Well, owning a franchise or starting a new business both have one common goal, “profit.” It is very obvious that when you invest money, you want returns.
Buying a franchise is a great way to take on less risk as an entrepreneur. But, how do you determine the best Franchise that gives you the most profitability?
In this article, we will review some facts related to franchise profitability Statistics, which will help you to invest your money in the right way.
Franchise Profitability: Industry Specific Forecast
- The Personal Services sector franchise industry is growing at a rate of 3.1% and is predicted to see the highest growth.
- Lodging, Full-Service Restaurants, and QSR are also predicted to follow the upward trend based on their current improvement of 1.3%, 2.5%, and 2.1%, respectively.
- Apart from this, it is predicted that the commercial and residential services sector will continue to remain the 2nd fastest growing franchise sector, and the number of establishments is predicted to rise by 2.7%.
After the Pandemic, many states have seen a recovery pattern in their franchise. It is predicted that the southern and western states will continue to recover at the fastest rate.
Let us have a look at the growth rate of the top 10 states and their franchise establishment:
Franchise Establishment growth statistics
In 2021, the total number of franchise establishments hit 774,965, which comes down to a growth rate of 2.8%.
Although franchise establishments were able to recover from Covid in 2021, due to inflation, lack of labor, and changing market conditions, the franchise establishments’ growth might decrease. It is estimated that the growth rate will be lower by at least 2.2%.
FRANCHISE EMPLOYMENT GROWTH
In 2021, the unemployment rate dropped to 3.9%, and there was an increase in the franchise employment rate by 8.8%, with a net gain of 660,300 jobs from the year 2020.
Now, this year in 2023, it is predicted that the franchise employment rate will increase by 3.1%, and the majority of people will be employed in the healthcare, leisure and hospitality, and education sectors.
FRANCHISE OUTPUT GROWTH
- The output from all franchise units grew to $787.7 billion, increasing by 16.3% in 2021, and the franchise output is predicted to grow by 4.9% this year in 2023.
COMMERCIAL & RESIDENTIAL SERVICES
- It is predicted that the Commercial & Residential Services sector will reach 77,708 establishments in the year 2022.
- Apart from this, the employment rate in this sector is expected to rise by 5%, and the output is expected to increase by 5.9%.
- In the real estate sector, the franchise establishment is expected to rise by 2% in the year 2022.
- The employment rate in the real estate sector is expected to grow by 4.3% to 277,500 workers.
- In 2022, the franchise output of real estate is expected to rise by 2.2% to a total of o $61.5 billion.
RETAIL FOOD, PRODUCTS & SERVICES
- In 2022, the franchise establishment is predicted to grow at a rate of 2.1% to 165,955 businesses.
- The rate of employment in this sector is expected to grow by 2.4% to 1.1 million employees.
- The output of the retail, services and products will increase by 2.5% to $130.3 billion.
- It is expected that the personal services sector will see the highest growth in the franchise sector.
- The number of personal services establishments is predicted to rise by 3.1% to 117,600.
- The number of employees in the personal services franchise industry will increase to approximately 552,700 jobs.
- The output of this industry is expected to rise by 10.5% to roughly $39.6 billion.
QSR & FULL-SERVICE RESTAURANTS
- In 2022, the franchise establishment in the QSR sector grew by 2.6% 2021, and now it is expected to grow by 2.1% to 192,426 businesses in 2022.
- The employment rate in the QSR industry is predicted to grow by 2.2% to 3.8 million employees.
- In 2022, the output of the QSR and full-service industry is predicted to grow by 5.8% to $276 billion.
Read: Franchise Statistics, National & Local Business Growth Rates
How Much Does A Franchise Make?
We can’t predict the exact figure of franchise profit because every Franchise has a different business model and strategy.
But according to reports, the average annual pre-tax income of a franchise is $80,000.
In the USA, only 7% of the Franchise make more than $250,000 annually and 51% less than 50,000.
But it is an average statistic, and some franchises can make millions. Profitability depends on the investment and business model of the Franchise.
An investment is always proportional to profit, a higher investment can give us a higher profit, and a lower investment gives us a low profit.
But it is not about investment; Profit also varies on the goodwill and the business model.
Like some companies have goodwill in the market which increases the possibility of profit. If you own a strong brand, there is a possibility to earn more profit.
Highest Profitability Franchise Companies
Here are the top 5 profitability franchise companies in 2022
- McDonald’s Franchise- $ 1 million to $ 2 million
- Dunkin Donuts Franchise – $229,000 to $1.7million
- 7-Eleven Franchise- $38,000 to $1.1 million
- The UPS Store Franchise $178,000 to $403,000
- RE/MAX LLC Franchise- $38,000 to $225,000
Millions of companies offer franchises, but these brands have established their name in the industry.
An established brand may have a more polished plan, a great customer base, and a proven track record of offering to its Franchise.
So instead of choosing a new brand or company, we recommend you always choose a brand. That doesn’t mean a new brand has less possibility of making a high profit.
A new brand also has the possibility of generating high revenue, but the fact is that an established brand has a lower risk than a new brand. So, choose wisely before investing.
Franchise Disclosure Document
Before investing in any franchise, keep an eye on Franchise Disclosure Document. The lack of financial information can create a miserable situation for you.
Whenever you think of investing in any franchise, request an FDD to determine the performance of the Franchise.
It will give you a clear vision of the performance and a framework for starting the work. You will get a better idea of the brand’s potential by looking at an FDD with item 19.
A franchise is quite a great option for those who would like to become a small business owner at low risk, possibly with higher returns.
To determine the profitability, you can research the brand and its annual revenue and, most importantly, check the Franchise Disclosure Document to get an idea of the brand’s potential.
Now we’ve come to the end of this article on franchise profitability statistics, hope that you liked reading this article.
Also Read: Franchise SEO – 4 Ways To Generate More Customers
Frequently Asked Question
Is franchising a good investment?
Yes, Franchising is a good investment. It is quite a great option for those who would like to become a small business owner at low risk, possibly with higher returns.
What is the success rate of Franchise?
As per reports, the Franchise has a 90% of success rate as compared to only about 15% for business that is started from the ground up.
What is the biggest Franchise in the world in 2022?
Taco Bell is the biggest Franchise in the world in 2022.
How much profit does a franchise make?
As per reports, the average income for a franchise owner in the USA is $50,000 to $200,000 annually.
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.