Even people with very little business experience understand the franchise model. In most arrangements, the company that owns the brand allows individual business owners to open stores in their community using the recognized name of the bigger company.
SEE: Top 7 Franchise Dangers
In exchange, the owner pays a franchise fee, a percentage of annual sales and agrees to abide by a standard of service that makes each of the locations provide a high quality level of service. Many entrepreneurs find success with franchises because the complicated work of building a brand is done for them. Well known names like McDonald's, UPS and Ace Hardware have attracted entrepreneurs for decades, but finding the right franchise opportunity isn't easy.
The problem facing future entrepreneurs is finding a franchising opportunity that fits into their budgets. Entrepreneurs are often surprised by the amount of franchising opportunities available to them but finding the quality brands within the sea of virtual unknowns is difficult. "Entrepreneur Magazine" publishes an annual list of the top franchise opportunities. Here are a few that made the top 10.
With startup costs as low as roughly $375,000, Dunkin' Donuts has 98% brand recognition among American consumers. Dunkin' Donuts is no longer just a coffee and donut shop. The company now offer a large variety of breakfast sandwiches as well as K cups and other retail products.
Possibly the best known pizza chain the United States, Pizza Hut has remained in the top 15 franchises for the past four years. With more than 13,000 stores, Pizza Hut is one of the oldest and well known franchise opportunities with startup costs as low as about $300,000.
Not all franchises are in the food service industry. Popular tax preparation service H&R Block has franchises all over the world, including nearly 5,000 in the United States. For entrepreneurs with a mind of taxes, this franchise is well within the reach of most future business owners with startup costs as low as $36,000.
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If you think there's a McDonald's on every street corner, the company would disagree with you. Although there are more than 12,000 stores in the United States and over 33,000 worldwide, the company is still looking to add more. Startup costs are well over $1 million, putting it out of reach for many; however, for those who can afford it, McDonald's has a long record of happy franchisees.
When disasters happen, ServPro may be your first call. With more than 1,600 stores nationwide, ServPro specializes in cleaning up after floods and fires. It also offers residential and commercial cleaning services. With franchising starting at under $200,000, ServPro is another opportunity available to entrepreneurs without millions to invest.
If McDonald's seems to have saturated communities with fast food, Subway might not appear to be far behind. Subway was rated as the second best franchise by "Entrepreneur Magazine, and the company continues to expand rapidly. With startup costs as low as $85,000, entrepreneurs have found huge success with a relatively low initial investment.
The Bottom Line
How do you know which franchises are quality businesses? First, request the franchise disclosure document that will give you more information on the opportunities you're considering. Next, talk to franchise owners and gauge their satisfaction. Finally, consider visiting the franchise's corporate headquarters and talking to company executives. Just as you would any investment opportunity, exhaustive research is the most important first step.