The most profitable restaurant franchises of 2024
Restaurant franchises are some of the most recognizable brands in the world. But these businesses, especially quick-service restaurants (QSRs), have a reputation for intense competition and slim profits.
Of course, there are always more successful outliers. When choosing which restaurant franchises to invest in, it helps to know what those outliers are and what differentiates them from the pack – which is the knowledge we want you to gain from this article. Specifically, you’ll learn:
- What it takes to make a restaurant franchise great
- Why restaurant franchises make good investments
- The most profitable restaurant franchises
Let’s take a closer look.
What makes a great restaurant franchise?
Despite their reputation, successful restaurant franchises bear all the hallmarks of a great business in any industry. While restaurants have some profit-eating traps to be aware of, mastering the fundamentals can still lead to success in their operation.
Strong margins
Margins are the heart of business profits. The quickest way to assess profitability is to look at a company’s earnings before interest, taxes, depreciation, and amortization (EBITDA), which refers to its operating profit. For restaurant franchises, an EBITDA of about $300,000+ is the sweet spot for excellent profit margins.
It’s also worth examining margins from levels that aren’t just EBITDA. After all, QSRs are notorious for having thin margins. Does a restaurant overstaff, or does it run a lean operation? Has EBITDA been growing year-on-year, or has it been shrinking? Do its physical locations seem expensive to build and run, or are they more efficiently designed and managed? Researching the answers to these questions will help you evaluate the opportunity and make a smart decision.
Proven systems
Any franchise that wants to grow needs proven, effective systems. For restaurants, this requirement extends to all areas of customer service: food sanitization, preparation, and service should all follow a proven formula.
The business should also follow a proven franchising formula. Does leadership know what makes a specific location successful? If so, what’s their plan to replicate this in new locations? How do they vet new franchisees and ensure they’re franchising the business to the best of the best? Strong franchises demonstrate capable management in all these areas.
Low headcount
It’s a well-known fact that headcount is one of the biggest expenses of any business. In restaurants, where margins already tend to be slim, low headcount is critical to profitability.
Yet, it’s important to note that “low headcount” does not mean “understaffed.” Low-headcount stores have just enough staff to run the business; enough coverage that the team can handle it if someone needs to call in sick for the day.
Some restaurant franchises will standardize – or strongly recommend – the number of heads in a location, including their individual roles. These recommendations come from the data of running a standard location successfully. It speaks to a franchise’s ability to keep costs down while running a lean, efficient business.
Network availability
Setting up individual franchise units for success is a key challenge in any franchise business. When investing in a franchise, you should look at the current network and its plans for expansion. Some restaurants have local market dominance and are clustered more heavily in specific regions, whereas others perform better with more spread-out locations.
Demonstrated growth
Has the business been growing year-on-year? You can qualify growth in a couple of ways, but we like to point investors toward EBITDA and the number of locations.
A growing EBITDA means growing profits. There is no better way to demonstrate growth than showing an increase in profits. You can look at EBITDA by location (if available) or for the entire company.
Likewise, a growing number of locations means the franchise is expanding successfully. These brands have found product-market fit outside their founding location and offer proven systems to allow for expansion. If those locations stay open, it also means that headquarters has been able to train franchisees in how to successfully run and replicate the business model. For investors, this is as “green flag” as it gets.
Why invest in restaurants?
Restaurants are a great investment vehicle because they offer some of the most recognizable brands, have a huge addressable market, and offer well-oiled, scalable business systems.
Benefits of restaurant businesses
Restaurant businesses have plenty of benefits that make them attractive investment opportunities:
Quick-service restaurants are growing: The Business Research Company reported in January 2024 that the QSR industry amounted to $295.03 billion in 2023 and is projected to exceed $316 billion in 2024. Obviously, this sector is only getting bigger.
Increased travel and tourism contributed to QSR growth: According to QSR magazine, when people travel, they’re more likely to catch a bite at a QS restaurant. As the travel industry continues to grow in 2024 with more accessible transit options than ever, successful, well-positioned QSRs will be able to cash in on the influx of tourists and travelers.
Proven models = lower risks: QSRs are some of the best in the business when it comes to growing franchises and increasing their profits. As a general trend, they are a reliable investment because they’ve been well-proven.
Most profitable restaurant franchises of 2024
Now that we’ve covered what makes a successful QSR franchise, we’ll examine some of the most profitable restaurant franchises of 2024.
Panera Bread
The Kirkwood, Missouri-founded Panera Bread needs no introduction. The company began with humble origins and quickly became a national phenomenon in the 1990s and 2000s. Panera Bread is a bakery-café that sells a variety of breads, bagels, sandwiches, soups, and salads. It’s most concentrated in the United States with a few Canadian locations in the greater Toronto area such as Richmond Hill and Mississauga.
Fast facts
Locations: 1000+
Founded: 1987
Franchised: 1997
EBITDA: $462K
Startup cost: $1.1M–$3.9M
Franchising fee: $35K
Wings and Rings
Wings and Rings makes the list after a successful rebrand and operations makeover, including new store designs and an enhanced POS system. Founded in Cincinnati, Ohio as Buffalo Wings and Rings, it is a stellar example of a franchise in the early stages of newfound growth, with great EBITDA and an increasing number of locations every year.
Fast facts
Locations: 54
Founded: 1984
Franchised: 2005
EBITDA: $416K
Startup cost: $1.5M–$2.0M
Franchising fee: $40K
Newk’s Eatery
Originally called Newk’s Express Café, Newk’s Eatery was founded in Oxford, Mississippi in 2004 by father-and-son restaurateurs, Don and Chris Newcomb. After a few years of lackluster growth, it was acquired by a private equity firm in 2013 and has quickly grown, opening scores of locations across the southern United States.
Fast facts
Locations: 73
Founded: 2004
Franchised: 2005
EBITDA: $343K
Startup cost: $1.1M–$1.4M
Franchising fee: $40K
Wendy’s
Wendy’s is one of the oldest and best-known fast-food chains in the United States. Famous for its creative marketing, the Columbus, Ohio-founded burger restaurant now operates over 5,000 locations throughout the world, with most in North America.
Fast facts
Locations: 5,000+
Founded: 1969
Franchised: 1972
EBITDA: $322K
Startup cost: $2.0M–$4.7M
Franchising fee: $50K
Zaxby’s
Zaxby’s humble roots as a Statesboro, Georgia-founded chicken restaurant aren’t apparent in its phenomenal growth – more than 700 locations across the United States in the past 30 years. (For reference, that equates to a new location about every 15.6 days.) With high EBITDA and strong brand recognition, Zaxby’s reputation built on quality chicken and amazing flavors proves to be a winning formula for further growth.
Fast facts
Locations: 700+
Founded: 1990
Franchised: 1994
EBITDA: $310K
Startup cost: $1.4M–$3.3M
Franchising fee: $35K
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If you’re convinced it’s time to add restaurant franchises to your investment portfolio, but you aren’t quite sure about owning and operating a franchise, consider passive fractional franchise investing with FranShares. Our approach offers strong return potential and diversification in a completely passive investment model. We give both retail and accredited investors access to all the benefits of franchising with low initial capital investment.
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