For aspiring entrepreneurs, joining a franchise is an excellent opportunity to become a business owner while mitigating much of the risk involved in starting a business from scratch. That’s because franchise advantages include a proven business model, name recognition, and vendor and supplier network, which cuts out a lot of the work involved in starting a business from the ground up.
Of course, joining one of the most profitable franchises is a particularly safe bet for aspiring entrepreneurs.
Choosing a profitable franchise
Determining how much money you can make by buying a franchise depends on a number of factors, but there are a few boxes a potential franchise should tick to ensure that you have the best possible chance of turning a profit. For example, the franchise should appeal to your local demographic, have a proven support system for franchisees, and have a strong reputation generally. Nationwide number of locations and annual revenue are also good indicators of whether a franchise can be profitable for you.
According to Franchise Direct, the best way to determine a franchise’s future profitability is by analyzing Item 19 of the franchise’s franchise disclosure document (FDD), which outlines the business’s financial performance. It’s a good idea to consult an accountant or lawyer, who can help you crunch the numbers. Of course, turning a profit also means mitigating debt, so you should only consider the franchises whose initial franchise fee and upfront investments are doable for your current financial situation—and this, too, should be a conversation you have with your lawyer or accountant.
Clearly, determining whether a franchise will be profitable for you is a subjective activity. But with that in mind, there are several franchises out there that meet all those general requirements we mentioned, and which are well worth looking into.
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10 of the most profitable franchises in 2021
The following 10 franchises are representative of a range of industries, investment amounts, number of locations, and degree of brand recognition. The diversity on this list is indicative that a franchise doesn’t necessarily have to be top-tier in order for you to turn a profit. That said, we would be remiss not to include some of the world’s most popular franchises on this list, as well.
1. McDonald’s
There is something to be said about brand recognition, and you’d be hard-pressed to find a franchise (or virtually any business, for that matter) with greater brand recognition than McDonald’s. Owning a McDonald’s franchise, wherever you’re located, guarantees a loyal customer base—a key for generating a profit. With that said, buying a McDonald’s franchise requires a hefty initial investment, so this is not a pathway to profitability if you have limited access to franchise funding. Potential franchisees must have access to at least $500,000 in liquid assets for their application to be considered, and you’ll be expected to put down at least 25% in cash as a down payment to secure your McDonald’s franchise location.
Initial franchise fee: $45,000
Estimated initial investment: $1 million to $2.2 million
2. Dunkin’
Dunkin’ franchisees also enjoy massive brand recognition—and that’s especially true in the Northeast, where the doughnut shop is beloved as something of a cultural institution. And, like McDonald’s, franchisees can take advantage of the robust franchisee support system that Dunkin’ offers. But also like McDonald’s, buying a Dunkin’ franchise requires a serious upfront investment. At a minimum, candidates must have at least $250,000 in liquid assets and $500,000 minimum net worth per unit, though those numbers vary depending on your location. Dunkin’ franchise fees vary depending on your state, so entrepreneurs in certain areas will have a lower barrier to entry here. Dunkin’ also provides discounts off the initial franchise fee for certain investors, such as entrepreneurs who plan to open several locations, those who plan to open restaurants in developing areas, or qualified veterans.
Initial franchise fee: $40,000 to $90,000
Estimated initial investment: $95,700 to $1.5 million
3. The UPS Store
The UPS Store has been ranked among the top five on Entrepreneur Magazine’s Franchise 500 List for the past three years, thanks to the company’s world-class training and support system for new franchisees, strong brand recognition, and spotless reputation. Opening a UPS Store franchise may require significantly less upfront investment than opening a food franchise with equal name recognition, and the franchise offers programs and incentives to help ease that burden. The UPS Store is partnered with Guidant Financial, a small business lending institution that can offer qualified investors with franchise financing. They can also provide special financing incentives for veterans, and people opening UPS Stores in rural areas or small store-in-stores. Just be aware that to qualify for a UPS Store franchise, you’ll need to have access to at least $60,000 in liquid assets.
Initial franchise fee: $9,950 to $29,950
Estimated initial investment: $138,433 to $470,031
Quickbooks Online
The industry standard for bookkeeping and other services.
4. Dream Vacations
If you’re interested in owning a travel agency, a Dream Vacations franchise should be at the top of your to-research list. This is one of the most profitable franchises firstly for its low-cost investment: Depending on your experience level, the initial franchise fee may be as low as $495. That rate is unparalleled by any other franchise we’ve seen, especially from a franchise whose reputation matches that of Dream Vacations. The franchise offers financial incentives for other franchisees as well, including veterans, military spouses, first responders, “community heroes” such as medical professionals and teachers, and members of DiversityFran. This is also a great opportunity for people who prefer or need to work from home—Dream Vacations franchises don’t require brick-and-mortar locations, so you can run your business entirely remotely.
Initial franchise fee: $495 to $9,800, depending on experience level (more experienced franchisees receive larger discounts)
Estimated initial investment: $1,795 to $20,300
5. The Maids
The Maids has over 40 years of experience as a franchise, and that robust support system proves itself in the numbers. According to the company, the average Maids franchise makes about $1.1 million in annual revenue, and their most successful franchise raked in $6.5 million last year. Plus, their initial franchise fee and other startup costs are much lower than most other cleaning franchise opportunities out there. At the high end, the total initial investment is under $200,000. All in, you can expect to spend a relatively modest $200,000 in your first year of owning a Maids franchise.
Initial franchise fee: $12,500
Estimated initial investment: $48,950 to $124,950
6. Anytime Fitness
As the name implies, Anytime Fitness’ unique business proposition is that their facilities are open 24 hours a day, seven days a week, 365 days of the year. The sheer availability of their services maximizes each franchise location’s opportunity to bring in revenue, and the company says that they sign on one new member every minute—which proves their huge, and growing, market. Interestingly, Anytime Fitness doesn’t collect monthly fees based on sales totals; rather, franchisees pay a flat monthly fee of $699, which makes ongoing costs easier to plan for.
Initial franchise fee: $3,150 to $42,500
Estimated initial investment: $58,870 to $521,437
7. Pearle Vision
Founded in 1961, Pearle Vision was revolutionary in eye care for bringing the retail and medical experience under one roof—a business model that continues to be successful today. They’re now owned by Luxottica, the world’s largest eyewear company, which gives Pearle Vision franchise owners access to a massive range of both mid-tier and designer glasses and sunglasses. That all spells a franchise system with a huge opportunity to generate revenue: In 2018, Pearle Vision locations that employed an optometrist made an average $1.325 million in revenue, and $1.04 million was generated through retail.
Initial franchise fee: $30,000
Estimated initial investment: $391,795 to $620,538
8. JAN-PRO
JAN-PRO is a world leader in commercial cleaning and janitorial services, with over 25 years of experience and several innovative, proprietary cleaning systems under their belt. Plus, JAN-PRO offers potential franchisees three ownership options, which are appropriate for varying experience levels and require varying levels of investment. Uniquely, they offer a remote franchise opportunity, which is both relatively low-cost and flexible for people who don’t or can’t work outside their homes.
Initial franchise fee: $1,000 to $20,000, depending on the type of franchise you buy
Estimated initial investment: $1,000 to $768,000
9. Supercuts
Supercuts is one of the most recognizable names in salon franchises, which is likely due to their 40+ years in business and over 2,600 locations. In addition to offering haircuts, Supercuts franchisees can take advantage of diverse income streams to maximize their profitability, like selling hair care products and offering other salon services. Supercuts candidates don’t need prior experience in the salon industry (though prior management experience is preferred). However, you will need $500,000 in total net worth, $150,000 in liquid assets, and good credit for your application to be considered. While Supercuts doesn’t provide financial assistance themselves, they can link you up with franchise financing institution FranFund to help you secure a franchise loan.
Initial franchise fee: $39,500
Estimated initial investment: $151,370 to $321,020
10. Ace Hardware
Ace Hardware offers potential investors three types of franchise opportunities: They can either open a new Ace Hardware store, convert their current location into an Ace Hardware, or open an Ace Hardware Grocery, which converts previously unused space within existing grocery stores into an Ace Hardware “store-within-a-store.” The latter is the least expensive option, most notably because Ace waives the initial franchise fee for these types of franchises. (Ace also waives the initial franchise fee for veterans.)
That said, new Ace locations and conversions also have ample opportunity to make a profit, thanks to the company’s training and marketing support, name recognition, national presence (they have locations in all 50 states), and robust supplier network. They also don’t collect monthly royalty fees, which cuts out a major monthly expense required of just about every other franchise out there.
Initial franchise fee: $5,000
Estimated initial investment: $286,000 to $1.07 million
The bottom line
As we mentioned, determining what will be the most profitable franchise for you requires research. In addition to analyzing your potential franchisor’s FDD within the broader franchise agreement (ideally with the help of your lawyer or accountant), it’s a good idea to speak with as many current franchisees from each franchise that you’re considering as possible. That’s the most accurate way to receive detailed and practical answers about the question of profitability.
In your interviews, however, it’s important to look beyond the numbers. Ask franchisees about their satisfaction with the support they receive from the franchisor, as well as their opinions about the overall outlook of the business. That way, you’ll get a holistic understanding of whether you feel comfortable putting your money, time and effort into this franchise, or if you should set your sights elsewhere. And if one franchise doesn’t cut it for you, there are so many other franchise opportunities you can look into, so there’s no need to settle for an unsafe bet.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.
FAQs
What is the best franchise that makes the most money? ›
McDonald's
The company's number of locations and annual revenue are also good indicators that it is the most profitable franchise to own. A reputable company like Mcdonald's could unlock new financing and commercial business. It is better than investing in a startup as it provides a higher net worth.
- Cruise Planners. Franchise fee: $10,995. ...
- Jazzercise. Franchise fee: $1,250. ...
- Help-U-Sell Real Estate. Franchise fee: $15,000. ...
- United Country Real Estate. Franchise fee: $8,000 to $20,000. ...
- Stratus Building Solutions. ...
- Anago Cleaning Systems. ...
- JAN-PRO. ...
- Dream Vacations.
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.
What is the number 1 franchise in America? ›| Rank | Name | Industry |
|---|---|---|
| 1 | Chick-fil-A | Fast Food Franchises |
| 2 | The UPS Store | Business Services Franchises |
| 3 | Ace Hardware Corporation | Home Services Franchises |
| 4 | McDonald's | Fast Food Franchises |
- Anytime Fitness. Anytime Fitness is a popular gym brand with a low-cost investment and high revenue potential. ...
- McDonald's. McDonald's franchise program is one of the most established in the fast food industry. ...
- UPS Store. ...
- Jersey Mike's Subs. ...
- Dunkin' ...
- Sport Clips. ...
- 7-Eleven. ...
- Papa John's.
Chick-fil-A pays (almost) every startup cost.
If you've started to wonder why anyone would consider purchasing a Chick-fil-A franchise, given that you can't actually own the franchise, this is a powerful reason.
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.
Are franchises a good investment? ›If you're a fledgling entrepreneur or a seasoned business person wanting to diversify your holdings, you've probably wondered, “Are franchises a good investment?” The simple answer is yes, especially if a great opportunity presents itself. There is an obvious appeal to starting a business via buying a franchise.
Is owning a franchise risky? ›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.
Who is the richest franchisee? ›The most lucrative route in franchising is to become a multi-unit franchise operator. Take the case of Greg Flynn, who now owns more than 2,400 franchise restaurants. In 2012, he became the first American franchisee to reach the $1 billion mark.
Do franchise owners take a salary? ›
Most franchise owners don't receive a salary. Instead, your earnings as an owner come from the excess revenue after overhead costs to support the operation of the business are paid.
Is it better to own or franchise? ›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.
Who benefits more from a franchise? ›Franchising provides benefits for both seller and buyer. For franchisors, the primary benefit is the ability to use other people's money to expand the brand more rapidly than they could either on their own or through investors or lenders.
What is the success rate of owning a franchise? ›The Bureau of Labor Statistics reports that about 20% of independent businesses close after two years. In contrast, franchise consulting firm FranNet reports that 92% of franchisees were still going strong after two years. About 65% of all franchise owners are men.
What is the fastest growing franchise in America? ›| Franchise name/rank | Category/Description | Initial Investment |
|---|---|---|
| # 1 Stratus Building Solutions | Commercial Cleaning Environmentally friendly commercial cleaning and disinfecting | $4K - $80K |
| # 2 Jersey Mike's Subs Request Info | Submarine Sandwiches Subs and Philly cheesesteaks | $194K - $955K |
In return for 60-hour work-weeks, an operator might take home 5-7% of revenue (around $150-$250k per year). But from an investment perspective, certain things about being a Chick-fil-A franchisee aren't so enticing: They don't own the restaurant or equipment (everything belongs to corporate).
How much does a 711 owner make? ›How much does an Owner make at 7-Eleven in the United States? Average 7-Eleven Owner monthly pay in the United States is approximately $3,742, which is 37% below the national average.
What is the fastest growing franchise in the world? ›| Franchise name/rank | Category/Description |
|---|---|
| # 1 Century 21 Real Estate | Real Estate Real estate |
| # 2 KFC | Chicken Chicken |
| # 3 Circle K | Convenience Stores Convenience stores |
| # 4 Jan-Pro Cleaning and Disinfecting | Commercial Cleaning Commercial cleaning |
- Marvel Cinematic Universe - $28.2 billion.
- Star Wars - $10.3 billion.
- Harry Potter - $9.5 billion.
- Spider-Man - $8.2 billion.
- James Bond - $7.8 billion.
- Batman - $6.8 billion.
- Fast and the Furious - $6.6 billion.
Do franchises pay monthly? ›
Franchise royalties are usually collected by your franchisor on a monthly basis. Like marketing fees, these fees are based on a percentage of your revenue. But there's one major difference; the percentages are higher. Franchise royalties range from 4% of your revenue all the way up to 12% or more.
What is the average return on a franchise? ›As a general rule of thumb, you should never invest in a franchise unless you believe (based on your own investigation). 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.
How often do franchise owners get paid? ›Fixed fees are set fees, typically paid in regularly timed intervals — like monthly, quarterly, annually. These overhead costs and franchise fees are generally baked into the final total selling prices for products and services rendered. Any left over is considered profit.
What is the failure rate for a franchise? ›Pretty much every year the survey has been conducted has shown between 8-12% of franchise businesses left their franchise each year. This is for a variety of reasons, including retirement, selling, ill-health and financial failure.
Can a franchise lose money? ›A failed franchise hurts the franchisor
Of course, if things don't go well, you and the franchisor both lose money. The franchisor's losses include money that was not recovered from initially training and supporting you, plus the loss of royalty dollars that your unit failed to produce.
Often the best answer to a franchise that is not succeeding is for the franchisee to sell the business to a third party who becomes the new franchisee for that territory. This allows the failing franchisee to terminate its obligations under the franchise agreement and under any lease.
What is a disadvantage of buying a franchise? ›Less flexibility than running a business on your own.
Some franchisors exert a level of control that you may find too restricting. Franchisees often have restrictions on where they can sell their products or services, as well as requirements on the suppliers to be used or operating hours.
The main disadvantage of buying a franchise is that you must conform to the rules and guidelines of the franchisor. Some franchisors exert a degree of control that you, as a supposedly independent business owner, may find excruciating.
Why do most franchises fail? ›Here are a few of the most common reasons why franchises fail: The franchisor sells to unqualified, inexperienced, undercapitalized, or naive franchisees. In addition, franchisees are unrealistic about the workload that goes into operating a franchise.
Do most franchises fail? ›As a result, the U.S. and Canada are currently seeing a massive spike in new franchise systems. But there is a problem: too many franchisors never grow into a bona fide successful franchise system. The numbers don't lie: 67 percent of all franchisors who launch don't sell a single franchise in their first two years.
Who is the largest US franchisee? ›
In 2021, the U.S. franchise with the highest global sales was McDonalds, which reported over 112 billion U.S. dollars in sales worldwide. Second in the ranking was 7-Eleven, whose franchising locations generated approximately 95 billion U.S. dollars in sales worldwide.
Who is the boss of a franchise owner? ›A franchise owner has responsibilities similar to a small business owner. The big difference is that the franchise owner has to operate under standards set by the franchisor.
What percentage do franchise owners take? ›Typically, the franchisee takes home 90% or more of their gross sales, with the remaining 10% going to the franchisor. In this model, the franchisor collects a percentage of total sales, usually between 4-6% of gross sales.
How many hours a week does a franchise owner work? ›While growing your business will require visioning and taking people to lunch, there will also be more active work. Some franchisees find that they're working 80 hours a week while they get their businesses up and running.
Do franchise owners pay taxes? ›Unlike state income taxes, franchise taxes are not based on a corporation's profit. A business entity must file and pay the franchise tax regardless of whether it makes a profit in any given year. State income taxes—and how much is paid—on the other hand, are dependent on how much an organization makes during the year.
What does a Taco Bell franchise cost? ›Total cost: A standalone Taco Bell franchise location is estimated to cost between $1.2 million and $2.6 million, exclusive of land and lease costs. Initial investment: Initial investments will vary significantly based on your location and the type of restaurant.
Should I form an LLC before buying a franchise? ›The answer is yes. If you plan to buy a franchise, you should strongly consider setting up a business entity from which to operate your business. Business entities serve an important role in the business world because they offer their owners protection.
How many franchises fail each year? ›| Year | Failures | Failure Rate |
|---|---|---|
| 2017 | 294 | 47.7% |
| 2018 | 198 | 47.4% |
| 2019 | 123 | 37.8% |
| Total 3-year (2017-2019) | 615 | 189.2% |
...
Other commonly franchised industries include:
- Automotive repairs and services.
- Environmental services.
- Hair salons.
- Health aids and services.
- Computer and phone repair.
- Clothing stores.
- Children's services.
Business Format Franchise
The franchisor offers a detailed plan and procedures on almost every aspect of the business, provides initial and ongoing training and support. Business format franchising is the most popular type of franchise system and the one generally referred to when talking franchising.
Can you be successful with a franchise? ›
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 long before franchise is profitable? ›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.
How many franchise owners fail? ›National Franchise Statistics
The Bureau of Labor Statistics reports that about 20% of independent businesses close after two years. In contrast, franchise consulting firm FranNet reports that 92% of franchisees were still going strong after two years. About 65% of all franchise owners are men.
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 are the 4 types of franchises? ›The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.
How much is a Chick Fil A franchise? ›Chick-fil-A has a distinct franchise business model. The franchise fee to join Chick-fil-A is a very accessible $10,000. Chick-fil-A corporation will pay for land, construction and equipment for a restaurant, then rent it to the franchisee for 15% of sales plus 50% of pretax profit remaining.
What is the largest franchise on earth? ›...
Biggest Franchises in the World 2022
- McDonald's. ...
- KFC. ...
- Burger King. ...
- 7-Eleven. ...
- Domino's. ...
- Ace Hardware Corporation. ...
- Century 21. ...
- Papa John's.
The No. 1 entry on our Franchise 500 list was originally called The Open Kettle, which was then renamed Dunkin' Donuts and then simply Dunkin'. It was founded in 1950 and began franchising in 1955.
What are 4 disadvantages of a franchise? ›- Limited creative opportunities. ...
- Financial information is shared with the franchisor. ...
- Varied levels of support. ...
- Initial investments and start-up costs can be expensive. ...
- Contracts aren't permanent. ...
- You're your own boss, but you have less individual control.
The Rule requires franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise, its officers, and other franchisees.
How much is a Taco Bell franchise? ›
Costs overview
Total cost: A standalone Taco Bell franchise location is estimated to cost between $1.2 million and $2.6 million, exclusive of land and lease costs. Initial investment: Initial investments will vary significantly based on your location and the type of restaurant.
The franchisee only pays the $10k franchise fee. Chick-fil-A pays for (and retains ownership of) everything — real estate, equipment, inventory — and in return, it takes a MUCH bigger piece of the pie. While a franchise like KFC takes 5% of sales, Chick-fil-A commands 15% of sales + 50% of any profit.
How much is Dunkin Donuts franchise? ›Here is a breakdown and ranges of the financial requirements to open a Dunkin' franchise: Total investment range: $97,500 to $1.7 million. Initial franchise fee: $40,000 to $90,000 (varies by location) Net worth: $500,000 minimum.