10 Most Profitable Franchises To Buy in 2023
In this article, we take a look at the 10 most profitable franchises to buy in 2023. You can skip our detailed analysis of franchises and the current franchise industry prospects, and see the top 5 entries in this list by clicking the 5 Most Profitable Franchises To Buy in 2023.
When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product and brand name. A franchise is a joint venture between a franchisor and a franchisee, with the franchisor being the original business that sells the right to use its name and idea, while the franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark. This practice is common in a variety of segments across the global economy and encompasses some of the most well-known companies in the world.
The franchise industry is skyrocketing and achieving incredible growth in terms of business, with the economic output of franchise establishments in the United States reaching about $790 billion in 2021. According to the International Franchise Association's (IFA) 2023 Economic Report, the overall number of franchise establishments is expected to increase by almost 15,000 units, or 1.9%, to 805,000 units which will in turn, add approximately 254,000 jobs in 2023. Growing at 3.0%, total franchise employment is forecasted to reach 8.7 million. Additionally, the report states that franchises’ GDP is anticipated to grow at a pace of 4.2% to $521.3 billion. Given these factors, it is anticipated that the growth in employment will be driven mostly by business services, personal services, and quick-service restaurants. In 2023, business services are projected to contribute a growth rate of 5.2% to the overall labor force, while personal services are expected to add 4.7%. As a consequence, some franchises tend to push ahead of their competitors as they exhibit growth that would place them as the fastest-growing franchises in the world.
On the other hand, qualified labor availability and workforce costs continue to pose the most significant challenge for nearly all franchised businesses. The latest labor survey conducted by IFA/FRANdata in 2023 reveals that 81% of franchised brands faced growth limitations attributed to labor-related issues, which is consistent with the challenges observed in 2022.
The franchise industry is dominated by fast food or quick-service restaurants. According to Polaris Market Research, the booming quick service restaurant (QSR) industry was valued at $173.72 billion in 2021 and is expected to grow at a CAGR of 4.9% during the forecast period. While 2022 was a challenging year for QSRs due to supply constraints, labor shortages, and high inflation rates, personal services and QSRs are expected to lead the growth in franchised units in 2023, expanding by 2.5% year-over-year despite a decline in consumer spending, due to the strong demand for food deliveries. Major players in the QSR industry, include big household names such as McDonald’s Corporation (NYSE:MCD), Burger King Worldwide Inc (NYSE:BKW), and The Wendy's Company (NASDAQ:WEN).
While franchises seem to be a lucrative source of income, they come at a high price as there usually an initial investment that is required in order to open the business. In order to become a franchise owner, each business establishes its own set of conditions, which typically include an initial franchise fee, a minimum net worth requirement, and a minimum liquid assets requirement. Moreover, each company imposes a basic and advertising royalty fee, the specific amounts of which may differ between companies. As an example, McDonald's Corporation (NYSE:MCD), franchisee applicants must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee. Those looking to launch a new McDonald's franchise can expect to shell out between $1,314,500 and $2,306,500. Similarly, prospective Ace Hardware franchise owners must have roughly $250,000 in liquid capital, with a minimum net worth of at least $400,000. Other than the initial investment, there are annual licensing fee, and royalty that are paid by the franchisee over the tenure of the business. Most franchise businesses typically provide easily accessible online applications for people interested in applying for a franchise. Additionally, these businesses generally offer a rough estimation of the initial investment necessary to establish and operate the franchise.
There are many advantages, and drawbacks, that come with investing in a franchise. The most profitable franchises include a ready-made business formula to follow since a franchise usually comes with market-tested products and services, and in many cases established brand recognition. Consumers prefer a proven quality product over new brands. In that same vein, it is expected that the same quality products are offered by brands all over the world irrespective of the region. On the other hand, franchises, by definition, have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or revenue. This percentage can range between 4.6% and 12.5%, depending on the industry. Additionally, franchisees may have limited autonomy in running their business, as they must adhere to the franchisor's established system and standards.
In the United States, there is a vast array of businesses that provide franchising opportunities to aspiring entrepreneurs and investors. Our list of the 20 Most Profitable Franchises in the World highlights some of the notable contenders, such as RE/MAX Holdings, Inc. (NYSE:RMAX), Marriott International, Inc. (NASDAQ:MAR), McDonald's Corporation (NYSE:MCD), and various subsidiaries of Yum! Brands, Inc. (NYSE:YUM).
Ken Wolter / Shutterstock.com
Our Methodology
In order to compile the list for the most 10 profitable franchises to buy in 2023, we have taken the rankings from the report published by Franchise Direct which used Franchise Disclosure Documents and press releases to rank the companies based on parameters like sales revenue, number of locations, location growth, age, franchising tenure, and corporate citizenship. Furthermore, we have mentioned annual sales and initial franchise costs of all the companies in order to provide additional data to our readers. For private entities on our list, we’ve estimated their annual global sales and franchise costs based on multiple sources, including Franchise Times and ZoomInfo, among others.
10. Express Employments Professionals
Category: Employment & Staffing Franchises
Number of Franchises: 860
Annual Sales: $4.16 billion
Estimated Initial Franchise Cost: $100,000 - $400,000
Express Employment Professionals is a leading staffing provider in the U.S., Canada, South Africa, Australia, and New Zealand that was established in 1983 with its headquarters based in Oklahoma City. Two years later, in 1985, the company embarked on a franchising endeavor aimed at providing staffing support and human resource services. This expansion involved the establishment of a network of franchise office owners who work closely with clients to understand their specific staffing requirements and provide tailored solutions. Proving to be one of the most profitable franchises to buy in 2023, the staffing agency set new milestones this past year with an 8% increase in sales to $4.46 billion and employing 579,000 associates in 860 franchise locations across the globe.
9. RE/MAX Holdings, Inc. (NYSE:RMAX)
Category: Real Estate Franchises
Number of Franchises: 9,175
Annual Sales: $16.13 billion
Initial Franchise Cost: $43,000 - $239,500
RE/MAX, LLC, short for Real Estate Maximums, is a franchisor based in Denver, Colorado that operates a widespread network of real estate brokerage offices across the United States, Canada, and other global locations. With more than 140,000 agents in more than 9,100 offices and a presence in more than 110 countries and territories, it is one of the most profitable franchises to buy in 2023. Its parent company, RE/MAX Holdings, Inc. (NYSE:RMAX), achieved a revenue of $85.4 million in the first quarter of 2023. The company offers a quarterly dividend of $0.23 per share and has an annual dividend yield of 4.81%.
8. Matco Tools
Category: Automotive Repair Franchises
Number of Franchises: 1,937
Estimated Annual Sales: $775 million
Initial Franchise Cost: $77,236 - $313,646
Founded in 1946 and established as a direct seller in 1979, Matco Tools is an American professional tool distribution franchise for several industries, including automotive, and is based in Stow, Ohio, United States. A subsidiary of Vontier Corporation (NYSE:VNT), a transportation and mobility focused company spun out of Fortive Corporation in early 2020, the franchise deals in over 13,000 different tools such as wrenches, screw drivers, gauges, and specialty tools. In addition to its distribution through franchisees, Matco Tools extends its sales reach to central purchasing operations and institutional customers through its dedicated industrial sales representatives. The franchise marked an estimated $775 million in global sales in 2022, with sales growth reaching 10.7% that same year.
7. Pirtek
Category: Maintenance Services Franchises
Number of Franchises: 590
Annual Sales: $595 million
Initial Franchise Cost: $249,400 - $899,300
Pirtek is a global brand specialising in Hydraulic & Industrial hose. It was founded in Australia in 1980 by Peter Duncan, expanding into the United Kingdom in 1988 and the United States in 1996. It operates its business using a franchise model that provides hydraulic and industrial hose maintenance and replacement services. The business boasts 400+ Service & Supply Centers and a fleet of Mobile Service Vehicles in 23 countries where franchisees sell and service hydraulic hoses and related parts and equipment. The automotive services franchise raked in $595 million in sales this past year, making it one of the most profitable franchises to buy in 2023.
6. Snap-on Incorporated (NYSE:SNA)
Category: Automotive Franchises
Number of Franchises: 4,775
Annual Sales: $2.05 billion
Initial Franchise Cost: $201,433 - $465,436
Snap-on Incorporated (NYSE:SNA) is an American designer, manufacturer and marketer of high-end tools and equipment for professional use in the transportation industry including the automotive, heavy duty, equipment, marine, aviation, and railroad industries. With more than 65,000 SKUs in their product line, operating in more than 130 countries and employing approximately 12,600 people worldwide, Snap-on Incorporated (NYSE:SNA) is one of the most profitable franchises to buy in 2023. As of 2021, Snap-on Incorporated (NYSE:SNA)'s annual net sales amounted to $4.25 billion.
Recently, Snap-on Incorporated (NYSE:SNA) declared a quarterly dividend of $1.62 per share, the same as the previous quarter. The company's annual dividend yield currently holds at 2.41%.
Click to continue reading and see 5 Most Profitable Franchises T0 Buy in 2023.
Suggested articles:
Disclosure: None. 10 Most Profitable Franchises To Buy in 2023 is originally published on Insider Monkey.
