Can Artificial Intelligence help your business? Yes, but it can also hurt it. We asked ChatGPT "What are the best franchises" and the results were underwhelming.
If you run a business you have likely been hit up by multiple "AI Bro's" promoting how amazing AI is and how our business will fail without using Artificial Intelligence. All these people are of course selling something so before moving ahead I decided to test AI, ChatGPT specifically on knowledge in our industry, the world of franchising.
"What are the best top 10 franchise opportunities" we initially get some good information:
Research the franchise: Look into the franchise's track record, business model, franchisee support, and financial requirements before investing. Seek advice from experts: Consult with a franchise attorney, financial advisor, or business consultant before making a decision. So basically call Franchise City.
Consider your interests: Choose a franchise that aligns with your skills, experience, and interests.
Assess the market: Analyze the demand for the franchise in your area and research competitors.
All great information until ChatGPT tries to give examples in its own created Top 10 list. Spoiler alert, this list is terrible. #2 in its top 10 best franchises list is 7-Eleven, a franchise with terrible franchisee satisfaction, in fact 9 out of 10 7-Eleven franchise owners say owning the franchise has had a negative impact on their health! 7-Eleven is not highly profitable that is why you see most owners working in the stores. Their royalties exceed 50% and increase the more money you make and multiple other problems we have covered here on the channel. Ill place a link at the end of the video. #3 top 10 franchise is Subway, a franchise that has closed thousands of stores the past few years, they reportedly closed as many as 2400 stores in 2020 alone and lost nearly 120 billion in sales during the onset of the pandemic. Until recently Subway had the second lowest revenues of all major franchises on the QSR50 at $375k gross. H&R Block we have also covered here on the channel look at how many franchise locations have closed in the past 3 years. McDonalds is a strong brand, good profits but they have a pretty saturated market and most great territories are gone, and cost over a million dollars to open.
Basically every franchise on this list has been chosen for the wrong reasons. You can see ChatGPT is focused heavily on number of locations, 7-Eleven 70,000 locations, Subway, 44,000, Pizza Hut 18,000. But number of locations can actually be a bad thing for a buyer as the market is likely saturated, and average store earnings are often lower than with an emerging brand.
Even when we tried a more specific search "What are the top 10 most profitable franchises?" we get another error we refresh but look at this new list. Subway - one of the lowest earning franchises on the QSR50 that has closed thousands of stores made it again! RE/MAX is listed, they dont even include any earnings in their disclosures, generally not a good sign, and RE/MAX has closed almost 250 locations over the past 3 years. 7-Eleven made the list again we covered the problems with that brand previously, certainly not in the top 10 most profitable. Now McDonalds is a decently profitable franchise but is it as ChatGPT suggests one of the most profitable franchises in the world? As of their latest FDD 80% of McDonald's restaurants had annual sales volumes in excess of $2,700,000; approximately 74% had annual sales volumes in excess of $2,900,000; and approximately 66% had annual sales volumes in excess of $3,100,000. Their highest earning store did $16,757,000, the year before just over 10 million and the year before around 9 million.
Even they have been closing stores the last few years perhaps as a result of market saturation. Also, I have seen a much more profitable franchises, one in the senior care space whose most profitable unit was doing an incredible $55 million a year with an only $150,000 investment. None of these franchises listed by ChatGPT even come close to that number and the most most profitable franchise is not even mentioned.
So why did Artificial Intelligence get everything so wrong? Well ChatGPT seemingly relies on the same old very bad and very incorrect lists that everyone posts online. This includes mainstream media outlets like The Franchise 500.
Sellers of AI solutions suggest you can just click a button and pump out hundreds of contextual articles and video content, but given the results I think we will stick to the old fashioned way. #franchisecity

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