The most profitable franchises of 2023
Investing in franchises can be a lucrative endeavor – but not all franchises are the same. Some are more profitable, while others offer the potential for explosive growth and higher ROI.
So, if you’re thinking about adding franchise investments to your portfolio and don’t know where to begin – or have no particular preference about which industry you’d like to invest in – you’ll find this article helpful. We’ll cover:
- Minimizing risk to achieve higher profitability
- Best practices to help increase your chances of success
- The most profitable franchises of 2023
Is franchising profitable?
The answer to that question is yes, franchising can be incredibly profitable – but like every business venture, it can also be risky.
The risk of starting a new franchise can be significantly reduced with three strategies:
- Ensuring enough support from the franchisors. Since the franchisors have built this business before and created the brand, they’re the ones with the most knowledge of how to grow the business.
- Being smart about business choices. A certain amount of business acumen and location strategy, such as avoiding competitive markets, can increase the likelihood of a profitable franchise.
- Investing in good management, operations, and systems. Franchisees who dial in their operations and hire good managers are ahead of the curve.
Best practices to maximize success
Along with taking steps to reduce risks, there are strategies franchisees can use to help make a franchise more profitable.
Weigh initial investment and franchise fees against revenue. Take a look at item 19 on the Franchise Disclosure Document (FDD), “Financial Performance Representations,” and do some simple break-even analysis. How long should it take you to recoup your initial investment, including the franchise fees? Think about your expenses in the meantime, including any debt you’ve taken on to finance this new venture, and make a financial plan for yourself and the business.
Hire effective management. This is half the equation. The other half? Having strong, robust protocols and operations in place. For a home-based franchise in which you as the franchisee will be doing most of the work, this requires a lot of diligence and bookkeeping. For the franchisee who owns a more traditional business, like a fast food restaurant where much of the labor is hired out, it also means having good people in middle management.
Proven systems. The smartest step you can take as a franchisee is to plug into an existing, proven system and replicate somebody else’s results. That’s the huge advantage of a franchise over starting a new business – the work of branding and establishing trust has already been done. The best franchises have an established playbook that has worked time and time again.
Location. The importance of the right location cannot be overstated. When making this choice, for example, you want to steer clear of a location that is difficult to access or that’s replete with more established competitors – avoiding the red ocean is key. Likewise, locations that are unnecessarily expensive for the amount of revenue you expect to generate are a risky gamble. Some locations, like airports, have other security or extenuating factors to compete with.
Most profitable franchises of 2023
Taking into consideration the factors covered so far, we’ve compiled a list of some of the most profitable franchises for 2023. Here are the criteria we used:
- Locations: How many discrete locations does this franchise operate? The more locations, the better, but the mix of locations matters too. A franchise with more than 100 locations in Texas and a franchise with over 100 locations worldwide will have very different personalities, customer bases, and financial profiles. Likewise, knowing how locations have changed in the previous few years is an important signal: if locations are closing, why is that?
- History: When was this company founded?
When was it first franchised? Companies that are newer in their franchising journey might not have the same proven, foolproof systems as companies that have had more time and opportunity to refine their playbook.
- Average gross revenue: Typically referred to as earnings before interest, taxes, depreciation, and amortization (EBITDA), this is a measure of how much a franchise can expect to earn in a financial year.
- Startup cost: The initial investment typically required for this franchise. Startup costs include the cost of land, inventory, and materials.
- Franchise fee: The amount you pay to the franchisor to operate a franchise.
- Net worth required: The required amount of net worth to be considered for a franchising license.
Headquartered in Philadelphia, CertaPro offers interior, exterior, and commercial painting for jobs of all sizes. It is a subsidiary of FirstService Brands, the leading North American brand in property services, itself a subsidiary of FirstService Corporation. Together, they have grown CertaPro into one of the most successful franchises in the United States.
- Locations: 331
- Founded: 1992
- Franchised: 1992
- EBITDA: $2,436,417
- Start-up cost: $155,750 – $216,000
- Franchise fee: $65,000
1-800-Radiator & A/C
Charlotte, NC-based 1-800 Radiator & A/C, a Driven Brands portfolio company, is one of the largest independent auto parts distributors in the United States. They offer more than just radiators and A/C kits, though. In select markets, they also offer fuel pumps, lighting mirrors, gas tanks, rotating electrical parts, and more.
- Locations: 194
- Founded: 2001
- Franchised: 2005
- EBITDA: $2,383,107
- Start-up cost: $457,500 – $1,269,000
- Franchise fee: $45,000
As one of America’s fastest-growing automotive styling companies (including window tinting, audio and video entertainment, and auto accessories), Taramac, Florida-based Tint World has since spun out over one hundred locations and expanded into all kinds of car styling options.
- Locations: 101
- Founded: 1982
- Franchised: 2007
- EBITDA: $883,270
- Start-up cost: $289,950 – $469,950
- Franchise fee: $49,950
Dog Training Elite
Dog Training Elite works with dogs of any breed, size, or age, on in-home as well as socialized training on key skills like leash and potty training, staying and coming on command, chewing and digging, barking, nipping, and anxiety, among others. Founded in Lehi, Utah, Dog Training Elite is one of the best pet training franchises in the United States.
- Locations: 283
- Founded: 1995
- Franchised: 2015
- EBITDA: $973,756
- Start-up cost: $159,050 – $185,750
- Franchise fee: $110,000
Savannah, Georgia-based Pearle Vision has provided communities with eye exams, designer eyewear, and prescription sunglasses since 1961. In 2004 it was acquired by Italian luxury eyewear company, Luxottica, and has expanded into locations across Europe and the Middle East.
- Locations: 511
- Founded: 1961
- Franchised: 1981
- EBITDA: $1,133,817
- Start-up cost: $639,239 – $990,710
- Franchise fee: $30,000
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