What is a profitable franchise? Before opening a franchise, it’s important to know whether the concept is profitable. Several indicators need to be taken into account in order to obtain a
return on investment
and the ability to expand.
The franchise is holding up well, showing its strength in 2021 with sales of 68.8 billion euros. This represents an increase of 7.7% on 2020, and even 1.2% on 2019. “Franchising has existed in France for over 50 years. It’s a dynamic and relevant model,” says Véronique Discours-Buhot, General Delegate of the French Franchise Federation.
This is all the more true given that the average franchisee earns between €30,000 and €39,000. Sometimes more. As a result, every year there are many prospective franchisees.
The key is to find a concept that will generate sufficient sales and attractive profitability. The aim is to see a return on investment after a few years (five years on average).
In 2022, food, home furnishings and fast-food will be safe, sustainable values.
How do you know if a franchise is profitable?
A franchise is profitable as soon as the company’s net income exceeds the initial investment in the project. All expenses such as rent, royalties, salaries, management remuneration, etc. must be deducted to determine this figure. On average, this net income represents between 5% and 15% of franchise sales (before tax). It’s likely to be much higher for companies with smaller sales.
So, before committing yourself and signing with a brand, you need to gather a lot of information. They will show whether the franchise concept is profitable, and whether it is possible to earn a salary and make a profit from it.
Search for essential data before taking the plunge
Information that a franchisor can share – but rarely does. To obtain them, you need to take a serious look at the franchisor’s reputation. To do this, we need to compare the number of openings and closures, to deduce a turnover rate. If it exceeds 10%, vigilance is called for.
It is also advisable to study whether the network’s franchisees have several sales outlets. It’s a sign that they’re making money and reinjecting it into their development.
It’s also a good idea to read the balance sheets and income statements of the companies in the network. These documents can be found on sites such as societe.com or infogreffe.
Last but not least, it’s important to choose the right franchise concept for your financing needs. This will be a decisive factor in drawing up your business plan, and will give you a perspective on your objectives.
What are the most profitable sectors at the moment?
Among the most successful franchise networks, some are the most profitable for several years running. Further proof of the strength of their concept and network.
O’Tacos, Nabab, Pomme de pain, Paul, Prêt-à-manger and Domino’s Pizza dominate the fast-food sector. While King Marcel, Memphis Coffe and Del Arte are making their mark in the themed restaurant sector. Envia Cuisines, Self Tissus, Illico Travaux and Carré Blanc represent the home equipment sector.
Other chains in growth sectors are doing well with low personal contributions. Such is the case with electronic cigarettes: Le Petit Fumeur or Happesmoke. These brands each require a personal contribution of €15,000. The bulk market, represented by chains such as Mamie Mesure, is also growing.
Finally, in the personal services sector, Dom et Vie is doing very well. Specializing in PRM fittings, the company requires an initial investment of 30,000 euros.
