What Type of Franchise is Most Likely to Succeed?

The franchise brands most likely to succeed have competent, well-capitalized franchisors and belong to sectors including home-based businesses, QSR concepts, automotive services, tech companies, tutoring centers and health and wellness spas.

Here are the three factors that help determine if a franchise is likely to succeed:

The Franchisor

While some industries are more poised for growth than others, a good franchisor can win in a bad market and a bad franchisor can lose in a good one.

In general, a brand’s franchise disclosure document (FDD) is the best way to evaluate the franchisor as it provides in-depth information on the brand’s performance history, business model and support infrastructure.

The Franchisee

Successful franchisees, without fail, have a passion for what they’re doing. A great franchisee can work with a great franchisor in a great industry, but if they don’t truly live the brand, they can still fail.

For example, if a prospective franchisee is coming from a background in sales, then a retail franchise may be the best bet. If they are more skilled at working alone, then they’ll want to find a concept that does not require managing a team, such as pool maintenance or dog-walking.

The business model should also align with a candidate’s specific goals — are they looking for a semi-absentee business opportunity that will generate passive income over time or are they looking for a 9 to 5 job that will put them on a new career path?

The Industry

Prospective franchisees will want to evaluate the longevity of the industry, consumer demand, competition and how the specific category has fared with the COVID-19 pandemic.

For example, home-service franchises have been booming as homeowners spend more time tackling renovation projects, and quick-service restaurant concepts are appealing to the growing demand for delivery and takeout services. Other categories that are particularly hot right now include: automotive services, tech services, children’s education and health and wellness.

For more information, publications like Entrepreneur and Franchise Times release annual lists that detail the top franchise categories and concepts of that particular year.