Franchising is an appealing option for entrepreneurs who want to start a business without spending years building a new concept from the ground up. But the idea of franchising is divisive. “Some people say, ‘Oh no, that’s a terrible concept,’ and other people love it,” says franchise consultant Teri Villanueva. To find the right franchise for her clients, Teri asks: “What’s the end result? What do they want the business to do for them?”
The International Franchise Association (IFA) recognizes more than 300 franchise business concepts in industries ranging from roofing to dog grooming. Some require a brick-and-mortar location and a large upfront investment, while others can operate out of a home office or truck. Choosing the right franchise business opportunity depends on your priorities and resources.
What is a franchise?
A franchise is a business model that allows you (the franchisee) to operate a business under the established brand of a larger company (the franchisor). Franchising empowers franchisors to broaden their reach by enabling independent operators to oversee locations, while franchisees gain the advantage of managing a business under a recognized brand with a tested operational blueprint.
“It’s really a license to use the trademark, systems, and the name of the franchise in exchange for an initial franchise fee and then ongoing royalties,” Teri explains. “But with those royalties, you’re getting a ton of support and a ton of training from the franchisor.”
Advantages of owning a franchise
If you want to start your own business but don’t want to develop a business idea from scratch, franchising could be a good fit. Some of the benefits include:
Operating under an established brand
One of the biggest benefits of opening a franchise is the brand recognition. It can take decades to become as well known as, say, Taco Bell or H&R Block. But because these businesses are franchises, you can open your own and leverage their established customer base—provided you’re ready to cover the franchise fees.
Accessing a proven business model
When you join a franchise, you bypass the need to develop and test a profitable business model because part of your franchise agreement includes following the franchisor’s proven operating system. “I hear good things from people who follow the system,” Teri says. On the other hand, “Some people may not like that restriction.”
Training and resources
Franchisors provide training to all new franchisees to ensure consistency across franchise units. This can be especially helpful if you’re entering a new field or are new to business ownership. “A common misconception is that you have to have prior experience in whatever industry you’re entering,” Teri says. “The franchisor is going to train you on whatever the specific industry is and how the model works.”
Community
Being a founder can be lonely. When you open a franchise, you become part of a community of franchisees. “You can see what other owners are doing and then relate,” Teri says. “People are willing to help each other.”
Factors to consider when evaluating franchise opportunities
How do you choose the franchise opportunity that’s right for you? Teri asks prospective franchisees many questions: “Do they want a brick-and-mortar? Do they want a home base? How much do they want to spend? Where do they like to be? How many employees would they like?” Here are the key considerations to keep in mind:
Industry growth
If you’re unsure which industry to invest in, the International Franchise Association (IFA) releases a report each year with its predictions for franchise establishments across industries. According to the IFA’s projections, franchises that provide personal services—anything in the beauty, health, pets, and education industries, Teri explains—will see the most growth in 2024.
“All of that is predicted to do very well because of the pent-up demand during COVID,” Teri says. “Now, people want to have experiences and they really want to pamper themselves, so we’re seeing some growth in areas like eyelashes, waxing, and things like that.” Other growth areas include quick-service restaurants, retail, maintenance, and business services.
Budget
Most franchisors have net worth and liquidity requirements for their franchisees, so your finances partly determine which businesses you’re eligible for. (For example, you need $500,000 to open a McDonald’s.)
Teri says prospective franchisees need at least $300,000 if they’re planning to open a brick-and-mortar business. But there are many home-based or small-office-type franchises that you can open with $100,000 to $150,000. “It really depends on the type of franchise that you’re getting into,” she says.
Franchisor financials
While the franchisor’s profit doesn’t necessarily indicate the profitability of any individual franchise unit, it’s a good place to start when assessing profitability. You can find the franchisor’s financial performance information in item 19 of the Franchise Disclosure Document (FDD), a legal document franchisors must give prospective franchisees at least 14 days ahead of signing a franchise agreement, per Federal Trade Commission (FTC) rules.
“The franchisor by law cannot go into more detail than what’s in the Disclosure Document,” Teri explains, “but you can use the numbers in item 19 to create your own projections.” Franchisors aren’t required to provide financial performance information in the FDD, but if they don’t, they won’t be able to share their financials elsewhere. If they do, franchisors cannot share numbers that differ from what is in item 19.
Franchisors can decide what financial information they share, such as franchisees’ average income or gross sales. The FTC warns these numbers can be misleading: a few high-performing units could skew the average income upward, and gross sales don’t mean much without corresponding information on expenditures.
According to the FTC, most franchisors don’t have access to their franchisees’ net profits, so if you see net profits in item 19, ask if they are from the franchisor’s own units—units the company owns may have lower operating costs and higher profits.
Other franchisees’ experiences
Since franchisors legally cannot share financial information beyond what’s in the Franchise Disclosure Document, Teri recommends speaking with current franchise owners to get a better sense of their potential earnings. “Talk to other owners and ask, ‘Hey, is this realistic? How many customers did you need to break even?’” Teri suggests. “So you get to verify (what’s possible) from the people who are living and breathing it.”
8 franchise business opportunities
- Senior care
- Day care
- Child education and enrichment programs
- Beauty services
- Pet services
- Quick-service restaurants
- Second-hand retail stores
- Home repair and renovation
There are hundreds of different franchise opportunities to choose from. The right one depends on your budget and goals. Start your research with some of the best franchises for 2024:
1. Senior care
As life expectancies increase and birth rates decrease, the IFA expects growing demand for senior services such as in-home care. Because these types of businesses involve visiting clients in their homes, start-up costs can be lower.
For example, the initial investment for a franchisee of Visiting Angels, which provides non-medical in-home care for seniors, is about $125,460 to $171,150. According to Visiting Angels, franchisees’ average annual gross sales are nearly $1 million, with 15% to 18% net profit.
Other options with similar start-up costs include Home Instead, Senior Helpers, and Interim HealthCare, which also provides medical services and has a net worth requirement of $300,000.
2. Day care
The IFA expects growth in child-related services, from day care to education and enrichment activities. For example, The Learning Experience, which provides dayc are and early education services, increased its units by 45.7% from 2020 to 2023. (Current owners also rate it well, with 97% of franchisees likely to recommend it to others.)
To open a Learning Experience, you need a net worth of $350,000 and $150,00 in cash. After an initial franchise fee of $60,000, you can spend anywhere from about $600,000 to more than $5 million in your first year, and must pay a 7% royalty fee and 1% advertising fee for the 15-year term of the agreement.
3. Child education and enrichment programs
You don’t necessarily need to open a pricy brick-and-mortar to get into child services. A mobile swim school was the answer for one of Teri’s clients. The start-up costs are relatively low because instead of building out a facility, you rent pools either at a gym or homeowner association, or through parks and recreation groups.
British Swim School follows this model and grew by 71.2% from 2020 to 2023. Franchise Business Review named it one of the top low-cost franchises in 2023. To get started, you need a net worth of $150,000 and $100,000 in cash.
After the initial franchise fee of $55,000, British Swim School estimates you’ll spend $29,080 on marketing, $9,000 on pool fees and labor, and $17,160 on other business expenses to bring your first-year costs to about $110,000. You’ll also pay an ongoing 10% royalty fee and 2% advertising fee.
4. Beauty services
The IFA predicts specialty beauty services like waxing and eyelash extensions will see continued growth. For example, the number of European Wax Centers in the US increased by 30.1% from 2020 to 2023.
European Wax Center is the largest operator of waxing services in the United States. Opening one requires investing in a physical location. You’ll need a net worth of $1 million, half of which must be liquid. Expect start-up costs of $396,600 to $554,950, making this one of the more expensive franchise opportunities.
Deka Lash, which provides lash extensions, has expanded by 52.9% from 2020 to 2023. Deka Lash has slightly lower start-up costs than European Wax Center ($222,800 to $476,850) and more modest net worth requirements ($100,000 liquid and $500,000 total).
5. Pet services
In 2023, Americans spent $147 billion on pets, and the American Pet Products Association (APPA) predicts the pet industry will continue to grow year after year through 2030. The IFA attributes this boom to a growing pet population and increased per-pet spending. There are many different types of pet businesses, from dog training to mobile pet grooming to retail stores like Pet Supplies Plus.
In 2023, Pet Supplies Plus stores averaged $2.6 million average unit volume annually and Franchise Business Review named the franchise one of the most profitable. Opening a Pet Supplies Plus isn’t cheap. You need a net worth of $600,000 and at least $200,00 liquid assets. After a $49,900 initial franchise fee, you’ll pay an ongoing royalty fee of 3%.
6. Quick-service restaurants
Quick-service restaurants (QSRs) have long been the backbone of the franchise industry. According to the IFA, they’re also growing: In 2023, 21% of new franchise concepts were QSRs, and the IFA predicts there will be 2.2% more QSR franchise units in 2024 than in 2023.
As real estate costs increase, the IFA has seen an increase in the number of QSRs compared with full-service restaurants, which require a larger physical footprint.
If you want to move into the restaurant industry but don’t have the cash to open a brick-and-mortar restaurant, consider opening a food truck. Kona Ice is the largest food truck company in the world and ranked eighth in Entrepreneur magazine’s list of the fastest-growing franchises. Expect start-up costs of $149,995 to $189,300.
The IFA predicts the growth of QSRs with more plant-based and health-focused options. This turned out to be a good fit for one of Teri’s clients, who purchased a QSR with healthy grab-and-go meals. A former pilot, “his passion for health, and making good choices drew him in,” Teri says.
7. Second-hand retail stores
In 2024, the IFA expects consumers to gravitate toward low-cost retail, particularly resale stores, which offer both affordability and sustainability. Clothing reseller Uptown Cheapskate, for example, has increased its number of units by 43.5% since 2020.
Opening an Uptown Cheapskate requires an initial investment of $376,936 to $610,986 and a net worth of $200,000, about half of which should be liquid. Other popular second-hand clothing franchises include teen-focused Plato’s Closet and children’s retailer Once Upon a Child, both owned by Winmark. (Winmark also owns Play It Again Sports, which sells used sporting goods, and Music Go Round, which does the same for instruments.)
Start-up costs and royalty fees are similar for Uptown Cheapskate, Plato’s Closet, and Once Upon a Child, but the two Winmark brands have a higher net worth requirement ($400,000) and slightly lower liquidity requirement ($75,000).
8. Home repair and renovation
The National Association of Realtors predicts existing home sales will be up 13.5% in 2024, which means home services—like fencing, roofing, gutters, flooring, painting, and garage renovations—will be in demand.
Teri considers this sector a staple in the franchising world. “It continues to be strong because people are home, they’re keeping their homes longer, they want to make them better.”
These types of franchises typically do not require a physical location, making them a more affordable option than, say, a quick-service restaurant. Mighty Dog Roofing, named Entrepreneur’s top new and emerging franchise in 2023, has start-up costs of about $200,000 to $300,000 (including the $59,500 initial franchise fee) and requires franchisees to have a net worth of $500,000 ($150,000 of which must be cash).
Budget Blinds has experienced steady growth since 2014. Listed as one of the fastest-growing franchises in 2024 by Entrepreneur, it has a lower net worth requirement ($250,000), and start-up costs range from about $100,000 to $200,000. Instead of charging royalties as a percentage of your business’s earnings, Budget Blinds charges a flat $2,500 monthly royalty fee on top of its $19,950 initial franchise fee.
Franchise business opportunities FAQ
What is the most profitable franchise business?
While individual franchisees’ experiences vary, you can check item 19 of the Franchise Disclosure Document to determine a franchisor’s profitability. According to Franchise Business Review, some of the most profitable franchises with low start-up costs are Visiting Angels, Molly Maid, Wetzel’s Pretzels, and Orkin. Entrepreneur magazine’s list of top franchises of 2024 includes Taco Bell, Jersey Mike’s, Popeyes, and the UPS Store.
Do franchise owners make a lot of money?
According to Franchise Business Review, franchise owners make an average annual salary of $102,910, more than the US average of $63,795. How much money you can make as a franchisee depends on how much you have to invest, which franchise you choose, how many units you open, your location, and more.
Are there drawbacks to owning a franchise?
Owning a franchise requires an initial franchise fee plus ongoing royalties (and often marketing fees) in addition to your business’s operating expenses. As a franchisee, you have less control over which goods or services you sell and how you sell them.
