Through years, many entrepreneurs chose to acquire a franchise as a way to kick-start their path to self-sufficiency and profits. Buying a franchised business has many advantages, such as the support of a large company and getting access to a strong brand and established reputation. In addition, it can cheaper to buy a franchise than start your own business from the ground, although many of the most profitable franchises require investments that range from a couple of hundred thousands to well over a million dollars. However, banks are more willing to offer financing for a franchise. Moreover, franchises can be acquired even by inexperienced entrepreneurs, since companies usually provide all the necessary training.
At the same time, franchising also comes with some disadvantages. While owning your own business allows you to conduct operations the way you want, franchising involves adhering to some rules. The company that franchises the business also requires franchisees to stick with the suppliers, equipment and products that they provide. In addition, buying a franchise means sharing some profits with the franchisor. On the one hand, getting a franchise means there is a higher probability of success, so sharing some profits can be worth it, although over the long run an independent company can provide higher returns.
So, in the end, whether or not to get a franchise is an individual decision. There is also the matter of picking what franchise to acquire, since there are hundreds of companies that offer franchises and they operate in various industries, from quick service restaurants, to apparel retailing, to real estate. It’s important to do your research and to make sure that the business you are about to launch will have a market in your designated region. Buying a franchise from a large and well-known brand like McDonald’s involves very high costs and it does not guarantee a success. At the same time, there are low-cost franchises that can generate substantial returns (take a look at best low cost franchises with high profits in 2018).
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Let’s take a look at investing in franchises from another angle: buying stock in companies that offer franchises. Often, franchise stocks are great growth investments and are known to outperform the broader market. When a company offers to sell franchises, it makes it one of its main objectives to reduce the number of company-owned outlets. The reason for this is that, even though companies that offer franchises see less revenue, they also get better profit margins. Moreover, having more franchised locations frees the company from the need to invest in space, equipment, pay wages and maintain locations and provides it with a consistent and stable cash flow that can be used on growing the brand value and expanding the network, as well as paying dividends.
So, whether you are interested in buying a franchise, or investing in a company that sells franchises, we have compiled a list of 11 fastest growing franchises in the US in 2018. The list uses data from Entrepreneur‘s ranking of fastest growing franchises in the US and Canada, but includes those companies that saw the largest increase in the number of locations over the last two reported years.
11. Jan-Pro Franchising Int’l. Inc.
Company: Premium Franchise Brands LLC
Jan-Pro Franchising Int’l. Inc. is a subsidiary of Premium Franchise Brands and it offers commercial cleaning services to businesses. To acquire a Jan-Pro franchise, an initial investment between $3,985 and $51,105 is required. Jan-Pro has been offering franchises since 1992 and in 2010 it had over 10,000 franchises in the US and Canada. However, in 2011 the number of franchises slid to 6,000 in the US and 1,083 in Canada and since then these numbers have been climbing and reached 7,105 in the US and 1,381 outside the US in 2017, up by 130 and 132 on the year, respectively.
10. McDonald’s
Company: McDonald’s Corporation (NYSE:MCD)
McDonald’s Corporation (NYSE:MCD) offers the largest global franchise network that covers over 100 countries and generated almost $78 billion in sales last year. Out of a total of 37,241 restaurants, McDonald’s Corporation (NYSE:MCD) owns and operates 3,133 as of the end of 2017, down from 5,669 a year earlier, while the number of franchised restaurants increased to 34,108 from 31,230. Over the long run, McDonald’s Corporation (NYSE:MCD) expects to have 95% of its restaurants franchised. The initial investment in a McDonald’s franchise can go between $1.0 million and $2.21 million, which includes real estate interest, although the company usually owns and land and building or obtains long-term leases for franchised restaurants. In the US, McDonald’s Corporation (NYSE:MCD) has 13,186 locations, up by 77 compared to the end of 2016. Among the hedge funds tracked by Insider Monkey, 62 funds held shares of McDonald’s Corporation (NYSE:MCD) at the end of 2017, up by two funds over the quarter.
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9. Cruise Planners
Cruise Planners is one of the cheapest franchises, mainly because it doesn’t require large investments in equipment or real estate. Cruise Planners is an American Express Travel Services Representative and it offers travel agency franchises. Travel agents that acquire the Cruise Planners franchise work from home and sell travel packages. The initial investment for Cruise Planners goes from $2,000 to almost $23,000. The company has 2564 franchises as of last years, compared to 2,432 in 2016, all of which are in the US.
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8. Papa John’s
Company: Papa John’s Int’l, Inc. (NASDAQ:PZZA)
Papa John’s Int’l, Inc. (NASDAQ:PZZA) was founded in 1984 and currently has 5,199 restaurants in operation that operate both in the US and 44 countries and territories. Papa John’s Int’l, Inc. (NASDAQ:PZZA) has been offering franchises since 1986. The initial investment to acquire a franchise from Papa John’s Int’l, Inc. (NASDAQ:PZZA) is between $130,000 and $845,000. In the US, there are 2,731 franchises as of 2017, versus 2,588 locations a year earlier. Overall, the network saw an increase of 113 locations between 2016 and 2017, while the number of company-owned locations declined to 645 from 734. The number of smart money investors tracked by Insider Monkey long Papa John’s Int’l, Inc. (NASDAQ:PZZA) fell by two to 20 during the last quarter of 2017.
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7. Mac Tools
Company: Stanley Black & Decker, Inc. (NYSE:SWK)
Mac Tools offers franchises that sell automotive tools and equipment. The company is part of Stanley Black & Decker, Inc. (NYSE:SWK), having been acquired in 1980 by Stanley Works. During the fourth quarter, the number of investors bullish on Stanley Black & Decker, Inc. (NYSE:SWK) advanced by four to 37. Mac Tools has been offering franchises since 2011 and saw significant growth, as the number of franchised locations expanded to 1,146 in 2017 from 103 in 2011. In the US, Mac Tools has 791 franchised locations as of 2017, up from 606 a year earlier. The initial investment amount for a Mac Tool franchise is between $171,000 and $360,000.
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6. Great Clips
Great Clips is a company that franchises hair saloons usually located in strip malls. The initial investment for a Great Clips franchise ranges from $136,900 to $258,300. Great Clips has been offering franchises since 1983 and has expanded to nearly 4,300 locations, most of which are located in the US. In 2017/2018, the number of Great Clips US locations increased by 190 to 4,135.
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5. Orangetheory Fitness
Company: Ultimate Fitness Holdings LLC
Orangetheory Fitness is a network of fitness studios that is part of Ultimate Fitness Holdings. Orangetheory was launched in 2010 and in the last three years it saw massive growth in the number of franchised locations. In 2017, there were 636 US franchises of Orangetheory Fitness, as well as 77 locations outside the US and 17 company-owned locations, up from just 100 US franchises, eight non-US and four company-owned studios in 2014. To open an Orangetheory Fitness studio an investment between $489,000 and $995,000 is required.
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4. Jazzercise
Jazzercise is one of the cheapest fitness franchises, as initial investment can be as low as $3,700, but can reach $32,750. Jazzercise provides dance fitness classes that combine dance, strength and resistance training. As of 2017, there are over 9,000 Jazzercise locations. In the US, Jazzercise has 7,235 franchises as of 2017, up from 6,990 a year earlier.
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3. Taco Bell
Company: Yum! Brands, Inc. (NYSE:YUM)
Taco Bell has been around since 1962 and has been offering franchises since 1964 and is currently part of Yum! Brands, Inc. (NYSE:YUM), a large operator of quick service restaurants that also franchises KFC and Pizza Hut. Yum! Brands, Inc. (NYSE:YUM) has over 45,000 restaurants, which includes 6,849 Taco Bell restaurants in 27 countries and territories, 90% of which are franchised. In the US, Taco Bell has 5,535 franchised restaurants as of 2017, up by 261 over the year. Opening a Taco Bell restaurant is rather expensive as the initial investment ranges from $525,000 to over $2.60 million. In addition, to acquire a Taco Bell franchise, the franchisee must have a net worth of at least $1.50 million and have $750,000 in liquid capital. Yum! Brands, Inc. (NYSE:YUM) saw 31 funds from our database holding shares as of the end of 2017, up by one over the quarter.
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2. Planet Fitness
Company: Planet Fitness Inc (NYSE:PLNT)
Planet Fitness Inc (NYSE:PLNT) is one of the largest franchisors and operators of fitness centers in the US, although it also franchises a small number of locations in Canada, Panama, and the Dominican Republic. Overall, Planet Fitness Inc (NYSE:PLNT) has 1,518 stores system-wide, which includes 62 corporate-owned and has 1,000 locations that have to be opened under area development agreements (ADAs). In the US, Planet Fitness Inc (NYSE:PLNT) has 1,335 franchises as of last year, compared to 1,059 in 2016. The initial investment for a Planet Fitness franchise ranges from $857,000 to more than $4.23 million. There were 23 investors long Planet Fitness Inc (NYSE:PLNT) in our database as of the end of 2017, versus 25 funds at the end of September.
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1. Dunkin Donuts
Company: Dunkin Brands Group Inc (NASDAQ:DNKN)
Dunkin Donuts is a brand of restaurants owned and franchised by Dunkin Brands Group Inc (NASDAQ:DNKN), which also owns and franchises Baskin-Robbis. Dunkin Brands Group Inc (NASDAQ:DNKN) managed to have 100% of its locations owned and operated by franchisees, but it does own 97 properties and has leases on 975 locations, most of which are leased or subleased to franchisees that contribute 12% to the company’s revenue. Out of more than 20,500 locations, Dunkin Brands Group Inc (NASDAQ:DNKN) has more than 12,500 Dunkin Donuts shops located in the US and 52 foreign countries. In the US, there are 9,141 Dunkin Donuts franchises as of the end of 2017, up by 193 over the year. The initial investment for opening a Dunkin Donuts shop can be between $229,000 and $1.69 million. During the fourth quarter of 2017, the number of funds bullish on Dunkin Brands Group Inc (NASDAQ:DNKN) slid by seven to 13.
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