Owning a franchise has countless benefits. You can profit from the franchiser’s recognizable brand while essentially running your own operation. The most profitable franchises rarely fail, removing the risks typically associated with opening a brand new business.
What is a franchise?
A franchise is a business in which independent entrepreneurs use the rights to a larger company’s business name, logo, and products to operate an individual location. The franchiser is the owner of the larger company who sells the rights to license their business, and the franchisee is the third-party owner and operator of the business locations.
You’ve done business with a franchise before, even if you don’t know it. Maybe you've even considered purchasing and owning one yourself.
But which franchises are best suited for your budget and skill set? Let’s take a look at how you can evaluate a franchising opportunity.
How to Evaluate a Franchise Opportunity
No franchise is one-size-fits-all. Entrepreneurs who want to open a franchise must take into account their budgetary constraints and the franchiser’s support system during the evaluation phase.
Here are a few criteria that you should consider.
Franchise Fees and Set-Up Costs
Every franchiser requires an upfront fee. This can range from hundreds to hundreds of thousands of dollars.
Preferably, the franchise fee would be paid out-of-pocket (though some franchisers offer financing options). Either way, we recommend having at least $10,000 to invest up-front.
Profitability
When you're evaluating a business investment, it's important to know if the opportunity is worth the money. Determining the profitability of a franchise isn't an exact science, but there are a few factors to consider:
Unit growth: See how many units (franchise locations) have opened in recent years.
New franchisee success rates: Look at the percentage of new franchises that are still operating after a year.
Franchiser's financial statements: Analyze the franchise disclosure document and look at average sales per unit.
Support Systems for Franchisees
When selecting a franchiser, take a look at the support systems they’ve put in place to ensure their new location is a success. Eleven, for example, flies accepted franchisees to their support center in Dallas for training. They also have a resource center with seminars and events. Not all franchisers, especially small ones, will have extensive resources like 7Eleven, but make sure they offer basic training.
Time Commitment
Operating a franchise will be a decades-long commitment, ideally longer — you can’t operate a store and leave after a year. The franchise term for McDonald’s, for example, is 20 years.
Be sure that you’re prepared to stick around for a while without pursuing other time-consuming commitments (such as an additional career). If you feel that you’ll want to leave in less than ten years, be sure to choose a brand whose franchises are easier to sell.
Available Territories
Most, if not all, franchisers are looking to grow in a particular geographical area. It wouldn’t be profitable, for example, to open a new location just miles from another, or in an area where there’s no demand.
Be sure to check whether your target franchiser wants to open a location in your area. If not, decide whether you’re willing to relocate.
Brand Recognition or Growth
How recognizable is the brand that you’ll be franchising? If it’s a smaller brand, has it seen significant growth in the past year?
These two characteristics will determine whether it will be profitable to operate a franchise for a prospective brand. Sometimes, going for a big, highly recognizable brand isn’t ideal, because up-front costs are significant.
A smaller franchiser could be an easier entry point — so long as the company has been growing in revenue.
Now that you know how to evaluate an opportunity, let’s take a look at our list of the best franchise opportunities to select from. Throughout the pandemic, these franchisers have either seen growth or very little stagnation, making them the best franchises to own in 2021.
Best Franchises to own in 2021
McDonald's
7-Eleven
Dunkin'
The UPS Store
Popeyes
Sonic Drive-In
Great Clips
Taco Bell
Kumon Math & Reading Centers
Sport Clips