Thinking of starting your own restaurant but not confident about how to build your restaurant brand? Starting your entrepreneurial journey by investing in a good food franchise can be a good idea. But why invest in a food franchise?
Food franchise opportunities are a complete package deal. You get ready-to-use marketing collateral, brand legacy, high brand awareness, and extensive business support from the franchise owner. Imagine becoming a franchisee of a Subway or Dunkin Donuts or Popeyes and the like. These are a few of the most sought-after brands, a decent footfall is guaranteed the day you throw your doors open.
Franchise business in the US
The franchise industry in the US is particularly known for a number of fast food franchise chains. As per Statista, the economic output from franchise businesses in the US was a whopping $790 billion in 2021. Nearly 8 million people in the US work in the franchise industry. With McDonald’s taking the lead as the most lucrative franchise business and many others on the list, you have a plethora of food franchise businesses to choose from and embark on your journey as a restaurateur.
Making a foray into the restaurant business by investing in a food franchise has countless benefits. First, you get to leverage a franchiser’s recognizable brand and run operations on your own. Second, profitable well established franchises have high success rates. Third, most of the risks and uncertainties associated with starting a brand-new business are eliminated in a franchise model. We will introduce you to some more benefits later.
For now, let’s focus on what criteria should a potential investor evaluate a franchise.
Evaluating a Franchise Opportunity
Acquiring a franchise comes with a cost attached to it. Therefore, the first and foremost factor is your financial affordability. You may be dreaming of getting a franchise for McDonald’s but it may not be possible for you to acquire one in your budget. So like everything else, your budget and affordability matter. This is the first step in helping you narrow down the franchises you can choose from. Other factors basis which you should evaluate a franchise opportunity are:
- Franchise fees and initial set-up costs.
- Study their past financial statements, the number of new franchise locations opened, and their success rate to get an idea of the profitability.
- Support system for franchisees.
- Minimum lock-in period – McDonald’s for example gives franchise rights for a minimum of 20 years.
- Available areas – Franchisors want to expand their business, increase their presence, and thus get better visibility. However, not all areas where they are planning to open franchise locations may be equally lucrative. There may be two locations that are close by or you may get an option to open in a location where the popularity and demand for fast food may not be that high.
- Brand recall value – Is the franchise you are planning to acquire a popular brand? Do people recognize it? Does it have an aspirational value? If not then investing in such a franchise business comes with the same uncertainties as starting a new restaurant with no brand recognition. However, investing in a well-established franchise comes with high initial costs which may not be the best option as it will have a significant impact on profitability. A new opportunity that may not be as well established but still has some recognition can be a good franchise investment.
Now that you have an idea of how to evaluate a franchise opportunity, let’s look at some of the food franchise businesses in the US worth investing.
1. McDonald’s
No prize for guessing why it tops our list. McDonald’s is the most popular fast-food restaurant in the world. A whopping 90% of McDonald’s based in the US are owned and managed by franchisees
- One-time franchise fee: $45,000.
- Initial investment: $1 million to $2.2 million.
Interesting fact, many of McDonald’s franchisees are owned by women and minorities.
2. KFC – Kentucky Fried Chicken
KFC started by Colonel Sanders has a lot of nostalgic value attached to it and it is one of the most recognized and popular American fast-food chains.
- Initial franchise fee: $45,000.
- Initial investment: $1.4 million to $2.7 million.
KFC has a robust business model and a great franchise support system making it one of the most reliable and profitable franchises to own. KFC has the most rigorous financial qualifications. An applicant willing to acquire a KFC franchise must have a net worth of $1.5 million and $750,000 in liquid assets.
3. Dunkin’
One of the most-loved donuts brands across the globe, Dunkin’ operates in over 12,400 locations spread across 41 states and 46 countries. Now, these are some really crazy numbers.
- One-time franchise fee: $40,000 to $90,000 (differs from state to state).
- Initial investment: $95,700 to $1.5 million.
Though the initial investment for acquiring a Dunkin’ franchise is quite high, they offer a 20% discount on the initial franchise fee if you sign a Store Development Agreement for five stores at one go.
4. Pizza Hut
You had be surprised to know that Pizza Hut is the largest Pizza company in the world with over 18,341 outlets spread across the globe.
- One-time franchise fee: $25,000.
- Initial investment: $357,000 to $2.2 million.
Pizza Hut provides comprehensive training, marketing, and new location opening support.
5. Popeyes
Popeyes is a well-known brand globally in the fast-food franchise segment. Started in the year 1972 in Miami, Florida Popeyes has over 3,705 outlets.
- One-time franchise fee: $50,000.
- Initial investment: $384,000 to $2,620,800.
6. Taco Bell
A popular Mexican fast-food chain, Taco Bell started way back in 1962. Out of the 7,791 restaurants, Taco Bell has a whopping 93% franchise-owned outlets. Now owned by Yum! Brands Inc. Taco Bell has a global fan-following
- One-time franchise fee: $25,000 to $45,000.
- Initial investment: $525,525 to $2.8 million.
To get more information about getting a franchise at Taco Bell one needs to fill out an application online as not much is available in the public domain.
7. Cinnabon
Started in Seattle, Washington in the year 1985, Cinnabon has gained popularity as a bakery franchise and has made cinnamon buns with cream cheese a rage globally. The brand now has 1500+ outlets across the globe
- One-time franchise fee: $30,000.
- Initial investment: $230,000 to $545,000.
The various formats of the Cinnabon franchise comprise a full bakery, kiosk bakery, co-brand store, and co-brand kiosk. There is a minimum lock-in of 20 years.
Ice cream/Dessert brands
8. Baskin-Robbins
Started in 1945, Baskin-Robbins now owns 2,500 locations in the US alone and more than 7,500 storefronts across the globe.
- One-time franchise fee: $25,000.
- Initial investment: $94,350 to $402,200.
The financial investment varies from location to location and the type of Baskin-Robbins store you plan to open (A traditional storefront or a kiosk).
9. Dairy Queen
Operating for 80 years Dairy Queen is probably one of the oldest and most established names on this list in America and beyond. Dairy Queen has over 6,800 restaurants under its belt spread across the U.S., Canada, and 27 more countries.
- One-time franchise fee: $45,000.
- Initial investment: $1 million to $1.8 million.
Have no prior experience in restaurant management, not a problem you can hire someone with relevant experience to get a Dairy Queen franchise.
10. Cold Stone Creamery
One of the relatively new entrants on the scene when compared to a Dairy Queen or a Baskin Robbins, Cold Stone Creamery has been around for 30+ years now. The brand has over 1,000 outlets in the US alone and a presence in some 30 countries globally.
- One-time franchise fee: $10,000 to $27,000.
- Initial investment: $53,200 to $468,775.
Cold Stone Creamery has aggressive expansion plans over the next few years.
Signing-off
You may choose one of our top picks or go ahead with other popular franchise brands which are not on this list. No matter, what you choose evaluating them and establishing a transparent and trustworthy relationship is the key to running a successful franchise business.
