Let's say you want to take advantage of a strong pre-existing brand that has all the mechanics worked out for process and training. This would mean you want to join an established franchise. There are lots of things to consider before jumping into the game, so we will go through those below.
First, here is a franchise scaling financial model that lets you plan out the cash flow, investment requirements, and timing of opening up to 12 locations over 10 years.
- Your interests and skills: Choose a franchise that aligns with your interests, skills, and experience. Consider your passions and hobbies when selecting a franchise to ensure that you enjoy the work and are motivated to succeed. You don't want to get stuck around something that makes you miserable.
- Industry and market trends: Research the industry and market trends to identify franchises that have a proven track record of success and are poised for future growth. The data is tough to find here, but you are going to want to find a lot of FDDs (franchise disclosure documents) and there are sources that show public data about various franchisees. Take a look at these so you can decipher the strength of the brand and revenue trends.
- Franchise fees and costs: Consider the initial investment required, ongoing fees, and expected revenue and profitability to determine if the franchise is financially viable. You can negotiate on these so try to get lower rates. The initial costs will be dependent on what the franchisor offers in terms of onboarding training / setup as well as ongoing royalties.
- Franchise support and training: Look for a franchise that offers comprehensive support and training to help you succeed. This may include assistance with site selection, marketing, and ongoing operational support.
- Brand recognition: Consider franchises that have established brand recognition and a loyal customer base. This can help to attract customers and build a successful business more quickly.
- Franchisee satisfaction: Research the satisfaction level of current franchisees to gauge the franchisor's support and overall satisfaction with the franchise system.
- Legal and regulatory requirements: Ensure that the franchise complies with all legal and regulatory requirements, including any licenses or permits required to operate the franchise.
Note, you can check out a wide range of bottom-up financial forecasting models for all sorts of industries here.
For some high level guidance, here are the most profitable franchise sectors currently in existence:
- Fast food franchises: Fast food franchises, such as McDonald's, Subway, and Pizza Hut, are typically profitable due to their high volume of customers and relatively low overhead costs.
- Health and fitness franchises: Health and fitness franchises, such as Anytime Fitness and Orangetheory Fitness, are growing in popularity due to the increasing focus on health and wellness, making them a potentially profitable option. Also, you can get exposure to membership-based revenues in this industry, which are valued much higher than one-time fee models.
- Senior care franchises: As the population ages, senior care franchises, such as Home Instead Senior Care and Comfort Keepers, are in high demand, making them a potentially profitable option. Another big one here is assisted living facilities.
- Cleaning and maintenance franchises: Cleaning and maintenance franchises, such as Jani-King and ServiceMaster Clean, can be profitable due to the recurring nature of their services and low overhead costs.
- Education and tutoring franchises: Education and tutoring franchises, such as Kumon and Sylvan Learning, can be profitable due to the increasing demand for academic support and the potential for repeat business.
