After reviewing the Franchise Disclosure Documents and interviewing the head honchos of dozens of franchises, I’ve discovered quite a few brands that most people have never heard of but probably should know about because, for one reason or another, they represent an interesting investment opportunity. I don’t have any insider knowledge on any of these franchises; my opinion is based purely on publicly available information, including the FDD Talks and Exclusive Q&A’s I’ve posted on this blog. But you can be sure that this list represents my honest opinion, unaffected by any considerations other than to highlight the undiscovered franchises that I feel deserve your attention.
Just to be clear, I’m not recommending any of these franchises for your hard-earned dollars. But I do invite you to learn about each one so that you can form your own opinion and, hopefully, share your thoughts with me and the rest of the community. And if you are a current franchisee of any of the Top 10 Franchises, please chime in and let me know if I’m spot on, or way off the mark.
1. Retro Fitness (Fitness Franchise)
“The past performance of Retro Fitness outlets is stellar. The average EBITDA reported by over 50% of its franchisees in 2009 is $475,660, which is way above the norm in franchising. The average EBITDA reported by all its franchisees in 2009 is just shy of $300,000, which is still an outstanding number, especially when compared to other popular fitness franchises like Anytime Fitness and Snap Fitness (where average EBITDA tops off in the $100,000 to $150,000 range with 800-900 members).”
2. Pandora (Retail Jewelry Franchise)
“The average unit volume of Pandora ($1,950,317) is in a league of its own. And it blows my mind that these stores haven’t been around for very long! I don’t know of any other franchise opportunity where it’s possible to do $4,849,906 in sales out of a single location.”
3. Complete Nutrition (Retail Weight-loss and Nutrition Products Franchise)
“With the average store doing around $800,000 in gross sales, with cost of good sold at just a little over 25%, the typical store has around $600,000 from which to pay all other expenses like rent, payroll, advertising, royalties, and owner’s earnings. It certainly looks like a six figure income is well within reach for most of these stores.”
- FDD Talk: Average Annual Gross Sales and Cost of Goods Sold of Franchised Complete Nutrition Stores in 2010
- Complete Nutrition: From 15 Stores in 2009 to 120 Stores Today: Exclusive Q&A with Carey Gille, Director of Franchise Development
4. Freddy’s Frozen Custard and Steakburgers (Better Burger, Frozen Desserts Franchise)
“Their average annual unit volume is an impressive $1,220,000, when counting all affiliate-owned and franchised Freddy’s restaurants. The highest volume store did $2,171,988 in sales in 2010, while the lowest did $735,644 — still a decent number for the worst performing location in the chain. The average gross profit margin (sales less cost of good sold) is also outstanding, coming in at just a tad under 70%.”
5. Cheba Hut (Sub Sandwich Franchise)
“When it comes to average unit volume, Cheba Hut places surprisingly well in the sub sandwich franchise pecking order. With an average unit volume of around $600k, Cheba Hut ranks just below marquee names like Jimmy John’s and Schlotzsky’s (both in the $700k to $800k range), on par with soon-to-be household name Firehouse Subs (also in the $600k ballpark), and well ahead of lower-tier brands like Togo’s (between $500k and $600k), Cousins Subs (close to $400k), and Submarina (just over $300k).”
“The estimated initial investment to open a Cheba Hut restaurant (from $149,500 to $299,500) and the ongoing royalty fees (4% of revenues) are on the very low end for food franchises. In addition, Cheba Hut’s average sales-to-investment ratio runs from 2 to 4 (where the ideal is 2 and up). All these add up to a compelling investment opportunity.”
6. Noodles & Company (Quick Service Restaurant Franchise)
“Combining Asian, American, and Italian pasta dishes in a quick service restaurant format is a fresh concept that — to the best of my knowledge — no other national chain is doing. Pasta dishes typically have very good margins and are relatively easy to prepare. So it’s quite logical that Noodles & Company’s EBITDA is an impressive 20% of net sales (with the average EBITDA being $232,155, out of which royalties still need to be paid). Based on all the Item 19 (FDD) financial disclosures I’ve examined, I consider Noodles & Company to be in the top tier of food franchises in terms of profit potential.”
7. Children’s Lighthouse Learning Centers (Educational Childcare Franchise)
“Even without knowing anything about the average operating expenses of Children’s Lighthouse Learning Centers, I’m inclined to believe that these schools are quite profitable based solely on the system’s impressive average unit volume ($1,546,367 for schools operational for more than 18 months). The only significant operating expenses I can think of for this concept are rent and payroll (all others are minor in comparison), so there really should be a healthy amount left over as operating profit.”
- FDD Talk: Average Gross Revenue of Franchise and Affiliate-Owned Children’s Lighthouse Learning Centers
- Franchise Chatter Exclusive: Q&A Interview with Steve Dixon, VP of Franchise Sales for Children’s Lighthouse Learning Centers
8. Lemon Heaven (Beverage Franchise)
“Among all the figures disclosed by Lemon Heaven, I’m most interested in the highest monthly gross receipts because it indicates the full potential of the business when all the stars are aligned (great event, location, weather, attendance, etc.). One franchisee did over $200,000 in August alone. June, July and September are also terrific months for the business. Lemonade has very high profit margins, so these top franchisees are probably making a killing — and a terrific annual income working full time just 4 months out of the year.”
9. Capriotti’s (Sub Sandwich Franchise)
“The average unit volume of Capriotti’s more mature restaurants (5 years and older) is comparable to the systemwide averages of Jimmy John’s and Schlotzsky’s ($700k+), with Capriotti’s newer stores doing about $100K less. Still, these results are better than Firehouse Subs, Togo’s and Cousins Sub Shops. Also on the positive side is Capriotti’s reasonable start-up costs — from as low as $197,000 to as high as $427,500, inclusive of the $40,000 franchise fee.”
- FDD Talk: Average Sales, Expenses, and Operating Profits of Capriotti’s Sandwich Shops
- Franchise Chatter Exclusive: Q&A Interview with Ashley Morris, CEO of Capriotti’s
10. Another Broken Egg Cafe (Breakfast, Brunch, and Lunch Restaurant Franchise)
“Our hours (7am to 2pm) are perfect for a one shift operation, allowing the owners/managers to have a normal work day and minimizing heavy management requirements. We give our franchisees the flexibility to extend those hours with a caveat: more hours doesn’t necessarily mean more to your bottom line. We love being known as the 7am to 2pm cafe, where guests know they’re going to have a great experience, sometimes eliminating their middle meal due to our generous portions.” – Ron Green, Founder and CEO of Another Broken Egg Cafe
{ 2 comments… read them below or add one }
I am interested in natural foods vending. I would like info on Grow Vending, Human, And Naturals to go. I would like feed back on which if any would be the best.
Hi all,
Is anyone familiar with Grow Vending and Naturals to Go? I’ve written about Human and Fresh Healthy Vending, but not familiar with the other brands. Any thoughts on which one is the best?
Best regards,
Ambrosio