An Objective Look at a Subjective Franchise Situation
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Best Franchises? By Robert Edwards
Last video where we discussed "best franchises" I got some flak from viewers because I didn't give any solid examples of what the supposedly "Best Franchises" actually are. I'll try and do better this time.
But in my defense what is the "Best franchise?" That's completely subjective. And that is why in the last video I didn't mention any names because to do so would be impossible. It's the same as me asking you what is the best car. It depends entirely on your situation and your needs. You wouldn't want a Lamborghini to go 4 wheeling or to drive kids to sports and it's the same for franchising - every person, every location, every budget, every situation is different. But let's break it down and give some individual examples of what a best franchise might mean for you.
We have found there are varying top priorities people seek in a franchise. and depending on what your priorities are your best franchise choices will be entirely different. Those 6 priorities are as follows
1. Passive or absentee ownership
2. High earnings
3.Exit Strategy and Resale
5.Low Cost or driven by budget
6. Lowest Risk
These 6 categories have several or even hundreds of franchise choices in each category and from an overall perspective most people will find their "best franchise" in one of these 6 categories. Obviously we wont have time to cover them all as there are hundreds - but we will look at industries within each group that are best suited for your goals.
Now depending on which of those are important to you your best franchise choices will be entirely different. Not to mention many people have no idea how much franchises actually make and just go with the big names thinking they pay the big bucks. Not true in fact often the opposite.
Lets break down these 6 categories one by one.
1. Passive investment. Some people don't want to actively work in the franchise because they have an existing job or run another business, or it may be a celebrity or investor group. Obviously they don't want to work behind the counter so they need a business that will allow for passive or absentee ownership. Now keep in mind these will not be your highest moneymakers because you also need to hire additional senior management in your place to run your store. many people are under the mistaken impression that all franchises can be run passively and that is just not true. In fact many of them have clauses requiring you to be actively involved in the operation of the store. So from a purely passive ownership perspective some of the best franchise choices are Hair salons, certain types of restaurants, automotive repair and bodyshop centers, certain learning and tutoring centers, certain health clubs or massage outlets and assorted business services franchises. These businesses also have sufficient margins to allow you to hire a manager and still earn a profit. You typically wont make a lot of money from one location with these types of franchises so the ultimate goal should be multi unit ownership which you can build over time. That's a great move as in a decade you could own 5-10 locations and sell them off for a nice profit.
2. High earnings. For those people who want to work hard and long and make as much money as possible the best franchises for them are the ones that of course have the highest profits and these franchises must provide the owner the ability to directly impact these profits. Businesses like restaurants are not good choices because you are completely reliant on walk in traffic and have little to no control over increasing your revenues unless you buy another location, and pay more fees. Business to business service type franchises however are excellent moneymakers and are likely your best franchise choice. These can be a blend of retail and also B2B sales like a printing or sign franchise. Other service based franchise like cleaning and painting are also surprisingly solid earners. Senior care can be good although may be becoming saturated in certain areas. Personnel and staffing companies are high revenue generators as well - one of the franchises we work with has an average of $6.4 million dollars per single mature franchise territory. That's just the average many are over that number. If you put that in context with a typical Subway franchise that is over 12 times the annual average earnings of a Subway store. We'll dig into that topic in another video where one franchise owner across the street from another can be working twice as hard and making literally 10 times less than the other and not even know. You don't want to be that person. For anyone who has sales, marketing or business management experience these types of franchises are a great fit.
Another little known but solid moneymaker in franchising is Master Franchising. This allows you purchase the rights to a large territory and sell franchises as well as open your own. You then share in collected franchise fees, and the ongoing royalties of all your franchisees in the system. Many millionaires have been made from master franchising. We work with close to 100 franchises that have master franchising options available.
3. Exit strategy. Some investors have a specific plan where they want to build a business and sell it off in 5-10 years for a profit. There are people that do this multiple times as a career. Now as suggested above owning multi units is a good plan for exit strategy so choices might be master franchising, restaurants, retail franchises, or even some service based, cleaning, painting or junk removal if profitable can be sold for several times their original purchase price if profitable and will be your best franchise choices if exit strategy is a priority. Consulting type businesses are terrible for exit strategy so if this is your goal keep to traditional business models that are easily understood by buyers and will be easily resold.
4. Lifestyle Franchises. Many individuals don't have money or exit strategy at the top of thier list they just want a business they can enjoy working at every day and make a decent living. Best franchises will vary from person to person but usually these franchises involve the life passion the investor may have. Franchising has a lot of great lifestyle choice franchises like pet grooming or boarding where you can be around animals all day. If you like helping kids tutoring or kids health franchises are a fantastic fit. Health clubs or gym franchises are a great lifestyle business if you are into fitness and health and can be very profitable as well. Certain retail franchises can be fun like specialty coffee shops or smoothie or Yogurt - although we caution people in this sector as the industry has taken a beating recently. Senior care can also be a lifestyle business for someone who has a passion for helping seniors in the community. The earnings in senior care can also be quite impressive depending on your location. Travel planning type franchises can also be a good choice -which brings us to........
5. Low cost franchises. If someone has a limited budget their best franchise will be one that offers the most for the lowest price. Be cautious however in this segment because this is the arena where a lot of scammers reside offering little to no real viable business model. Some of the sectors that we like for low cost or work at home are travel planning - for around $10,000 you can become a travel planner and work from anywhere in the world helping people with their travel plans. Many people are generating 6 figure incomes. If you have a business background business consulting or coaching can be very profitable and great from an R.O.I perspective. many of these franchises have low start up costs under $50,000, can be operated from home, have low overhead and very high margins.
Within that group as well are specialty consulting franchises, such a cost reduction consulting where you help companies save money on telecom or billing costs, or energy consulting where you help companies save money on their energy costs. These are all cash businesses no inventory and low overhead so can be very profitable. One franchise we work with shows their top 25% of owners generating over $650,000 a year with only a $50,000 investment. Medical billing is also a great choice at under $25,000 and just one doctor client will typically recoup your investment costs.
6. Low Risk Franchises. There are actually franchises that provide safety nets for people who are extremely risk averse but still want to own a franchise. They will provide the owner with a salary during startup, buy all the equipment, and even in some cases offer a money back guarantee if the business doesn't succeed. These perks come at a cost however as you will typically pay half of your royalties to the franchise. There is always a trade off.
So as you can see depending on your business goals and situation there are many different choices for the "best franchises". If you would like to discuss any of these franchises further or see which are available in your territory give us a call consultations are always free or visit our Franchise Directory