The most profitable franchises on the market today are the ones that are least affected by the downturn in the economy that has been prevalent for several years now. Winning over buyers in the franchise market today comes down to money. Many franchise units have dropped over the past few years, but others are thriving and experiencing rapid growth despite the down market and challenges that exist. These companies are usually the ones that have powerful brand names, such as McDonalds, Dominos, and 7-Eleven. We all know them, and a person buying into them have confidence and security that they will succeed. Without a famous brand name to rely on, however, a franchise company looking for rapid growth will need to have the numbers on their side.
To look for the most profitable franchises, you should be aware of three factors that lesser known but rapidly growing franchises have in common.
1. Low Investment: Financing a new business startup is extremely hard nowadays, as opposed to before the economic downturn. Therefore, buyers in today's market need to find lower investment levels. The average franchise investment may have been about $250,000 four years ago, with perhaps 60%-70% of that amount financed, but today many rapid growth franchises have total investments of $125,000 or less.
2. Rapid Breakeven: Traditionally a business was considered successful if it was profitable by the second or third year. In today's market, buyers are looking for a much quicker road to profits. You do not want to keep feeding additional money into a new business to cover operating deficits for a long period. Many of the fastest growing franchises will accomplish a breakeven point within the first year of operation and, in some cases, within a few months.
3. High Margins: It is important in today's market to be able to achieve high profit margins. That way, a business can quickly increase its total profit to a significant level once it starts making money. A normal business may put five or ten cents of every sales dollar toward the bottom line after reaching breakeven but today's buyer wants businesses with sales margins at least three to five times that level.
The most profitable franchises should score well on these monetary factors, but still need to convince potential buyers (such as you) that there exists strong consumer demand and plenty of paying customers. Service based franchises seem to be the best in terms of satisfying both the money requirements and the need for reliable demand.
Finding the most profitable franchises requires you to do due diligence on any business you are interested in. You should look for the three factors discussed above, get to know the staff at the franchise company, and carefully read their disclosure documents. This is a good start to finding a franchise business that interests and excites you, and you can see the long-term potential for success.
To look for the most profitable franchises, you should be aware of three factors that lesser known but rapidly growing franchises have in common.
1. Low Investment: Financing a new business startup is extremely hard nowadays, as opposed to before the economic downturn. Therefore, buyers in today's market need to find lower investment levels. The average franchise investment may have been about $250,000 four years ago, with perhaps 60%-70% of that amount financed, but today many rapid growth franchises have total investments of $125,000 or less.
2. Rapid Breakeven: Traditionally a business was considered successful if it was profitable by the second or third year. In today's market, buyers are looking for a much quicker road to profits. You do not want to keep feeding additional money into a new business to cover operating deficits for a long period. Many of the fastest growing franchises will accomplish a breakeven point within the first year of operation and, in some cases, within a few months.
3. High Margins: It is important in today's market to be able to achieve high profit margins. That way, a business can quickly increase its total profit to a significant level once it starts making money. A normal business may put five or ten cents of every sales dollar toward the bottom line after reaching breakeven but today's buyer wants businesses with sales margins at least three to five times that level.
The most profitable franchises should score well on these monetary factors, but still need to convince potential buyers (such as you) that there exists strong consumer demand and plenty of paying customers. Service based franchises seem to be the best in terms of satisfying both the money requirements and the need for reliable demand.
Finding the most profitable franchises requires you to do due diligence on any business you are interested in. You should look for the three factors discussed above, get to know the staff at the franchise company, and carefully read their disclosure documents. This is a good start to finding a franchise business that interests and excites you, and you can see the long-term potential for success.
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