Retail Franchises

Franchises in the retail industry are among the fastest-growing in the current business climate. They provide a wide variety of services and goods, from health and wellness to home remodeling and pet care. And while quick service restaurants are making a comeback—despite longer wait times—retail franchises benefit from more consistent demand and lower operational costs. Entrepreneurs who are interested in opening a retail franchise also have greater freedom and options than ever before. Ultimately, ​​prospective franchisees can find a franchise opportunity that best suits their needs in terms of industry, investment requirements, and personal interests.

We know this model works, because retail franchises have been around for hundreds of years. Whether that was selling salons or sewing machines, franchising has been a major driver in business growth and success—especially in the industrial revolution. In the modern-day United States, franchising has taken the retail industry by storm, and many successful entrepreneurs have invested in their own franchises. So what exactly is a retail franchise, and why are they so important today?

In this article, we’re going to explore:

  • What are the concepts and features of a retail franchise?
  • What retail franchises are for sale?
  • What is the biggest retail franchise?
  • What are the most successful franchises in retail?

What Are Franchises in Retail?

First and foremost, retail franchises are businesses you can invest in as a franchisee that sell commercial goods and merchandise under a well-known brand, trademark, or product line. In retail franchising, you’ll own a store that sells a product or service—for example, clothing at a boutique or doggy daycare. Retail franchises cover a wide range of industries, from fashion to home furnishings to hardware. That means you can pick a franchise that matches closely with your interests.

Retail franchises in and of themselves are focused on the individual owner rather than a large corporation. Franchisees often oversee day-to-day store operations including hiring and training personnel, maintaining inventory, and providing customer service. What is a retail franchise benefit? You have the freedom to operate a franchise business on your terms—i.e. be your own boss! The franchisor then offers support in the form of training manuals, marketing materials, and other resources. These are all things you would have to start by scratch (if you started a business rather than opened a franchise). 

Can You Franchise a Retail Store?

retail clothing franchise

Yes! You can franchise a retail store just like you can franchise a quick service restaurant or home improvement business. In fact, franchising is a popular method for retail companies to grow their customer base and overall brand recognition. However, as with all franchises, it’s important to remember that opening a retail franchise is no small undertaking. It requires a lot of time and finances to get started. You’ll also have to stick to the guidelines provided by the franchisor. But franchisors will provide you with a detailed franchise agreement and operating system. They’ll also help with educating and supporting you throughout your ownership!

What Is the Difference Between a Retail Store and a Franchise?

While both franchises and traditional retail businesses sell products and services directly to consumers, the main difference is in the business model and ownership structure of each. In general, a retailer makes a profit by buying products in bulk from manufacturers or wholesalers and reselling them to consumers. This structure is true of both chain stores and individually owned franchises because they each sell products directly to consumers in small quantities. That means, in most cases, retailers are the last link in the supply chain.

Major retail stores—or chain stores—are owned by the parent company that runs all of the locations and shares the brand name and product offerings. In other words, chain stores are corporately owned and don't have individual owners. That means they have a large network of resources and policies that each store implements in their operations. 

Ultimately, you can summarize chain retail stores as:

  • Owned and operated by a corporation that determines all aspects of running the business
  • Exists under the authority of a corporation to decide on site locations, inventory management, marketing, and promotion
  • Not having recurring royalties or licensings fees
  • Having to build their own name recognition and business infrastructure
  • Able to respond to shifting market conditions and evolving consumer preferences

On the other hand, retail franchises are owned and operated by franchisees who invest their time and money into licensing a well-known business. As a franchisee, you would be required to utilize the franchisor’s trademark, brand name, and other materials. So rather than being operated by corporate, franchise owners are solely responsible for their store. They can maintain consistency in their retail franchise by using materials provided by the franchisor. For example, franchisors often provide training guidelines and marketing materials like signage, coupons, etc. One of the best things about franchising is that all of those advantages continue during your time as an owner by paying royalties.

How do you summarize retail franchise stores? They:

  • Are independently owned and operated by a franchisee, using a proven business model
  • Follow the standards set by the franchisor, including locations, inventory, marketing, and promotion
  • Require regular royalty payments for use of trademarks
  • Offer pre-existing brand awareness and promotional backing
  • Benefit from the franchisor’s extensive training and constant support

So what are franchising features advantages and disadvantages compared with chain stores? The main advantage is being your own boss and maintaining control of the store without oversight. Because you have a financial stake in the franchise, you’re more likely to make the store great for employees and customers—which means more financial success for you and your business. With retail franchises, you’ll also get help from the franchisor in training and marketing—among other things.

One disadvantage is that you’ll have to pay royalties to the franchisor. That means your financial success also relies on making enough to pay the fees set by the franchisor. There’s also the concern of the initial financial investment that can make it difficult to break into the business. 

In the end, the advantages of franchising outweigh the disadvantages. You can find financial success by investing in the right business. If you’re still unsure where to start, Franchise Gator has resources that give you all of the information you need—plus a list of hundreds of franchises available for you to invest in today!

What Is an Example of a Retail Franchise?

One of the most successful retail franchises you can invest in is Batteries Plus. With over 700 locations and 30 years of experience, Batteries Plus has been consistently ranked as a top 500 franchise opportunity. The company specializes in selling and servicing batteries, light bulbs, key fobs, and mobile phones. Not only that, but as a leading franchise in the battery and technology industry, Batteries Plus serves both consumers and businesses. 

The company can help customers with all of their battery needs, including: 

  • Common Consumers Uses
    • Fire exits
    • Lawn and garden
    • Marine
  • Common Commercial Uses
    • Forklifts
    • Medical devices
    • Backup batteries for large commercial applications

Batteries Plus also offers other services like cell phone repair and lighting solutions. Franchise locations provide a wide range of services for customers' mobile devices, including battery replacement, as well as camera and button repairs. Batteries Plus is also a one-stop shop for all of your lighting needs, whether it's for the home or a commercial space like a warehouse, hotel, parking garage, distribution center, etc.

If you’re interested in investing in Batteries Plus or other popular franchises and existing franchises for sale, Franchise Gator provides you with all of the information you need about any financial requirements, franchisor details, and training and support. 

What Is the United States Largest Retail Franchise?

Founded in 1924, Ace Hardware—a home improvement and hardware store—is the largest retail business franchise in the United States. Have you ever heard “Ace is the place with the helpful hardware folks”? Ace really emphasizes their dedication to helping their customers. This is reflected in their success as a business. There are over 5,000 locations owned and operated by entrepreneurs in their local communities. Ace sells tools, hardware, plumbing supplies, and even outdoor living equipment—and more! Many Ace Hardware shops also offer services like tool rental, blade sharpening, and minor engine repair. Ace Hardware also has a handyman service for at home repairs!

How to Open a Franchise Retail Store

There are a number of things that you need to do in order to open a franchise retail store. These requirements may vary from one franchisor to the next and from one industry to another. The general outline of the steps are below: 

1. Research 

To begin your franchise journey, you need to first research retail franchises and find a business that aligns with your interests, skills, and financial goals. The best places to learn about available franchises include websites like Franchise Gator, trade publications, and franchise expos. When you’re doing your research you should:

  • Ask questions ,such as the franchise’s history and financial performance, to learn about the retail franchise.
  • Find information on the franchisor and how they help their franchisees—like the financial disclosure document (FDD) or the materials they provide.
  • Make connections with both current and former franchisees to gather valuable insight. Learn about their time with the franchise, any difficulties they encountered, and the help franchisors provide.
  • Learn as much as you can about the franchise's target market and the industry it operates in. Investigate any trends, opportunities, or risks that could have an impact on the franchise's bottom line.
  • Analyze the franchise's income statement, balance sheet, and statement of cash flows to determine its financial health. Track long-term trends and evaluate the franchise's benchmarks compared to the industry standards.

2. Evaluate the Current Market

After reviewing the available opportunities, you should evaluate whether or not the retail franchise will work in your area. Does the industry fit the current market? Before you make the decision, you should do your due diligence and make sure it is in demand.

  • Learn about the trends and future outlook of the franchising business. Investigate potential franchise opportunities and risks within the industry.
  • Consider how a new franchise would set itself apart from the competition and search for gaps in the market that it could fill.
  • Review the average age, household income, and level of education of the population in your target area.

3. Form an LLC or Corporation

Forming a corporation or LLC is important to keep your personal assets separate from your business assets—it also helps with liability. To establish an S or C corporation or Limited Liability Company (LLC), you should follow these steps:

  1. Pick a name for your company
  2. File articles of incorporation or organization
  3. Obtain the necessary licenses and permits
  4. Get a Tax ID Number (TIN)—also known as an Employer Identification Number (EIN)
  5. Set up a business bank account
  6. Register with your state's labor department

If you want to make sure you're not breaking any laws or will have to pay any fines or penalties, you should consider consulting a lawyer or accountant.

4. Start the Application Process

After doing some research and settling on a retail franchise, the next step is to fill out an application. It's important to note that not all applicants are approved as a franchisee. You will be subject to vetting during the application process, just as you have reviewed franchises. Retail franchisors will take into account the following factors:

  • Your finances—Do you have enough money to operate your business long-term?
  • Your background—What is your education and work history?
  • Your proposed location—Is the area and target market a good fit for your business?
  • Your motivation—Why are you interested in starting a franchise?
  • Your concerns—What stands out regarding the business and the franchisor relationship?

Your application should conclude with a call to action, such as requesting a follow-up phone call or an in-person meeting. This demonstrates your enthusiasm for moving forward with the franchise. 

Your application may also require a franchise business plan. In short, a business plan is an outline of a company's goals and strategies for achieving those goals. It helps you think about the most important parts of your business before you are accepted as a franchisee. Overall, these plans should include information about products and services, marketing research and strategy, financial projections, and a budget.

5. Get Financed

Before you’re approved to own a retail franchise business, you’ll most likely need funding. Whether you’re financing it yourself or in need of a bank loan, you’ll typically need a minimum amount of liquid cash and net worth to get started. Commercial business loans and lines of credit are two of the most used financial options available to retail franchise owners in need of startup capital. But it helps to have a solid credit score and a history that makes a lender comfortable with the risk they're taking on you. These requirements are usually set by the franchisor, and without the right funding, you will most likely be rejected for the franchise. Ultimately, before you put pen to paper, ensure you have secured sufficient funding for your company to operate. 

According to the US Small Business Administration (SBA), you can get funding using three different methods: self-funding, investors, and loans. 

  • When you self-fund, you use your own money to back your company. You assume all the financial responsibility for your company but also keep all the profits. Self-funding can involve:
    • Borrowing money from family and friends
    • Dipping into savings
    • Cashing in a retirement plan
  • When you seek money from investors, you're securing financing to help your new business get off the ground. Obtaining venture capital typically requires giving up some control and/or equity in exchange for the funding. There are several key ways in which venture capital stands apart from more conventional forms of funding.
    • Investors look for companies with high growth potential.
    • Investors offer capital in exchange for a stake in the company.
    • Investing provides a greater window of opportunity for returns than traditional approaches like loans.
  • Small business loans can be a good option if you need money to get started but would prefer to keep full control of your company. Developing a five-year company strategy, an expense sheet, and financial projections will boost your chances of getting a loan from a bank. These resources will help you choose a reasonable loan request amount and will reassure the bank that they are making a good decision by lending to you.

6. Review and Sign the Franchise Agreement

It's important to note that you and the franchisor are legally bound by the franchise agreement—which is a legally binding contract. These contracts are lengthy and may contain complicated language; seeking legal counsel may be helpful. Take the time to learn the ins and outs of the contract, as well as your specific rights and responsibilities.

What’s the Result?

Now that you understand how to buy a retail franchise, you can take the next steps in finding the right fit. Once you decide on which franchise to invest in, you’ll have the tools you need to develop a plan. That means you can reach out to franchisors and banks to secure your franchise! 

If you want to get started on your retail franchise today, you can look at all of the opportunities available on Franchise Gator. We have a wide selection of franchise options to choose from, so you can be sure to find the right fit. Using Franchise Gator, you’ll take the first steps to being a business owner!

What Are the 4 Ways to Become a Franchisee?

While the process of becoming a franchisee follows similar steps as laid out above, there are four things you can do to prepare yourself. Between finding your passion and speaking with experienced franchisees, you’ll be able to determine which company is the best fit for you.

  1. Researching a franchise and making an informed decision is essential in determining which franchise is right for you. But so is considering your own talents, experience, and enthusiasm for the business to make the best choice. Finding a field of business that meshes well with your skillset is crucial.
  2. There is a wide range of costs associated with franchising, so it's important to analyze your finances to determine what you can afford before making a commitment. If you want to be successful with a franchise, you need to fully commit and buy-in to the business model they promote.
  3. Do your homework on the franchises that exist in your target market. Compare and contrast any franchise you're thinking about investing in, and use resources like peer reviews, ratings, and award nominations to get a feel for the quality of each business.
  4. In addition to consulting professionals, talking to as many current and past franchisees as possible is indispensable. Ask them as many questions as possible. Visiting a franchise's physical location is highly recommended by many companies. Some even provide shadowing programs in which you can spend a day in the life of an established business owner.
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Why Buy a Retail Business?

Purchasing a retail franchise business in 2023 provides a turnkey solution to entrepreneurship, offering the advantage of an established brand, proven business model, and ongoing support. As the economy rebounds post-pandemic, consumer spending is expected to rise, making it an opportune time to enter the retail sector. Franchises often come with built-in customer loyalty and brand recognition, reducing the time and effort needed for marketing and customer acquisition. Additionally, you'll benefit from economies of scale in purchasing and have access to a network of fellow franchisees for support and best practices, thereby mitigating many startup risks.

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