2022’s Top Franchise stocks

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The franchise business concept has been around for a while, and it’s a simple approach to grow a company. If your business concept is a success, you can hire franchisees to open more stores while you focus on being the franchise owner. This results in a situation where both sides benefit: the franchisees receive the advantages of a well-known brand, a manual for running a business, and continuing support, while the franchisors receive franchise fees, which may include royalties on sales and money for advertising.

Investing in franchise stocks or the stocks of publicly traded franchise companies is one of the greatest methods to gain exposure to this industry if you’re not interested in operating your own small business. Fast food restaurants frequently use franchising as a business strategy, as do hotels, gyms, travel agencies, and industrial cleaners. Due of franchisors’ minimal fixed expenses and recurring revenue from royalties, franchise stocks typically have large profit margins when traded at scale.

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Best Food Franchise in the Stock Market

  1. McDonald’s (Stock code: NYSE:MCD)

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The multinational fast food chain includes more than 35,000 locations, more than 90% of which are controlled by franchisees. Many of the company’s restaurants in China and other overseas markets were recently transformed into franchises as part of a drive led by previous CEO Steve Easterbrook, giving the business an even more “asset-light” model and relieving it of the fixed costs of maintaining outlets. The fact that McDonald’s controls a large portion of the land on which its franchise locations are situated enables the business to charge franchisees rent.


The business has fared well during the pandemic because to its emphasis on drive-through service and subsequent adoption of delivery. McDonald’s, which is currently performing above pre-pandemic levels, is well-positioned to increase market share when the economy recovers.



  1. Domino’s Pizza (Stock code: NYSE:DPZ)

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You might be shocked to learn that, with a share price increase of around 2000% over the past ten years, Domino’s has been among the best-performing stocks on the market. The company’s rise over the last ten years has been fueled by a successful turnaround plan that involved reformulating their pizza recipe, and its excellence in delivery has made it well-known in the community.


Domino’s has demonstrated extraordinary consistency by growing same-store sales for 41 consecutive quarters and 110 consecutive quarters internationally. Domino’s appeals to many business owners because of its minimal initial investment requirements for franchisees and straightforward menu, which together with the widespread appeal of pizza delivery around the world.



  1. Wingstop (Stock code: NASDAQ:WING)

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Although Wingstop is far smaller than McDonald’s, the chicken wing vendor makes operating a franchise easy by providing a modest initial franchise fee and a straightforward menu. It has also fared well during the pandemic because of how well its compact design lends itself to takeaway and delivery. Even the delivery-only format known as “ghost kitchens” is being tested by the corporation.



Best Franchise Companies in the Stock Market


  1. Snap-on tools (Stock code: NYSE:SNA)

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As the number one tool brand in the world, Snap-on Tools claims to sell its products through franchisees that operate mobile stores, which are essentially trucks with the Snap-on Tools logo on them.


Over the course of its existence, Snap-on has produced consistent growth, and the business has successfully rebounded from the pandemic. In the fourth quarter of 2020, organic sales increased by 10.8%, and the business reported an operating profit margin of 20%, demonstrating the effectiveness of the franchise model. The first half of 2021 also saw great results.


The stock has historically outperformed because to the company’s reputation and broad selection of tools and equipment. Since there is always a market for its products, its business strategy should continue to provide positive outcomes.



  1. Marriott International (Stock code: NASDAQ:MAR)

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Marriott acquired Starwood Hotels & Resorts in 2015, making it the largest hotel chain in the world. As a result, Marriott is now one of the largest franchisors in the world.


Even if the business has had difficulty during the epidemic, one benefit of the franchise model is that it shields the franchisor from economic downturns by eliminating a large portion of the fixed costs that operators must bear.


In 2020, Marriott’s revenue dropped by roughly 50% to $10.6 billion, but its net losses were fairly modest at just $267 million. The company outperformed several of its competitors in the tourism sector, including airlines and cruise companies, which have greater fixed expenses.


The company has been consistently profitable through the first half of 2021 despite the delta variant’s extension of the travel ban prohibition, suggesting that the stock has largely recovered from the pandemic despite ongoing challenges.



  1. Planet Fitness (Stock code: NYSE:PLNT)

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Before the coronavirus outbreak, Planet Fitness was a model of excellence as the business rapidly spread across the nation. Its low-cost business approach, with monthly membership costs beginning at $10, contributed to maintaining steady demand.


The stock price has increased by more than 400% since its IPO in 2015. The value of Planet Fitness stock has almost fully recovered from the pandemic’s losses, and once the COVID-19 epidemic is over, it still has a bright future. Although Peloton (NASDAQ:PTON), a manufacturer of high-end fitness equipment, has received a lot of attention recently, working out from home isn’t necessarily a viable alternative to going to the gym. Many people love the variety of equipment that gyms offer, don’t have enough space in their houses for gym equipment, or prefer to exercise outside of their homes.


The company has recently topped 2,000 facilities in the United States, and it anticipates growing to 4,000 clubs or more, giving Planet Fitness plenty of room to expand. The gym stock appears to be a sensible long-term investment due to its high margin operation and low cost offering.



  1. RE/MAX holdings (Stock code: NYSE:RMAX)

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It shouldn’t come as a surprise that RE/MAX is on this list considering how well the housing market has performed since the outbreak. The corporation is in a good position to profit from the housing boom, which shows little indication of slowing down because it leads the world in residential real estate sales by transactions. Today, the brand has 135,000 agents in 8,000 offices across 110 countries and territories.


The company has been steadily expanding in recent years following a decline during the housing collapse of 2007–2010, while revenue declined in 2020 as a result of incentives provided during the pandemic in the spring, when the housing market briefly froze. However, so far, things seem to be going well for the market, with existing house sales on track to reach highs not seen since 2021 and revenue rising during the first half of the year.


RE/MAX is a desirable option for dividend investors due to the company’s track record of increasing its payout and its current dividend yield of 2.9%.



Should you invest in franchise stocks?

Franchise stocks are difficult to categorize because they come from a variety of industries, such as restaurants, retail, and travel.


Publicly traded franchise businesses do, however, frequently share some characteristics. Since the franchise model transfers the risks and fixed expenses to the franchise owner, they are high-margin enterprises. They also frequently have valuable, well-known brands that provide them a competitive edge.


Although there are rare exceptions, these firms often have been around for a while because the franchise model works best with well-known names. Numerous franchise businesses also trade as dividend-paying stocks, a telltale sign of a stable firm.


Overall, there are several benefits to this company strategy, including high profitability, quick expansion, and cheap fixed costs. Franchise stocks probably deserve a position in your portfolio if you’re searching for a combination of expansion and consistent, recession-proof profitability.




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