How Do Franchises Make Money?

[Emma Khoury]

Franchises are so varied and can be found in a variety of industries, however, they all make money in a similar way. Franchises make money in one of two ways: by selling a product, or by selling a service. If you’re new to franchising and would like to learn more, we have a detailed article on ‘How Does Franchising Work?’ Not all the money that your franchise makes will go to you as the franchisee, though. An agreed amount of the sales usually goes to the franchisor through royalty fees, and they can then use this money to invest elsewhere in the business, for example. However, the more money a franchise makes, the more income that is generated, meaning more profit is made and can go to the franchisee and franchisor.

At one time, finding a franchise opportunity was difficult but, in 2023, it’s easier than ever. There are directories available online, such as our own at Franchise Local, which is a fantastic resource. Our collection of franchise opportunities is updated regularly and will help you to see what’s currently available for you to invest in.

At Franchise Local, we organize these opportunities by industry, allowing you to narrow down your search to specific sectors so you can go straight to the franchises in the industries that appeal to you most. There’s no special formula to knowing what might be a profitable franchise – it can be difficult to predict – but, if you’re confident in your experience and knowledge of an industry then following your instincts is a good starting point. That’s not to say, however, that you can’t lead a successful franchise if you don’t have experience.

If you’re confident enough to trust your intuition, then feel free to go for it, but you can’t beat a bit of old-fashioned research and due diligence when looking for the most profitable franchise opportunities. Looking for trends and analyzing the numbers associated with well-known franchises is definitely worth doing if you’re looking for a franchise that will give you the best return on investment.

Some industry trends come and go and won’t always be profitable. There’s an element of risk involved here – if you choose a franchise based on how popular it is at the time, there’s always a chance this could change. If you’re more risk-averse, then there are some safer options you can choose. While taking risks can pay off in some circumstances, there’s a huge range of industries you can explore that will always be in demand. Although these franchises might always bring in regular business, that doesn’t mean that large profits are guaranteed. In the next section, we’ll highlight some examples of industries with franchises that offer a good return on your investment.

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