up. But the concept of franchising is divisive. “Some people say, ‘Oh no, that’s a terrible concept,’ and other people find it irresistible,” says franchise consultant Teri Villanueva. To search out the proper franchise for her clients, Teri asks: “What’s the top result? What do they need the business to do for them?”
The International Franchise Association (IFA) recognizes greater than 300 franchise business concepts in industries starting from roofing to dog grooming. Some require a brick-and-mortar location and a big upfront investment, while others can operate out of a house office or truck. Selecting the proper franchise business opportunity is determined by your priorities and resources.
What’s a franchise?
A franchise is a business model that permits you (the franchisee) to operate a business under the established brand of a bigger company (the franchisor). Franchising empowers franchisors to broaden their reach by enabling independent operators to oversee locations, while franchisees gain the advantage of managing a business under a recognized brand with a tested operational blueprint.
“It’s really a license to make use of the trademark, systems, and the name of the franchise in exchange for an initial franchise fee after which ongoing royalties,” Teri explains. “But with those royalties, you’re getting a ton of support and a ton of coaching from the franchisor.”
Benefits of owning a franchise
If you wish to start your personal business but don’t need to develop a business idea from scratch, franchising might be a great fit. A number of the advantages include:
Operating under a longtime brand
One among the most important advantages of opening a franchise is the brand recognition. It could possibly take a long time to turn into as well referred to as, say, Taco Bell or H&R Block. But because these businesses are franchises, you possibly can open your personal and leverage their established customer base—provided you’re able to cover the franchise fees.
Accessing a proven business model
Once you join a franchise, you bypass the necessity to develop and test a profitable business model because a part of your franchise agreement includes following the franchisor’s proven operating system. “I hear good things from individuals who follow the system,” Teri says. Alternatively, “Some people may not like that restriction.”
Training and resources
Franchisors provide training to all latest franchisees to make sure consistency across franchise units. This might be especially helpful in case you’re entering a brand new field or are latest to business ownership. “A typical misconception is that you might have to have prior experience in whatever industry you’re entering,” Teri says. “The franchisor goes to coach you on whatever the particular industry is and the way the model works.”
Community
Being a founder might be lonely. Once you open a franchise, you turn into a part of a community of franchisees. “You’ll be able to see what other owners are doing after which relate,” Teri says. “Individuals are willing to assist one another.”
Aspects to contemplate when evaluating franchise opportunities
How do you select the franchise opportunity that’s best for you? Teri asks prospective franchisees many questions: “Do they need a brick-and-mortar? Do they need a home base? How much do they need to spend? Where do they wish to be? What number of employees would they like?” Listed here are the important thing considerations to take into accout:
Industry growth
When you’re unsure which industry to speculate in, the International Franchise Association (IFA) releases a report every year with its predictions for franchise establishments across industries. In keeping with the IFA’s projections, franchises that provide personal services—anything in the wonder, health, pets, and education industries, Teri explains—will see probably the most growth in 2024.
“All of that’s predicted to do thoroughly due to pent-up demand during COVID,” Teri says. “Now, people need to have experiences they usually actually need to pamper themselves, so we’re seeing some growth in areas like eyelashes, waxing, and things like that.” Other growth areas include quick-service restaurants, retail, maintenance, and business services.
Budget
Most franchisors have net value and liquidity requirements for his or her franchisees, so your funds partly determine which businesses you’re eligible for. (For instance, you need $500,000 to open a McDonald’s.)
Teri says prospective franchisees need a minimum of $300,000 in the event that they’re planning to open a brick-and-mortar business. But there are a lot of home-based or small-office-type franchises you can open with $100,000 to $150,000. “It really is determined by the variety of franchise that you just’re moving into,” she says.
Franchisor financials
While the franchisor’s profit doesn’t necessarily indicate the profitability of any individual franchise unit, it’s a great place to start out when assessing profitability. You’ll find the franchisor’s financial performance information in item 19 of the Franchise Disclosure Document (FDD), a legal document franchisors must give prospective franchisees a minimum of 14 days ahead of signing a franchise agreement, per Federal Trade Commission (FTC) rules.
“The franchisor by law cannot go into more detail than what’s within the Disclosure Document,” Teri explains, “but you should utilize the numbers in item 19 to create your personal projections.” Franchisors aren’t required to supply financial performance information within the FDD, but in the event that they don’t, they won’t have the ability to share their financials elsewhere. In the event that they do, franchisors cannot share numbers that differ from what’s in item 19.
Franchisors can determine what financial information they share, similar to franchisees’ average income or gross sales. The FTC warns these numbers might be misleading: a couple of high-performing units could skew the typical income upward, and gross sales don’t mean much without corresponding information on expenditures.
In keeping with the FTC, most franchisors don’t have access to their franchisees’ net profits, so in case you see net profits in item 19, ask in the event that they are from the franchisor’s own units—units the corporate owns can have lower operating costs and better profits.
Other franchisees’ experiences
Since franchisors legally cannot share financial information beyond what’s within the Franchise Disclosure Document, Teri recommends speaking with current franchise owners to get a greater sense of their potential earnings. “Check with other owners and ask, ‘Hey, is that this realistic? How many purchasers did you must break even?’” Teri suggests. “So that you get to confirm [what’s possible] from the people who find themselves living and respiration it.”
8 franchise business opportunities
- Senior care
- Day care
- Child education and enrichment programs
- Beauty services
- Pet services
- Quick-service restaurants
- Second-hand retail stores
- Home repair and renovation
There are lots of of various franchise opportunities to select from. The suitable one is determined by your budget and goals. Start your research with a few of the perfect franchises for 2024:
1. Senior care
As life expectancies increase and birth rates decrease, the IFA expects growing demand for senior services similar to in-home care. Because these kinds of businesses involve visiting clients of their homes, start-up costs might be lower.
For instance, the initial investment for a franchisee of Visiting Angels, which provides non-medical in-home look after seniors, is about $125,460 to $171,150. In keeping with Visiting Angels, franchisees’ average annual gross sales are nearly $1 million, with 15% to 18% net profit.
Other options with similar start-up costs include Home As an alternative, Senior Helpers, and Interim HealthCare, which also provides medical services and has a net value requirement of $300,000.
2. Day care
The IFA expects growth in child-related services, from day care to education and enrichment activities. For instance, The Learning Experience, which provides dayc are and early education services, increased its units by 45.7% from 2020 to 2023. (Current owners also rate it well, with 97% of franchisees more likely to recommend it to others.)
To open a Learning Experience, you would like a net value of $350,000 and $150,00 in money. After an initial franchise fee of $60,000, you possibly can spend anywhere from about $600,000 to greater than $5 million in your first yr, and must pay a 7% royalty fee and 1% promoting fee for the 15-year term of the agreement.
3. Child education and enrichment programs
You don’t necessarily have to open a pricy brick-and-mortar to get into child services. A mobile swim school was the reply for one in all Teri’s clients. The beginning-up costs are relatively low because as a substitute of constructing out a facility, you rent pools either at a gym or homeowner association, or through parks and recreation groups.
British Swim School follows this model and grew by 71.2% from 2020 to 2023. Franchise Business Review named it one in all the highest low-cost franchises in 2023. To start, you would like a net value of $150,000 and $100,000 in money.
After the initial franchise fee of $55,000, British Swim School estimates you’ll spend $29,080 on marketing, $9,000 on pool fees and labor, and $17,160 on other business expenses to bring your first-year costs to about $110,000. You’ll also pay an ongoing 10% royalty fee and a pair of% promoting fee.
4. Beauty services
The IFA predicts specialty beauty services like waxing and eyelash extensions will see continued growth. For instance, the variety of European Wax Centers within the US increased by 30.1% from 2020 to 2023.
European Wax Center is the largest operator of waxing services in the US. Opening one requires investing in a physical location. You’ll need a net value of $1 million, half of which should be liquid. Expect start-up costs of $396,600 to $554,950, making this one in all the dearer franchise opportunities.
Deka Lash, which provides lash extensions, has expanded by 52.9% from 2020 to 2023. Deka Lash has barely lower start-up costs than European Wax Center ($222,800 to $476,850) and more modest net value requirements ($100,000 liquid and $500,000 total).
5. Pet services
In 2023, Americans spent $147 billion on pets, and the American Pet Products Association (APPA) predicts the pet industry will proceed to grow yr after yr through 2030. The IFA attributes this boom to a growing pet population and increased per-pet spending. There are lots of several types of pet businesses, from dog training to mobile pet grooming to retail stores like Pet Supplies Plus.
In 2023, Pet Supplies Plus stores averaged $2.6 million average unit volume annually and Franchise Business Review named the franchise probably the most profitable. Opening a Pet Supplies Plus isn’t low cost. You wish a net value of $600,000 and a minimum of $200,00 liquid assets. After a $49,900 initial franchise fee, you’ll pay an ongoing royalty fee of three%.
6. Quick-service restaurants
Quick-service restaurants (QSRs) have long been the backbone of the franchise industry. In keeping with the IFA, they’re also growing: In 2023, 21% of recent franchise concepts were QSRs, and the IFA predicts there will probably be 2.2% more QSR franchise units in 2024 than in 2023.
As real estate costs increase, the IFA has seen a rise within the variety of QSRs compared with full-service restaurants, which require a bigger physical footprint.
If you wish to move into the restaurant industry but don’t have the money to open a brick-and-mortar restaurant, consider opening a food truck. Kona Ice is the biggest food truck company on the earth and ranked eighth in Entrepreneur magazine’s list of the fastest-growing franchises. Expect start-up costs of $149,995 to $189,300.
The IFA predicts the expansion of QSRs with more plant-based and health-focused options. This turned out to be a great fit for one in all Teri’s clients, who purchased a QSR with healthy grab-and-go meals. A former pilot, “his passion for health, and making good decisions drew him in,” Teri says.
7. Second-hand retail stores
In 2024, the IFA expects consumers to gravitate toward low-cost retail, particularly resale stores, which provide each affordability and sustainability. Clothing reseller Uptown Cheapskate, for instance, has increased its variety of units by 43.5% since 2020.
Opening an Uptown Cheapskate requires an initial investment of $376,936 to $610,986 and a net value of $200,000, about half of which needs to be liquid. Other popular second-hand clothing franchises include teen-focused Plato’s Closet and youngsters’s retailer Once Upon a Child, each owned by Winmark. (Winmark also owns Play It Again Sports, which sells used sporting goods, and Music Go Round, which does the identical for instruments.)
Start-up costs and royalty fees are similar for Uptown Cheapskate, Plato’s Closet, and Once Upon a Child, however the two Winmark brands have the next net value requirement ($400,000) and barely lower liquidity requirement ($75,000).
8. Home repair and renovation
The National Association of Realtors predicts existing home sales will probably be up 13.5% in 2024, which implies home services—like fencing, roofing, gutters, flooring, painting, and garage renovations—will probably be in demand.
Teri considers this sector a staple within the franchising world. “It continues to be strong because individuals are home, they’re keeping their homes longer, they intend to make them higher.”
Most of these franchises typically don’t require a physical location, making them a more cost-effective option than, say, a quick-service restaurant. Mighty Dog Roofing, named Entrepreneur’s top latest and emerging franchise in 2023, has start-up costs of about $200,000 to $300,000 (including the $59,500 initial franchise fee) and requires franchisees to have a net value of $500,000 ($150,000 of which should be money).
Budget Blinds has experienced regular growth since 2014. Listed as one in all the fastest-growing franchises in 2024 by Entrepreneur, it has a lower net value requirement ($250,000), and start-up costs range from about $100,000 to $200,000. As an alternative of charging royalties as a percentage of your enterprise’s earnings, Budget Blinds charges a flat $2,500 monthly royalty fee on top of its $19,950 initial franchise fee.
Franchise business opportunities FAQ
What’s probably the most profitable franchise business?
While individual franchisees’ experiences vary, you possibly can check item 19 of the Franchise Disclosure Document to find out a franchisor’s profitability. In keeping with Franchise Business Review, a few of the most profitable franchises with low start-up costs are Visiting Angels, Molly Maid, Wetzel’s Pretzels, and Orkin. Entrepreneur magazine’s list of top franchises of 2024 includes Taco Bell, Jersey Mike’s, Popeyes, and the UPS Store.
Do franchise owners make a number of money?
In keeping with Franchise Business Review, franchise owners make a mean annual salary of $102,910, greater than the US average of $63,795. How much money you possibly can make as a franchisee is determined by how much you might have to speculate, which franchise you select, what number of units you open, your location, and more.
Are there drawbacks to owning a franchise?
Owning a franchise requires an initial franchise fee plus ongoing royalties (and sometimes marketing fees) along with your enterprise’s operating expenses. As a franchisee, you might have less control over which goods or services you sell and the way you sell them.
