- Owning a franchise is a popular way to start a small business with built-in support, including operations manuals, marketing materials, and brand recognition.
- If you’re looking to start a new business in 2023, a franchise might be a good option.
- Learn more about the most popular and most profitable franchise opportunities for 2023 in this article from Nav’s experts.
What Businesses Will Thrive in 2023?
While no one has a crystal ball to see into the future, there are some educated guesses we can make about what sorts of businesses will probably do well in 2023. Based on historical trends, you can expect the following six popular franchises to thrive:
- Fast food and restaurants — The top franchises in the U.S. are consistently fast food services, so it’s a good bet that they’ll continue to be some of the best franchise brands to invest in. Even before the COVID-19 pandemic, fast food and fast casual restaurants have done well, especially as franchises. Americans can be very loyal to their favorite fast food chains, and franchises provide consistency and give the customer what they expect.
- Convenience stores — Whether they’re on the corner in an urban neighborhood or attached to a rural gas station, convenience stores are very popular franchise opportunities across the U.S.
- Fitness and wellness chains — In the past few years, gyms and other fitness service providers have become some of the top franchises in the U.S. Crossfit, high intensity interval training, yoga, and pilates are all extremely popular.
- Hair salons and beauty services providers — Franchises that provide beauty services like haircuts, hair styling, nail services, waxing, and similar services tend to do well.
- Cleaning and janitorial services — With offices opening back up, people are looking for help keeping spaces clean. Cleaning services are also in high demand for personal homes, rental properties, and hotels.
- Real estate services and property management — While the market may be cooling off in some places, residential real estate is still going strong in many places, and 2023 should continue the trend. Property management companies are also growing, as buyers need help to manage real estate that’s being used as rental property or short-term rentals.
If you’re a small business owner looking to convert into a franchise in 2023, these are some good ideas of industries that will probably do well.
What Was the Most Profitable Franchise to Own in 2022?
According to FranchiseCoach.net, these were the top 10 most profitable franchises of 2022:
2. Dunkin Donuts
3. Taco Bell
5. Anytime Fitness
6. Sonic Drive-In
7. Planet Fitness
8. Orangetheory Fitness
9. Jan-Pro Cleaning and Disinfecting
These 10 franchises fall in line with trends, representing fast food, fitness and wellness, janitorial and cleaning services, and hair salons.
What Is the Fastest Growing Franchise in the World?
According to Entrepreneur, the fastest growing franchise in the world for 2022 was 7-Eleven. Convenience stores are one of the best franchise opportunities for business owners because they provide a range of options and services for people.
Century 21 Real Estate was the second fastest growing franchise in the world, followed by KFC in third place. These franchises also represent some of the most popular franchise opportunities currently on the market.
Is Owning a Franchise Passive Income?
While owning a franchise can be a lot of active work, if you set up your business properly, it can be passive income. Many franchise owners go into the business with the intention of building passive income. By using the business model, they may own multiple locations of the same franchise business to do so. But it’s important to recognize that you have to put hard work in the beginning of your franchise to ensure its success.
Why Do Franchises Fail?
As a business opportunity, franchises may seem like a great investment. According to FranchiseWire, they have a lower rate of failure than most startups. But there are several reasons that a franchise might fail:
- Choosing the wrong franchise for marketing conditions — It’s important to determine if the local market has enough demand to support your franchise. Doing research before you agree to take on the franchise can make all the difference.
- Undercapitalization — It takes money to run a business, including a franchise. Even though the franchisor should have a number of the important operating processes set up for you — including branding, daily procedures, and the overall business model — you need to make sure you keep up with regular costs like inventory, marketing, and payroll, all beyond your initial investment and any royalty fees.
- Overestimating skills — Even with a good operations manual and plenty of training and support, a franchise owner needs to have good management skills, including communication, time management, and sales capabilities. Before you start a new franchise, make sure you know how much work will truly go into the business and be honest with yourself regarding the skills you have to make it a successful franchise.
- Disinterest — As with any business, if the business owner isn’t interested in running the company, there’s a good chance they won’t succeed. It takes effort to make a franchise succeed, even with help from the franchisor.
- Lack of support from the franchisor — Most franchise owners get support and training from the parent company, but not all franchise owners get what they need to ensure success. When you’re researching a franchise, make sure you know just what to expect from the franchisor, especially if this is your first time starting a business.
How Much Money Do You Need to Start a Franchise?
Franchise cost is a major factor in deciding to start your own business through a franchise. Depending on which franchise you opt to start, you can expect to need as little as $10,000 or as much as $5 million, according to ADP. Most franchises tend to cost between $100,000 and $300,000 in initial investment, depending on the industry and location, as well as what type of franchise it is. There are low-cost franchises available, although they may not be as profitable or successful as other franchise opportunities.
There are many startup costs associated with starting a franchise, including the initial franchise fee. The total investment required may be more than those first few payments, so make sure you go through the franchise disclosure document (FDD) fully to understand other costs, like royalties.
Other startup costs you can expect as part of your total investment in the franchise are:
- Real estate costs
- Property improvements
- Equipment, inventory, and supplies
- Furniture and fixtures
- Employee training
- Marketing and advertising
Because a franchise can take some time to be profitable, you’ll want to make sure that you have enough working capital to cover the costs of owning and operating the business for at least a few years. Having liquid cash available for payroll and other expenses is vital to your business’s success until your gross sales catch up to your business expenses.
You may consider business financing to help you with the franchise cost, such as small business loans. In order to qualify for most loans, you’ll need good personal and business credit. Of course, having business credit means having a business. So, if you’re just starting out with a franchise, you probably don’t have credit history as a business owner. It’s a good idea to learn how to establish business credit before you start looking into business loans.
Business credit cards are another way to help you get working capital to start your business, and they tend to be easier to qualify for than business loans. But they do often come with higher interest rates, so it’s important to make sure you can afford to pay the monthly minimums so you don’t build up too much high interest debt.
Nav can help you find the right business financing to start your new franchise. We take basic information, like your credit scores and annual revenue, and help determine which options you’re most likely to qualify for. Sign up today and start seeing your financing opportunities.
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