Insider Monkey

20 Most Profitable Franchises in the World

Saad Raza
10 min read

In This Article:

In this article, we take a look at the 20 most profitable franchises in the world. You can skip this part and see the top 5 entries in this list by clicking 5 Most Profitable Franchises in the World.

Franchises are all around us. From your early morning coffee to late-night fast food indulgences, most of the money you spend go to the companies operating through the franchise model. For starters, a franchise is a business in which an individual uses rights to use the brand name, services, products, and logo to operate at different locations in return for some conditions and an annual license fee. A franchiser is a company that sells the rights of the brands to the individual known as the franchisee.

Franchises are one of the many ways businesses expand into new regions and international markets. By licensing to local individuals, franchisers take advantage by integrating their business principles and practices with local history, culture, religion, and customs. On the other hand, entrepreneurs take advantage of brand’s reputation and loyalty by becoming a franchisee. It has been reported that consumers prefer a proven and standard quality product over new brands. On the same lines, consumers expect that the same quality products are offered by brands all over the world irrespective of the region. Hence the correct transfer of knowledge and business knowledge is necessary for the franchiser.

Franchises seem to be a lucrative source of income, but they come at a high price. Usually, there is an initial investment that is required in order to open the business. This includes franchise fees and other set-up costs. This can range from $24,000 in the case of Century 21 Real Estate to $118 million in the case of Marriott Hotel. Other than the initial investment, there are annual licensing fee, and royalty that are paid by the franchisee over the tenure of the business.

The franchise industry is dominated by fast food or quick-service restaurants. The booming quick service restaurant (QSR) industry in the United States generated a revenue of $255.8 billion in 2020. Major players in the QSR industry include big household names such as McDonald’s Corp. (NYSE: MCD), Burger King Worldwide Inc (NYSE: BKW), and brands of Yum! Brands Inc. (NYSE: YUM) such as KFC, Pizza Hut, and Taco Bell.

The measurement of profitability of a franchise is an important aspect when venturing into a franchise business. But the profitability cannot be calculated as an exact science. The success of a franchise can not be solely determined from the sales or revenue it generate. The profitability needs to include many factors like the growth in the number of franchises of the brand, the success of franchises (measured through number of franchises being operational after a year), and the company's financial statements. Moreover, brand recognition is also a major factor. This is the reason why Chick-fil-A makes more than Dunkin' in sales but does not have the same brand recognition outside of the US as Dunkin' does.

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