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Owning a franchise is safer than starting your own independent business— Various industry reports indicate that 80-90% of franchises are successful.
Not only are franchises more likely to succeed than traditional businesses, but franchising is becoming a more popular route to business ownership. The International Franchise Association (IFA) released its annual report, which anticipates franchise growth of 2.5% in 2025.
The additional revenue stream for parent brands (franchisors) is a huge incentive for offering franchise opportunities, and the improved technologies and supply chain logistics have made it easier for brands to scale franchises.
So, what is a franchise, and what are the best franchises to own? Let’s dive into these questions and look at some of the best franchises to own in 2025.
What is a franchise?
A franchise is an extension of a parent company (known as the franchisor). The franchisor licenses trademarks, business processes, and other proprietary information to franchise owners, and allows the owner to sell goods or services under the original brand’s name.
An example of a franchise is McDonald’s. Most locations are franchises, run by a franchisee, who pays the McDonald’s corporation to use their brand name, equipment, ingredients, processes and more in order to operate their business.
How does franchising work?
Franchising is mutually beneficial for both parties. By owning a franchise, you're avoiding many of the hurdles of starting a completely new business, because the franchise already has established brand equity or proprietary value. On the other side, franchisors are able to scale their business nationally, and even globally, with the help of these partnerships.
Here’s how it works. A franchise owner will typically pay upfront and ongoing fees for the right to operate the franchise, known as the franchise fee. Continuing the example of McDonald’s, the franchise then provides the franchise owner with ingredients, recipes, and equipment to operate under their brand. This is important, because if McDonald’s didn’t provide these things, each location would deliver a different experience from the others—making it no different from any other burger restaurant.
With this arrangement, McDonald’s is able to deliver consistent quality from one location to the next, with the help of its massive marketing budget, technology solutions, and other benefits. This brand equity and consistent product makes it one of the most successful franchises year in and year out.
How to identify the best franchises to own.
Before you throw a dart at a board and select a franchise because of brand recognition, you’ll want to think carefully about the most profitable franchise for your unique situation. People are unique, situations vary, and market need and location all become important factors. A franchise that works well in Poughkeepsie, could be a dud in Daytona.
Choosing the best franchise is about finding the right one for you within the market you intend to operate the business in. You’ll also want to critically evaluate the franchising arrangement itself to determine your chances of profitability by owning a franchise location. Here are some things to look closely at.
Profitability and ROI
Understanding the profitability and return on investment from a franchise opportunity is key when you’re doing your research. Understand how franchisees of this brand typically generate revenue (usually through the sale of goods or services under the established brand name), and what profit margins typically look like both for specific franchises and for industry trends. Keep in mind that revenue is not the same as profit, and even high revenue businesses can have low profit margins.
Here are average profit margin ranges by industry:
Startup costs and accessibility
You’ll also want to understand what the total initial investment is to open a franchise. You’ll need to consider the upfront franchise fee, which grants you the right to operate, as well as access to proprietary systems, training, and support. However, you’ll also need to invest in start-up expenses like equipment, inventory, real estate, marketing materials, and working capital.
There’s a lot of variation in this area, depending on the industry, location, and the specific franchise, so it’s important to know exactly what starting the business will cost beyond franchising fees, and analyzing what it will cost to operate.
Risk factors and failure rates
Although 2-year survival rates for franchises are higher than new businesses, it’s by no means guaranteed. Franchises can and do fail, usually for a myriad of reasons. Three important culprits to watch out for are: inadequate support from the franchisor in critical areas, high operational costs and unstable cashflow, or struggling sales due to poor market analysis.
It’s important to research risk factors and failure rates of individual franchises before going all in. Make sure you’re investing in a franchise that provides excellent support and guidance to its locations, and adapts well to shifts in consumer preferences and economic trends.
You’ll also want to make sure you have the best market analysis possible before opening a new franchise location. If there isn’t enough demand, mismatched target demographics, or too much competition in the market, you could struggle to generate sustainable revenue.
Brand recognition and growth potential
Established franchise brands will usually outperform lesser-known or newer franchises. The franchise has had many years to grow and solidify its brand, which results in wide consumer recognition, operational experience, and support systems for franchisees. When the franchise already has brand recognition, franchisees will have to spend less on marketing and awareness campaigns in order to enjoy established customer loyalty.
However, there are always high-growth opportunities when it comes to emerging industries, too. Market trends can give great insight into franchises that have good potential based on consumer preferences. For example, consumer demand in the health and wellness space has grown in recent years thanks to shifting lifestyle preferences. Analyze market data, demographic trends, and economic forecasts to help determine which franchise categories are likely to expand and remain relevant for years to come.
Research and due diligence tips.
Choosing a franchise should not be done lightly. It's likely one of the biggest financial and personal investments you'll ever make—so take your time to research, review, ask questions, and exercise due diligence before moving forward.
You can actually learn a lot about a franchise's potential profitability throughout this process, especially if you comb through the Franchise Disclosure Document (FDD). The FDD, previously known as the Uniform Franchising Offering Circular (UFOC), is a legal document provided by the franchisor to potential franchisees disclosing critical information about the business and the franchise relationship.
Franchisors are required to provide you the FDD at minimum 14 days before you’re asked to sign any contracts or pay any money.
The FDD has 23 different sections, which are all important to review, but Item 19 and Item 21 are particularly important for assessing profitability.
FDD Item 19
This section of the FDD provides financial performance representations (FPR). The franchisor may offer estimates and forecasts for sales, income, or profits based on reasonable assumptions within the market or historical performance. Franchisors are not legally required to include FPRs in Item 19 and can satisfy the requirements by stating that they “do not make any representations about a franchisee’s future financial performance…”. If your franchisor includes information in this section, you can use that to anticipate potential profitability, and if they don’t include FPRs, it may give you pause as to why they wouldn’t share this information.
FDD Item 21
This section of the FDD requires franchisors to provide specific financial statements demonstrating the current financial health of the franchise. New franchisors (within the first two years) have more flexibility with the information required in this section, but more established (over three years) businesses have additional disclosure requirements. The franchisor’s balance sheet, cash flow statement, and other financial documents can give you additional insight into the potential revenue and costs associated with operating a franchise.
You can also find more information about the franchise and its potential profitability outside the FDD. If the franchise has multiple franchisees already, consider contacting the owners and asking them questions. Their answers can give you more clarity on the business itself as well as its profitability.
Don't rush into owning a franchise. Taking your time to research and understand the nuances of a specific franchise will improve your chances of turning a profit—or at least mitigate the risk of a bad investment.
The worst franchises to own in 2025.
Based on data and research from 2020 to 2022, the worst franchises to own based on SBA loan defaults are:
- Dickey’s Barbecue Pit (27 defaults)
- Subway (21 defaults)
- Anytime Fitness (17 defaults)
Loan defaults are concerning, because they’re a strong indication that the location couldn’t make enough revenue to pay back its loan in the allotted time.
Once you do a bit of digging on these three franchises, you see where the breakdown happened. For Dickey’s Barbeque Pit, while corporate financials appear strong, many franchise owners and workers cite a toxic work environment, exorbitant prices, and lackluster support from higher-ups to help the franchise succeed.
Subway, on the other hand, was stymied by a flawed development program. Despite having a household name and a seemingly healthy profit margin, this franchise investment also makes no guarantees for success.
Anytime Fitness is the fourth largest fitness brand in the United States, with over 2,000 locations in America and a handful of international locations. However, the number of franchise units has declined in recent years. With the franchise’s significant investment and start-up expense, as well as ongoing fees, it will take investors at least 6 to 16 years to recoup their initial investments in the business—without accounting for inflation or compounded interest rates.
These three franchises mirror common issues seen in the majority of franchises, including:
- Sales cannibalization from opening too many units too close to each other
- High employee turnover, which puts stress on the owner and manager to keep staff at a minimum
- Back-breaking 70- to 80-hour workweeks for owners just to break even
The best franchises to own in 2025.
As we’ve discussed, the best franchise to own is relative, so we’ll take a look at some of the best franchises to own in 2025 based on a few key categories.
- Best low-cost franchises: Your budget will have a huge effect on the franchise options available. If you have limited financial resources or want to avoid overleveraging yourself, then look for the best, most affordable franchise.
- Best franchises in emerging industries: Nobody wants to open a franchise in a dying industry. If you can find a franchise in a growing market, then you can better position yourself for future success.
- Best franchises in food service and restaurants: Many food service franchises are at the top of the Franchise 500 list year after year, and with good reason.
Best low-cost franchises to own in 2025.
Starting any business requires capital, but when you start a franchise, you have additional upfront and ongoing franchise fees. The initial investments needed to open a franchise can range from a few thousand to more than $1 million depending on the franchise—some even have net worth and liquidity requirements.
If you’d like to open a franchise in 2025 without making a large investment, then consider some of the following low-cost franchises.
2025 best franchises to own in emerging industries.
Emerging industries in franchising exhibit the potential for growth, scalability, and a rising demand for goods and services. Market trends and consumer demand often plays a large part in determining where these emerging industries are.
In 2025, demand for health and wellness services is still going strong, especially mobile experiences and subscription-based or digital platforms.
Others to look out for are eco-friendly and sustainable franchises, pet services, home services, and tech-based education franchises.
2025 best food service and restaurant franchises to own.
How to get started with owning a franchise.
If you’re interested in going the franchise route with your new business venture, the first place to start is choosing the right franchisor as your partner. The lists above are a great place to find some of the best franchises in 2025, but you may also want to consider looking at successful businesses in your city to see if they have franchise opportunities or review other popular franchises from the Franchise 500 list.
After you’ve decided on the perfect franchise, you’ll need to begin the application process and make sure you meet minimum qualifications. Once approved, you’ll need to get the capital to cover the initial investment fees. If you don’t have the liquid capital yourself, you may want to look into franchise financing solutions.
Then, you’ll review and sign your franchise agreement, pay any outstanding obligations, and attend any mandatory training. After that, you’ll be ready to launch your franchise and start hiring staff.
While starting a franchise is typically more difficult than an independent business, the benefits of an established brand, proven processes, and other technology solutions make it a safer investment. You can also improve your chances for success by choosing one of the best franchises to own in 2025.
