What Makes a Profitable Franchise?

Rob Lancit

Date

May 20, 2019

In order to run a profitable franchise you must take in more money (revenue) than you spend (expenditures), thus resulting in a profit. The math is quite simple. But how to achieve a profit? Not always so simple. The most profitable franchises in the world all use a variety of different strategies and business models in order to find the success they have. And every profitable franchise will find ways to benefit from the geography and demography around it. If you’re just starting out on your journey to franchise ownership, or if you’re looking to add a new franchise to your portfolio, it would behoove you to examine the most profitable franchises out there and ask yourself what about their successful strategies can you emulate. Listed below are some of the most profitable types of franchises in America, and even the world.

Fast Food Franchises

In many ways the fast food restaurant is the model franchise. Fast food restaurants, also known as quick service restaurants (QSRs), really lend themselves to the franchising model. They are one of the types of businesses that are most easily franchised and that can benefit the most from franchising. In many ways, fast food restaurants helped to spread the popularity of franchising. But the success of fast food franchises is definitely not all in the past. They still dominate the top of the “Franchise 500 List”, showing that they remain extremely profitable.

But what puts fast food restaurants among the most profitable franchises? One thing is branding. Many fast food franchises operate under some of the best known brands in the world. When buying a franchise of any description you want to make sure you’re buying from a trusted and well-known brand. Furthermore, QSRs offer something everybody needs: food. And they offer it in a highly convenient and quick way. If you’re worried about people turning away from fast food franchises because of health concerns, you can buy a franchise from a sit-down restaurant, and there are many fast food franchises that offer and even specialize in healthy food items.

Automotive Franchises

Aside from just having many potential customers, the likelihood of growth is also crucial to the most profitable franchises. Automotive franchises have both. There are over 270 million registered vehicles in the United States right now. All of those vehicles need regular service and occasional repairs. This makes the automotive aftermarket, the collective market that is comprised of all transactions concerning automobiles after their initial sales, worth hundreds of billions of dollars. And that number is growing. It is estimated that the automotive aftermarket and all its automotive franchises will be worth a collective $1 trillion globally. That is quite profitable.

Low Cost Franchises

Automotive franchises require quite a bit of investment. And even though many financial institutions are willing to provide financing for automotive franchises because they are, generally, among the most profitable franchises, you might be more comfortable with an auto glass franchise. These franchises typically costs a little less to buy and get up and running. When trying to create one of the most profitable franchises, starting off with as low a cost as possible is key for some people.