2015 Guide to Today's Top Franchises

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SPECIAL REPORT: Top Franchises Left: Tom Bunchman, CEO and Founder of JumpBunch, entertaining several important clients. Right: Air Force veterans, Kevin and Julie McAdoo, own an Office Pride franchise in Tampa. working less than 40 hours per week. That said, newer franchise owners—those in business for two years or less—report working longer hours on average. Be prepared to put in some extra time, especially those first few years, to get your new business off the ground. If you must have all your nights and weekends free, franchising probably isn’t for you. Of the franchisees we surveyed, 52% reported working evenings at least a couple of times per week, with 24% saying they “almost always” work evenings. Almost three quarters of franchisees (74%) said they work weekends at least a couple of times per month, with 35% “almost always” working weekends. The silver lining when it comes to owning a franchise is that 68% of franchisees said the hours they work are “flexible” or “very flexible” and 59% said their work/life balance was either “balanced” or “very balanced.” WILL YOU MAKE ENOUGH MONEY? “How much money will I make?” is the question that people want the answer to most when they start exploring franchise opportunities. It is a logical question to ask, but often a very difficult one to answer. There are many factors that play a role in estimating the potential revenues and profits of any business and ultimately what your “take-home” income might be. One of the biggest mistakes we see new franchise business owners make is equating business profits with personal income, which leads them to enter into franchising with unrealistically high financial expectations. In most cases, a franchisee’s personal income is significantly lower than the profits that their business generates. This is due to a variety of things including taxes, loan payments and required business reinvestment—all of which gets paid out of a business’s profits. Understanding how cash flows through a franchise is critical. In fact, it is such an important topic that we created a threehour online course entitled “How Much Money Can I Make?”, which is available as part of our Franchise Buyer’s Toolkit at www.FranchiseBusinessReview.com/toolkit. When we crunched the data for the 28,500 franchisees we surveyed, we found that their average annual pre-tax income was $80,000. We, however, know that average numbers can be misleading since they can be artificially inflated by a few top performers. When we looked at the median income for the same group of franchisees, it was actually under $50,000 per year. The bottom line is that many franchisees who do not do their homework in order to have realistic financial expectations earn less money than they had originally planned to. The good news is that the top 200 franchises listed in this report significantly outperform their competitors when it comes to meeting the financial expectations of their franchisees. On average, we found that franchisee incomes in these top brands are 15%–20% higher than other brands. In addition, in terms of your “upside,” the frequency of franchisees earning $250,000 or more was also 20% higher among our top 200 franchises. It is difficult to generalize how much you will earn since there are often significant differences between concepts and other factors such as location and the economy come into play. If the FDD of the franchise you are considering has an Item 19, Financial Performance Representations, you will be able to obtain insight regarding revenue. It is important to note that the data typically represents total franchise sales, not profitability. To determine profitability, the cost of labor, rent, supplies, insurance, royalties, ad fees and other business expenses must be deducted from the sales figure. ARE YOU AN IDEAL FRANCHISEE? According to Bisio, the most successful franchisees are disciplined, financially stable, confident, natural leaders and enjoy learning. In addition, they have a sense of personal responsibility, a clear vision of what they want out of life, and a supportive network of friends or family. You may think you will be a fantastic franchisee, but will the franchise system you wish to join agree? The majority of franchisors we interviewed said that business experience has replaced passion when it comes to what they look for most in a potential franchisee. 20 | For more information on this report, visit: www.FranchiseBusinessReview.com
SPECIAL REPORT: Top Franchises “We look for franchisees with proven business acumen who wish to be owner-managers, not owner-operators. Front-line staff who have passion can be hired,” says Carpenter of Wild Birds Unlimited. While in the minority, some franchises still place a premium on passion, particularly those that offer services which involve extensive personal interaction with customers. “We look for people who are passionate about serving kids and schools, not just about business,” says Scott Donnell, President of Apex Fun Run. Since top performing franchisees generate higher royalties, many franchisors have potential franchisee candidates take a personality profile, which measures personality traits that relate to work performance. “We had our top performing team members take a personality test and then pulled their common traits to create a profile of our ideal franchisee candidate”, says Mattingly of Welcomemat Services. “We compare the test results of potential franchisees to our ideal candidate profile.” What does a personality profiling test mean for you? It may help you find the right franchise fit. Additionally, if a franchise company using a personality profile is more successful at selecting top performing franchisees, it will help its brand remain strong, as well as protect your investment as a franchisee. THE BIG DAY You’ll probably spend several months engaging in franchise research and discovery before reaching a decision. The 200 companies in this report provide you with a great starting point by highlighting franchise opportunities deemed the best-of-the-best by the franchisees who own them. Whatever franchise opportunities you decide to investigate, be sure to ask questions and to be candid about yourself, your goals and your expectations during the process. The exciting day will eventually come when you will be asked by your chosen franchise system to say yes or no regarding whether or not you will join. If you’ve selected an opportunity that your research has shown is an ideal fit for you personally and your budget, your chances of succeeding are high. For more information about researching franchises, or more specific details about the top franchise opportunities featured in this report, please visit us online at www. FranchiseBusinessReview.com. Franchising Then and Now (2005 vs Today) Then Now Total Economic Output of Franchising $648 billion* $841 billion* Jobs in Franchising 7.8 million* 8.5 million* Number of franchisees surveyed by FBR 1,967 26,917 Total number of franchises researched by FBR 59 820 Biggest Franchise company McDonald’s $53 Billion sales (30,771 units)** McDonald’s $89 Billion sales (35,429 units)** Highest in Franchisee Satisfaction Heaven’s Best Carpet Cleaning Sotheby’s International Realty Hottest and Most Trendy eBay/auction stores dinner prep / take-away mobile pet grooming frozen yogurt gourmet pizza & burgers mosquito control Biggest Fall From Grace Blockbuster Video Quiznos Steady growth and high margins senior care personal / business services real estate senior care personal / business services real estate (again) Popular franchise sales lingo “Recession-Proof” “Recession-Resistant” Top 3 praises by Franchisees Top 3 gripes by Franchisees Honesty & Integrity of the Brand Respect for the Brand Quality of the products/services Marketing Financial Performance Training & Support Respect for the Brand Honesty & Integrity of the Brand Support of Fellow Franchisees Marketing Communications Financial Performance Franchisees that have owned their business for 6+ years 24% 50% Aging of Franchisees… Median Age of a Franchisee 46 50 Positive Work-Life Balance of Franchisees 51% 58% *Source: International Franchise Association **Source: Franchise Times For more information on this report, visit: www.FranchiseBusinessReview.com | 21
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2015 Guide to Today's Top Franchises

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