Many of us have considered opening franchises in the past or are actively looking for one to open. Franchising has been around in the United States since the 1850s and there are currently over 1500 franchise-able brands. Approximately 4% of all businesses in the United States are franchises accounting for billions of dollars of sales every year.
There are several advantages to franchising: benefiting from an already successful or tested businesses model, sharing risks with a larger amount of people, technical support for problems, marketing and brand names are already well known, and finally, you are your own boss. These advantages have helped a franchise boom since the 1960s, with the ubiquitous McDonald’s the clear-cut leader in world wide franchises.
2010 presents a unique set of problems for franchises- decline in consumer demand, artificial raising of prices to cut losses, and overall investor fear. Many people are searching for an honest, neutral article on best franchises to open. This list, which shows important statistics for opening a franchise, provides you with non-biased findings that will help you make your decision. We will assign an overall “SmarterSpend investment rating” to each franchise.
The Tidbits: Pinkberry now has 50+ stores in Los Angeles and New York. It has a strong cult following and is considered a healthy desert alternative, with medium sized alternatives around the 200 calorie range. Store designs are trendy and modern, with comfortable seating.
Industry: Frozen Yogurts
Industry Outlook: $35 billion a year in 2009, predicted to increase by another $3 billion (~9%) by 2012.
Financials: $45,000 licensing fee + $600,000 assets ($200,000 liquid needed per store)
Royalties: 2% marketing fee, 6% general revenue fee
Positives: Affordable franchise, trendy stores and management, just received $9 million for second round of investments
Negatives: Relatively new franchise, competition from Yogurtland, SpoonMe, and other similar brands, class action lawsuit for ingredients (not really Yogurt).
SmarterSpend Investment Rating: 7.0 / 10
The Tidbits: Seven-Eleven Japan Co.,Ltd., primarily operating as a franchise. It is the largest chain store with more than 36,842 outlets operating around the world and has surpassed the previous record-holder McDonald’s Corporation in 2007 by approximately 1,000 retail stores. It is found all over the world and is very prominent in Asia. They offer training in local training centers. At the moment, there are almost 7,000 franchises in the United States, and 30,000 worldwide.
Industry: Convenience Stores
Industry Outlook: 20% of all retail sales and 8% overall growth in 2008.
Financials: Net worth requirement: $127,000, with a range of total investments of $100,000 to $700,000, initial franchise fee of $25,000
Royalties: Ongoing Merchandise Gross Profit royalty of 25%
Positives: One of the fastest growing franchises, old and successful history, worldwide corporation, training centers, revenue on profits
Negatives: Most large metropolitan areas are saturated with 7-Eleven’s, Competition from other convenience stores, requires 7-10 employees
SmarterSpend Investment Rating: 9.0/ 10
Hampton Inn/ Hampton Inn & Suites
The Tidbits: The first Hampton Inn opened in Memphis, Tennessee in 1984. Hampton Inn was the first mid-price national hotel chain to begin offering a free continental breakfast and free local phone calls. In 1995, the Hampton brand introduced Hampton Inn & Suites, which consisted of two-room suite hotel rooms with living rooms and kitchen areas. As of March 2009, the chain comprises more than 1,700 hotels. It was acquired by Hilton in 1999.
Industry Outlook: 8.8% drop in hotel occupancy in 2009.
Financials: Total investment: $3,716,000 – $13,148,800, $50,000 franchise fee
Royalties: Ongoing 5% fee
Positives: Top American franchise, one of the fastest growing franchise, International company, Training, Marketing and Ongoing Franchisee Support Available
Negatives: Higher than regular hotel vacancies due to economy, very expensive franchise, long (22) years terms of agreement
SmarterSpend Investment Rating: 7.5 / 10
The Tidbits: Subway was founded in 1965 and began franchising in 1975. Offering a fresh, healthy alternative to fast-food restaurants, Subway has franchises throughout the United States and in several countries, with locations in traditional and nontraditional sites alike. There are currently over 22,000 franchises in the United States and 8,000 around the world. It was rated by Entrepreneur as the best franchise to open for 14 straight years, before it was beaten by 7-11 in 2008.
Industry: Food (Sandwiches)
Industry Outlook: Increasing revenue and profits; Subway hopes to open 2,000 more stores by 2014.
Financials: Total investment: $84,300 – $258,300, $15,000 franchise fee
Royalties: Ongoing 8% fee
Positives: Rapid expansion plans, increasing market, good media coverage, 65% of all franchisees own more than one Subway, affordable products
Negatives: Saturated in larger cities, long term of agreement
SmarterSpend Investment Rating: 9.5 / 10
H & R Block
The Tidbits: H & R Block is a tax preparation company in the United States, claiming more than 22 million customers worldwide, with offices in Canada, Australia and the United Kingdom. The Kansas City-based company also offers banking, personal finance and business consulting services. They have over 22 million customers and a large number of new franchises opening.
Industry: Tax Preparation
Industry Outlook: Increasing revenue, but decreasing net income ( lost 300 million in 2008).
Financials: Total investment: $84,300 – $258,300, No Initial Fee, No additional costs for advertising
Positives: Very low franchise costs, old brand with lots of clients, lots of company owned stores
Negatives: Competitive industry, net income loss in 2008, lots of stores currently being sold
SmarterSpend Investment Rating: 8.5 / 10
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