Although the majority of franchisers don’t disclose the profit margins they earn, it is fairly well known that some business models and franchise industry categories do share some common characteristics that make them less profitable than others.
Here is a general list of some common characteristics that the least profitable types of franchises share.
They Offer Low Margin Products & Services – This is particularly true with franchise businesses that sell commodity type products like gas, convenience store staples, etc.
Low Barrier To Entry – Franchises business models that have a fairly low barrier to entry like cleaning services generally have lots of competitors which forces them to operate on thinner profit margins.
High Overhead Expenses – This includes high fixed overhead expenses like a large payroll or ongoing building and equipment maintenance expenses that eat into profit margins.
Over Saturated Markets – Many franchise businesses that are located in oversaturated (particularly in many of the retail categories) markets face overwhelming competition which puts significant pressure on what they can charge for their products and services.
Go here to research franchises that are known to offer high profit margin products and services.