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What is the Most Profitable Franchise to Own?

Nov 25, 2020 Franchise Information

The answer to this question is easy. The most profitable franchise is the one that is making you lots of money, right? The question is, how do you get there from here?

If running a profitable franchise were easy, everyone would do it. The fact is, there’s a lot that goes into owning a franchise.

Owning a profitable franchise comes down to a series of key factors:

  • Passionate and dedicated owner
  • Location
  • Customer demographics
  • Staff/Team
  • Strong brand reputation
  • Franchising and ownership costs

 

Let’s look at the above in a little more detail.

 

What is the most profitable franchise to own?Passionate and dedicated owner

We’ve talked about having a passion for your business before. But it’s such an important factor, it bears repeating. What’s your passion? What gets you out of bed in the morning? How competitive are you? How driven are you to succeed?

Let’s face it, no business has a hope of being profitable if you as the owner are not passionate about driving it forward. Franchises are a different model than startup businesses, obviously, but that doesn’t mean they don’t require a hell of a lot of work. Your staff and your community are relying on you to deliver. Are you up to the challenge?

 

Location

We’ve all heard that franchising has a lot to do with real estate. Location is a big part of a successful franchise. If you set up shop in a location where there are no clear sightlines and no demand, then you’re in trouble. Location is arguably the most important factor out of the gate because positioning and visibility are crucial for developing awareness in your community. In other words, people gotta know you exist.

 

Customer demographics

This is just a fancy way of saying: people.

Consider:

  • What’s the community like?
  • What are their behaviours?
  • Are they early-risers, or night-owls?
  • Are they likely to want what your business can provide?
  • Are you fulfilling an established need?
  • What’s the demand for what you’re offering in the area you are considering?
  • Are there already similar businesses in the area, and if so, how are they faring?

 

It may be tempting to invest in a franchise based solely on the fact that people can see it. Unfortunately if you’re not considering your community, visibility alone won’t be enough.

 

Staff/Team

Do you get excited about the prospect of running your own team? Building a successful team is a big part of owning a franchise. If you’re not invested in the business as a leader, both monetarily, and with your heart and soul, then it may be more challenging for your team to gel. It’s not easy, but building, leading and nurturing a team can be extremely fulfilling and rewarding.

Some questions to ask when assembling a team for your franchise:

  • What kind of staff can you put together to make your franchise a success?
  • Do you already have people in mind for filling certain positions?
  • What kind of skills and characteristics are you looking for in your staff?
  • Will the community be able to provide the quality of staff you need?
  • Are you going to be able to continue to motivate and empower your team, even when things are difficult?
  • Do you have prior experience running a franchise or business that will encourage your team about your experience level?
  • How do you plan to continuously invest in, educate, and upskill your team?

 

Strong brand reputation

We recently did a survey where we asked the strongest deciding factor for purchasing a franchise business. Respondents selected “location” as the first factor, the second was “Brand Power”.

COVID-19 has changed things for people in that it has increased their desire to return to a sense of normalcy and familiarity. A strong, recognized brand can make people feel a sense of security.

Consider:

  • How established is the brand you want to represent?
  • How long have they been in business?
  • What kind of impression do people have of the brand?
  • How do you personally feel about it?
  • What about your family?
  • Will you be proud to say you’re an owner of this franchise?

 

Some established franchises have been operating in Canada for over sixty years. That’s a long legacy to uphold. You can’t expect to have a profitable franchise based on name alone, but brand perception is definitely an important part of the mix when it comes to consumer confidence.

 

Franchising and ownership costs

Yes, of course, cost will always be a factor. The cash outlay on the front end is often a barrier for many folks to start a franchise. You need to determine what your comfort level is with what you have, and what you will be willing to invest to get the business off the ground.

Naturally, the costs vary from franchise to franchise. Usually, the more recognition an established brand has, the more they can expect to charge for the initial investment as well as for ongoing franchise fees. Often, this is reasonable for the franchisee, given that much of the heavy lifting (business concept, promotion, marketing, business model, tools and resources) are already provided for them.

Finding the initial investment amount that is right for you will come down to weighing out a combination of several factors.

  • What are the build-out costs and up-front investment requirements?
  • How much cash runway do you have to get the franchise up and running?
  • Will you be responsible for promotional/advertising costs above franchise fees?
  • Do you have a clear sense of your monthly operational expenses?

 

In the end, the most profitable franchise to own is the one that delivers the right mix of all of the above. There is no magic bullet here. However if you have a firm handle on the factors listed in this article, your chances of having a successful and profitable franchise will increase drastically.

As always, we are here to help if you have questions you want to send our way.

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