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Franchising Trends

Franchising Trends

With franchising growing every year for the past six years, the successful franchisees and franchisors, for that matter, stay on top of societal trends to keep business booming.

Demographic Changes

US population shifts impact today’s consumers and as well as the labor force. Owners must adapt to this shifting base to mine growth opportunities:

Millennials- This cohort, born roughly between 1981 and 2000 affect everything because of their sheer numbers which are greater than that of baby boomers. Raised on the internet and technology, this group loves to be catered to. They want the owner to know what they want before they even go shopping!

Baby Boomers- As they age, boomers need new and customized services including housing, fitness, aging parent assistance and financial and retirement planning. Other programs and services tailored to their aging experiences will be in high demand.

Minorities- A new majority consisting of Hispanics, Asians and African-Americans is being formed. The growth here presents new opportunities for franchises focused on serving these groups.

Growth Areas

Recession-proof businesses- Businesses like shipping and packaging, hair care, tax preparation, childcare, pet care, computer services and many more do well in any economy. House cleaning and mailing services businesses especially appeal to those who want to stop doing maintenance work in order to pursue more life-fulfilling activities.

Personal care- This includes fitness centers, spas, tanning centers, healthy fast good and tailored education programs designed to improve physical appearance and mental well-being.

Green businesses- With LEED-certification and other guidelines aimed at sustaining and improving the environment, opportunities have arisen in areas such as home improvement, energy savings and green home care.

Staying current with these trends helps the franchisee and franchisor stay relevant in the ever-shifting market.

Fred Morache is a franchising expert and a partner in Postal Connections of America and iSold It franchisors.

The History of Franchising

The word franchise originates from the Anglo-French: franchir (to free) and franc (free). The concept of franchising slowly developed in Europe from roots going back to the middle ages. Back then, titled land owners granted rights to people to hold fairs, operate markets and conduct other business on their land. The rights became rules and as such, part of European Common Law.

The Sewing Machine

In the US, credit for beginning modern franchising, goes to Isaac Singer, founder of the Singer Sewing Machine Company. In the 1850s, Singer wanted a wider distribution for his sewing machine but did not have the cash to increase manufacturing them.  Another issue he faced was that people would be reluctant to buy his machines without some type of training which was not provided by retailers at the time.

Singer decided to assess licensing fees to individuals who would own the rights to sell the machines in certain geographical areas. The licensees also were responsible for teaching customers how to use the machines. This created a platform for making a sewing machine commercially available to the public.

Howard Johnson and Ray Kroc

In 1932, Howard Johnson established the first modern restaurant franchise system stemming from one successful restaurant in Quincy, Massachusetts. The concept was to allow independent business people to use the same name, supplies, logos and procedures in exchange for a fee.

Ray Kroc was a salesman of milk shake makers. When he bought a small hamburger joint in 1954, he saw that the owners had perfected a high-volume food production system that combined fast service and low costs with consistent food results. Kroc became their licensing agent and first recruited franchises in the Chicago area (The first was in Des Plaines, IL, a northwestern suburb of Chicago).

The franchising business method got so big that the International Franchise Association was founded in 1960. Their purpose was to provide guidance to the entire industry. In 1978, the Federal Trade Commission got involved by creating laws designed to protect franchisees.

The franchising system has a stalwart history and has proven to be the path to success for many an entrepreneur.

Five Reasons to Buy a Business

The franchise business has weathered the recession better than most industries and it shows considerable promise moving forward. Plus, this is the time when more people are patronizing local shops allowing for the flourishing of family capitalism rather than big business capitalism.

Good reasons to buy right now include:

Seasonality: Be ready to take advantage of the seasonal spikes that occur during the holidays. This can make a huge difference in revenue if you time it right. For example, Postal Connections of America does 2 to 2.5 times their average monthly volume between Thanksgiving and Christmas. That might be the best time to buy that franchise.

Financing: Not only may sellers and franchisors be more willing to finance but other funding options such as SBA loans, penalty free 401k funding and using unsecured credit are being made more readily available. This trend is definitely headed in the right direction especially when compared with a few years ago.

Buyer’s Market: Right now, prices on business and the equipment to run them (including real estate) are lower than usual. As with the stock market, it’s good to buy low and sell high which makes now a fertile business buying time.

When it comes to leases, landlords are open to negotiating favorable terms on prime space for a new franchise operation.

In addition, interest rates are at all-time lows. If you have a good credit history, you will be able to find excellent interest rates. Keep in mind that as the economy continues to heat back up, so will expenses.

Job Market: In addition to it being a buyer’s market for opportunities, it’s a good market for hiring qualified employees. Because individuals in all sectors are experiencing layoffs and downsizing, it’s highly probable that you will be able to get the right individuals to help your business prosper.

Risk: If you are concerned about the risk of going it on your own, an established franchise system reduces the worries of business ownership entry. In fact, it’s one of the big advantages of franchising. You build on the experience of a franchisor and established franchisees that can support and guide you through the process. Another positive is that a franchise system offers the buying power, efficiencies of scale and training you need to build a successful operation.

If you have a dream to be a business owner now is the time to go out there and make it happen.