Car franchises

Most franchises are going to be in the narrow niche of vehicle maintenance. So, some positive things, especially with the pandemic, there aren’t many new cars being sold. It’s a lot of used cars. Prices have gone up nearly 30% for used cars, a lot higher than inflation. So, there are a lot more people driving cars than ever before. And they’re not buying new cars so these used cars need maintenance.

Now, there’s also a lot of technology changes and there hasn’t been a period in time where there have ever been more electric cars, and electric car markets are growing double-digit growth in the United States. So, for the next few years, although vehicle maintenance might look positive, if you look 5 to 15 years out, it might be a different story, especially as electric cars don’t need as much vehicle maintenance.

So there are some good options in the car industry in car franchises available. However, before you rush in, really understand that this industry is going through changes. And you should best understand what is your time horizon for the investment? Are you going to buy a property and invest all your capital into that property to open up a vehicle maintenance franchise, or you’re looking more for a business that you hold for 3 to 5 years and then sell for a profit?

Automotive Industry

The average royalty for car franchises is 6.8% so it’s definitely higher than a food and beverage franchise that’s around 4%. And it’s going to cost you around $300,000 to $400,000 to open up an average car franchise. We’ve also looked at thousands of loans that have been issued to franchisees in the car industry. The default rate is pretty high. For every four people that pay their loan back in full, there’s one person that defaults on a car franchise loan. So that’s not a very good stat, especially, when you look at non-franchise car businesses where it’s 10 to 1.

So ordering a car franchise is not going to be more secure than an independent business. Are there some car franchises where the success ratio is better than 10 to 1? Yes, definitely. Are there some car franchises where the success ratio is, like 1 every 2 fails? Yeah. There are few.

The industry, as a whole, especially when you look just at franchises, has not been that successful. However, some car franchises have a very high success rate, and you don’t have to invest so much capital to start.

The automotive industry is one of 15 or so industries we have available on Vetted Biz. I do encourage you to take a look at our website at www.vettedbiz.com, where you can compare all different types of metrics and benchmark across different industries, as well as, over 2,000 franchise concepts.