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The Most Profitable Franchises Are…

While one might expect that large investment franchises (restaurants, big box retailers) have the highest (gross) profitability it is not necessarily so.

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To learn more about top-performing franchises, see the list of AllBusiness AllStar Franchises.


Q: What type of franchises are currently the most profitable?

 

A: This is a fairly common question, but I doubt that anyone truly has an exact answer. Here are two of the reasons I feel this way.

 

First, it should be noted that only about 25 percent of franchisors publish an "earnings claim" in their disclosure documents (currently called the UFOC – Uniform Franchise Offering Circular, but soon to be called FDD – Franchise Disclosure Document). Now, it is anyone’s guess as to why so few offer information on the profitability of their brand, but my guess is that those who don’t publish at least some indication of sales or profitability are not terribly proud of their performance. With that said, any given franchise system will have its superstars, but on average, the numbers may not be too enticing in the other 75% of franchise systems.

 

Second, while one might expect that large investment franchises (restaurants, big box retailers) have the highest (gross) profitability it is not necessarily so. A large investment in any given single franchised unit does not necessarily translate to proportionately large return. Being larger in the franchise world does not necessarily equate to better or safer.

 

Now, if pushed into a corner and forced to "guess" which franchisees do the very best in terms of income, I would bet on the multi-unit owners of top tier food chains. Multiplying any decent profit by 20 or 50 locations is hard to beat. 

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