How to Choose the Right Location for Your Business - UpFlip (2024)

For many budding business owners, buying a franchise is a no-brainer. That’s because the best franchises to buy have high profit margins and low failure rates.

Entering a franchise agreement helps your business get to financial stability quicker. For instance, Hilton Hotel franchises benefit from a loyal customer base, a recognizable brand, and a proven business model that helps you skip the shaky time when most new businesses fail. Multiple hotels under the Hilton name have less than a 1% failure rate.

Sure, you’ll have high initial investments and have to pay ongoing fees. But that is a small price to pay given that the most successful franchises are 63.3% more likely to succeed than the average small business during a three-year period.

[su_note note_color="#dbeafc"]We’ll discuss the most profitable franchise opportunities to help you choose one. Click on any of the links to jump straight to one of the best franchises to own, or read on.

• Are franchises profitable?
• What is the most profitable franchise to own?
• What are the most profitable franchises to own?
• Factors that impact franchise owners’ success
• How to measure franchise profitability
• Are you ready to become a franchise owner?[/su_note]

Are franchises profitable?

Yes, franchises can be profitable. According to Sculpture Hospitality, franchisees can expect to have 4% to 12% profit margins within a few years of opening a new franchise.

Profitability will depend on the franchise, investment costs, location, and managerial experience of the franchisee.

Yes, franchises can be more successful than other small businesses

Earlier, we told you the most successful franchises are 66.3% more likely to succeed than the average small business. Here’s how we figured that:

• Franchise failure rate over 3 years (top 100): Under 2%
• Small business failure rate over 3 years: 40%

That means 98% of the top 100 franchises survive a three-year period, compared to 60% of businesses overall. Do a little more math (98% divided by 60%), and you’ll find that a top-100 franchise has a 63.3% higher probability of surviving three years.

What is the most profitable franchise to own?

The most profitable franchise to own is Express Employment Professionals, a staffing agency. We’ll dive further into Express Employment Professionals, how we arrived at this conclusion, and the rest of the most profitable franchises below.

What are the most profitable franchises to own?

The most profitable franchises as measured by the time it takes to make the initial investment back are:

1. Express Employment Professionals
2. RE/MAX
3. Wendy's
4. Chick-Fil-A
5. Ace Hardware
6. UPS Store
7. Matco Tools
8. McDonald's
9. PIRTEK
10. Snap-on

Author’s Note: Our Methodology

We spent a lot of time debating the best way to establish the most profitable franchises.

The absolute best way to establish the most profitable franchise businesses is to review Franchise Disclosure Documents and establish the profit margins for over 2,000 franchises. Unfortunately, that requires a ton of labor (or an amazing web crawler), so we went with the next best viable option.

We found an Insider Monkey report that ranked the top 10 most profitable franchises. It provides annual sales numbers and maximum initial costs. We took that information and went a couple of steps further.

We divided the average annual sales by the number of franchises to find the annual revenue per franchise. This allowed us to determine the average monthly revenue per franchise. Then we divided the high end of the estimated franchise cost by the average monthly revenue to find the “time to return,” or time to recoup the initial franchise cost.

It’s not as precise a method as we would like for the most profitable franchises, but it gives you a good idea of the franchises that will pay for themselves quickly.

#1. Express Employment Professionals

• Number of Franchises: 860
• Average Monthly Revenue: $4,837,209
• Maximum Initial Cost: $400,000
• Time to Return: Less than 1 month

Though Express Employment Professionals is one of the lesser-known names on the list, this staffing agency has been in business for over 40 years.

Once fully operational, the average franchise could cover its initial costs within the first month. That’s hard—nay, impossible—to beat.

#2. RE/MAX

• Number of Franchises: 9,175
• Average Monthly Revenue: $1,758,038
• Maximum Initial Cost: $239,500
• Time to Return: Less than 2 months

RE/MAX is the only real estate franchise on this list. This is one of the best franchises in the real estate market, with each RE/MAX real estate agent averaging 13.3 transactions per year.

#3. Wendy's

• Number of Franchises: 6,949
• Average Monthly Revenue: $1,798,820
• Maximum Initial Cost: $698,500
• Time to Return: Less than 5 months

Wendy’s franchises have the shortest time to return of any fast food industry franchise on the list. The brand recognition will help drive net profits, and many franchisees own multiple stores.

#4. Chick-Fil-A

• Number of Franchises: 2,928
• Average Monthly Revenue: $5,836,749
• Maximum Initial Cost: $2,803,435
• Time to Return: Less than 6 months

Chick-Fil-As are some of the best franchises to own because they bring in massive revenue. With less than six months from opening to reach profitability, most franchises will be highly successful.

They are closed on Sundays and require Christian values, which may exclude some people looking to buy a franchise.

#5. Ace Hardware

• Number of Franchises: 5,555
• Average Monthly Revenue: $4,028,803
• Maximum Initial Cost: $1,913,000
• Time to Return: Less than 6 months

Ace Hardware is another one of the best franchises to own. With 5,555 stores and average sales of $4 million per year, it can take six months for this franchise to recoup its initial investment.

#6. UPS Store

• Number of Franchises: 5,465
• Average Monthly Revenue: $631,290
• Maximum Initial Cost: $476,993
• Time to Return: Less than 10 months

The UPS Store is one of the best franchises to open. It consistently ranks in the Entrepreneur Top 10 franchises list, and the average revenue indicates that the franchise requires about 10 months to earn back the initial investment.

#7. Matco Tools

• Number of Franchises: 1,937
• Average Monthly Revenue: $400,103
• Maximum Initial Cost: $313,646
• Time to Return: Less than 10 months

Matco Tools is a mobile automotive tool franchise. It is the best franchise to open that doesn’t require a building. Matco Tools franchisees and deliver tools straight to mechanics. It’s easy work, low cost, and doesn’t ask for royalties, which makes it one of the most popular franchises to start.

#8. McDonald's

• Number of Franchises: 40,000
• Average Monthly Revenue: $2,812,500
• Maximum Initial Cost: $2,503,000
• Time to Return: Less than 11 months

People commonly think McDonald’s is the best franchise to buy. It does have high profit margins and an established brand, but there is a hefty initial investment and a lot of competition.

#9. PIRTEK

• Number of Franchises: 590
• Average Monthly Revenue: $1,008,475
• Maximum Initial Cost: $899,300
• Time to Return: Less than 11 months

PIRTEK focuses on hoses for hydraulic machines. If you’re looking for entrepreneurial endeavors that focus on industrial applications and offer financial stability, PIRTEK might be for you.

#10. Snap-on

• Number of Franchises: 4,775
• Average Monthly Revenue: $429,319
• Maximum Initial Cost: $465,436
• Time to Return: Less than 14 months

Snap-on is another of the most profitable franchises that sells tools, but the retailer focuses on more than just automotive tools. Both the revenue and the minimum initial costs are higher than Matco, but the time to return might be slightly longer because of the higher initial costs.

UpFlip Top Franchise Opportunities

The following franchise ideas are some of the franchises we have interviewed. These make our best franchise opportunity list because they have low start-up costs, good business processes, and great owners who believe in helping franchisees succeed.

#11. MaidThis

This home and Airbnb cleaning franchise lands on the list of most profitable franchises instead because its extensive business support and remote business model provide many financial benefits.

You focus on business processes and pay others to clean the properties.

Franchise units require a $35K franchise fee and between $48K to $67K total startup costs.

The average location makes $10K per month in revenue. Assuming you make 30% profit, you’ll make back your money in less than two years.

Competing with other franchisees will not limit your financial success because most locations do not have a franchise. When you want to expand your business model, you can expand to other cities quickly.

Learn more about how to start a remote cleaning business from Neel below.

Like Neel's strategy?

Find out how to start a MaidThis franchise.

#12. Brown’s Pressure Washing

Brown's Pressure Washing just launched a franchise opportunity developed by founder Joshua Brown and UpFlip that enables you to launch a fully equipped pressure washing business seamlessly. The licensing fee gives franchisees access to video courses, a website, a boot camp, contracts, a territory, systems manuals, brand licenses, and a 24/7 online support community. Franchisees also agree to pay a 10% royalty fee to cover weekly coaching and administrative support.

• Licensing Fee: $20,000
• Total Investment: $50,000-$100,000
• Royalty Fee: 10%
• Space Needed: 100-2,000 square feet
• Employees: Hire employees or subcontractors to do the cleaning
• Territories: You can buy more than one territory if they are available in your area
• Franchising Funding Assistance: Yes, through third-party financing services

Find out how Joshua Brown started Brown's Pressure Washing below.

Want to use Josh's recipe? Become a Brown's franchise.

#13. Wise Coatings

A Wise Coatings franchise coats garage floors and other surfaces with a material similar to epoxy.

You’ll need an initial franchise fee of $50K and a total initial investment of $114K-$134K to become a Wise Coatings franchise owner.

The franchises make between $400K and $500K in revenue and 15%-20% profit margins. The average Wise Coatings franchise recoups its initial costs in two to three years.

• Franchise Fee: $50K
• Total Investment: $117K-$160K (including 3 months working capital)
• Space Needed: 100-2,000 square feet
• Number of Employees: 2-4 (suggested)
• Territories: Discounts for buying more than one
• Franchising Funding Assistance: Provided through Benetrends. Learn how to qualify.

Check out our interview with Brandon Vaughn, who runs a successful epoxy flooring business, below.

#14. Spray-Net

Spray-Net holds patents in a unique painting process that was innovated by Carmelo Marsala after he found a way to modernize the house painting industry. The company has 40 franchisees (and counting) and owns patents that mean only those who buy in and learn the process can offer it to their customers.

• Franchise Fee: $45,000
• Total Investment: $170,825-$241,825
• Royalty Fee: 8%
• Space Needed: 100-2,000 square feet
• Employees: Hire employees or subcontractors to do the cleaning
• Territories: You can buy more than one territory if they are available in your area
• Franchising Funding Assistance: Yes, through third-party financing services

See how you can start a Spray-Net painting franchise in this video:

#15. EverLine

John Evans started EverLine with $500 and a unique vision for parking lot maintenance. Twelve years later, the multimillion-dollar company has franchises all over North America that help keep other businesses’ parking lots safe and looking sharp.

• Franchise Fee: $49,500
• Total Investment: $164,744-$332,443
• Royalty Fee: 9% or $500 per territory+ 3%—whichever is greater
• Space Needed: 100-2,000 square feet
• Employees: Hire employees to provide the services
• Territories: You can buy more than one territory if they are available in your area
• Franchising Funding Assistance: Yes, through third-party financing services

Learn more about EverLine in our in-depth interview with its founder here:

Other Commonly Mentioned Franchises

There are plenty of other franchises that provide profitable opportunities. Some commonly mentioned options include:

• Anytime Fitness
• Dream Vacations

Anytime Fitness

Anytime Fitness earns monthly membership fees from people who want a workout. The company has 2,349 franchises and claims a 16.9% profit margin.

Dream Vacations

Dream Vacations franchises require very little upfront costs. You can get a franchise for a few thousand dollars and then you make a commission on each travel arrangement you help someone book.

Factors that impact franchise owners’ success

Factors that impact a franchise’s profitability include:

• Costs of goods or services: A franchise, like most small businesses, may spend up to 60% of revenue providing the primary products and services of the business.
• Franchisee satisfaction: A franchisee who is happy with the franchise business is more likely to be successful than one who is disgruntled with the franchisor. Prospective franchisees should talk to other franchisees to see if they are satisfied with their franchise units.
• Sales, general, and administrative (SG&A) costs: According to NYU Stern, SG&A costs are 14.4% of business spending, but the exact amount varies by sector. When SG&A is too high, the business is inefficient; when it is too low, the company may not make as much as the franchisee would like.
• Industry trends: Technology is evolving, and how a company responds to industry trends can make or break it.
• Rent: Owning a franchise will be much more profitable if the company can be a home business. You won’t have additional rent and utilities to pay. Read our resource on how to start a home-based business for more.
• Revenue: A franchise opportunity that has higher average gross sales tends to do better than one with lower gross sales.
• Royalties: Most franchisors collect royalties, which may be either a percentage of sales or a fixed rate each month. These royalties will eat into your profits. Be wary if they are substantially higher than your industry’s SG&A costs.

How to measure franchise profitability

There are a variety of ways to measure a franchise’s profitability. We’ll discuss how to measure a franchise’s profitability using:

• Net operating income (NOI)
• Franchise fee
• Initial investment
• Return on investment (ROI)
• Cash-flow
• Break-even analysis

Let’s look at how each of these helps prospective franchise owners judge the most profitable franchise opportunities.

Net Operating Income

The best metric to measure a franchise’s profits is the NOI. This measure of profitability excludes taxes, financing costs, earnings from investment activities, and depreciation to show how much money the business is making.

Franchise Fee

Every franchisor charges a franchise fee for the right to use their business name, business model, and intellectual property. Depending on the opportunity, expect to pay initial franchise fees between $1,000 and a million dollars.

Your franchise won’t be truly profitable until you have taken home at least this much from the franchise opportunity.

Initial Investment

In addition to an initial franchise fee, you’ll want to know the total initial investment to start owning a franchise. Franchise opportunities may require up to $5 million initial investment, but most are between $10K and $100K.

Until you make the initial investment back, you haven’t really made a profit.

Return on Investment

Another way to measure the most profitable franchises is by comparing the ROI. To measure this, you’ll use the net operating income divided by the total investment.

You can measure your ROI on both an annual basis and a lifetime basis.

Cash Flow

Cash flow is the amount of money going in and out of the business each month. A negative number means cash is flowing out of the business and you’ll need to reinvest or cut your losses, while a positive number means you are bringing more in than your expenses.

You can divide the initial investment by the cash flow to see how long it will take to get the investment back.

Break-Even Analysis

The break-even point considers the initial investment plus fixed and variable expenses and compares them to revenue. To break even, your investment and expenses equal your revenue—and thus, you’re not losing money. Check out our article on performing a break-even analysis.

Are you ready to become a franchise owner?

Buying any of the most profitable franchises is a great way to start your entrepreneurial journey. While buying a franchise location might cost more than starting your own business on the front end, they are more likely to succeed long term.

Which of these successful businesses are you considering purchasing?