This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Hot Franchise Concepts You Can Invest In

NEW YORK ( TheStreet) -- It seems hard to believe that McDonald's (MCD), Dunkin' Donuts (its formal name is now Dunkin' Brands (DNKN)) and Subway all started out as small ideas at one point in time. In order to get in on a McDonald's franchise now, for instance, an investor needs millions in capital. For an investor new to franchising, that's not realistic. Even if possible, with same-store sales at the fast-food chain stagnating, the prospects of long-term financial success are iffy.

Given the foodie explosion in the U.S., there are many smaller and less expensive franchise brands hitting on market trends. While many will fail, some clearly have growth potential. And not all are in food.

Del Frisco's CEO: U.S. Has Turned Into a 'Foodie Nation'

Dunkin' Brands CEO: Competition Makes Us Better

Denny's CEO on Staying Relevant in a Fast-Casual World

The International Franchise Association, franchising's main trade association, estimates that roughly 2,500 brands are franchised in the U.S.

As of the first quarter, 203 new business concepts went the franchise route in 84 different sectors. Some 1,498 units were opened by these newbies, according to a report by independent research firm FRANdata. (That number includes both franchised locations and company-owned units.) The report projects another 2,500 units from the newcomers over the next year. New concepts are young brands that have recently converted into a franchised business or start-up concepts that are only entering the franchised market, the report said. Some 65% of the brands that entered franchising in the first quarter were non-food concepts, the report said.

Thanks to the increased availability in credit since the recession, franchised brands are growing again. The IFA says that seven of the 10 business sectors that it tracks franchising in are adding jobs faster than the private sector as a whole.

Franchising "is a lot more than just fast food. It's automotive, it's commercial and industrial, it's personal services, it's real estate, it's hospitality," said IFA spokesman Matt Haller. "It's really thousands of different types of businesses in sectors across the spectrum."

Outside of food, the top five sectors in which franchises have launched concepts in the first quarter include: health and fitness; child-related; business; maintenance services and real estate, according to the FRANdata report. Within food, the most popular category is QSR, or quick-service restaurants, which includes the explosion of growth in so-called fast-casual concepts. Fast-casual concepts are typically a step up from fast-food chains in that items are cooked to order and made with higher-quality ingredients.

Looking for an Investment? Here are 9 of the Best Franchises in America

Looking for an Investment? 9 Franchises for About $100K

Want to Own a Dunkin' Donuts Franchise? Know This First.

How PizzaRev Plans to be the Chipotle of Pizza

Just because a franchise is opening lots of locations, doesn't mean it's a sustainable business, says FRANdata CEO Darrell Johnson. "Franchising is a business model follows opportunity and opportunities in the business sector are trend based and so trends take multiple years to evolve," Johnson says.

Potential investors should thoroughly review a company's Franchise Disclosure Document (FDD), a document that franchisors provide to prospects that provides a variety of aspects to the business including supply sources, financial statements, any litigation and general background on the company, among other things.

Other factors to consider when deciding on a franchise: how long locations have been open, net location openings in any given year; and growth potential of the concept's given industry. Finally investors should talk to established franchisees in the system.

Eager franchise investors looking for the next great idea can get a sense of new brands and established concepts at the International Franchise Expo, held June 19 through June 21 in New York City. The expo is sponsored by the IFA.

Here are 10 small, yet growing concepts hoping for big success.
1 of 11

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SOUP $0.07 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs