Investing in a franchise is a great way to launch a recognizable brand with developed systems and infrastructure. You don’t have to stress or invest in marketing materials, and you open your door on day 1 with proven products or services.
However, not all franchises offer the same benefits. Some are more expensive to launch than others, and each franchise has a different return on investment (ROI). So how can you find the franchise that is right for you?
There are a few ways to increase your chances of success. Learn more about franchise investments so you can generate the highest ROI.
Franchises can help you kick off your professional career and start your own business. You will need to pay a franchise fee and spend money building up your location, but these efforts can definitely be worth it. Some franchise professionals open multiple locations throughout their careers, growing their income with each new opening.
While franchises might be good investments, they aren’t passive investments. They are much different from buying into a startup company, acquiring real estate, or creating an investment portfolio.
As a franchise owner, you will be in charge of building, marketing, and operating the company as an independent business. Many franchisees share stories of working long hours and missing paychecks for the first few years. Opening a franchise is a full-time job and will take commitment, focus, and of course—money.
If you are committed to investing yourself in your franchise, it can be profitable. However, if you want a passive income stream that grows over time, consider looking into other options.
One of the challenges of opening a franchise is that there isn’t a set salary. As a business owner, you may need to take a pay cut during your first few years as you invest in your franchise and pay off debt.
You also can’t look at franchise owner income as a whole because some industries are more profitable than others.
If you want to get an idea of what franchise owners make each year, look at specific industries—and even specific brands. For example, the median annual income of franchise owners in the food and beverage industry is $70,000. This number drops to $50,000 when you include franchise owners who have been in business for fewer than 2 years.
Franchise owner income falls on a bell curve. Only 16% of franchise owners in the food and beverage field earn more than $200,000 per year. Conversely, 37% of franchise owners in that industry earn less than $50,000 per year. The rest fall somewhere in between.
Unfortunately, there is no definitive franchise that will guarantee you a positive ROI. There are too many factors that affect whether or not a franchise turns a profit—so don’t trust anyone who tells you otherwise.
For example, investing in a car wash company might be profitable in most areas but not in a region where public transit is popular and fewer people own cars. Conversely, a car wash might be profitable in a region that is car-dependent—at least until your competitors open a new location down the street. In the first case, the business owner needed to research regional demand. In the second case, profits were lost because of increased competition.
While no one can guarantee profitability with franchises, there are some highly-rated franchises with better customer ratings—which can increase the likelihood of success. Franchise Direct recently released their 2021 report of the top 100 franchises, which highlights brands like McDonald’s, 7-Eleven, Dominos, Ace Hardware, and Chick-fil-A, among others.
You can use lists like these to find franchises with brands that may give you the best chance to return a profit on your investment.
Investopedia recently gave Dunkin’ high marks for its franchise performance during the pandemic. They highlight the ability to build up repeat customer traffic (everyone wants their daily morning coffee) and the existing brand name that most people know. They also mention how 90% of Dunkin’ locations stayed open during the pandemic, with drive-thru and carry-out sales.
However, there are times when Dunkin’ might not be a good investment for your goals. You could live in a coffee-saturated location or lack the necessary morning commute traffic to build your customer base. Profit depends on the strategic decisions you make—not just the brand; so conduct your own research before making any decision.
While successful franchise investments vary by region and industry, there are a few ways to evaluate your franchise opportunities to see what would be a good fit. Ask yourself these questions as you research franchises:
Take time to conduct market research for your area and learn about your local economy. You don’t need to spend any money until you are confident that you are choosing the best franchise option possible.
If you are looking to break into a niche market and offer something unique in your area, consider investing in a Lendio franchise. Our services are available in 45 states, and franchisees typically only need $55–$65k in startup capital.
At Lendio, we believe in supporting our franchise owners. We offer training materials and assistance throughout your launch and growth stages. Even when you become an expert owner, we are here for you.
Learn more about franchise opportunities by Lendio to see if this is your next great career opportunity.