What’s Working in the Franchise Industry Today?
It’s easy to make the assumption that when times get tough, people run for the hills and certainly don’t take the risk of starting a new business.
Ironically, it’s exactly the opposite, when times get tough, people start businesses. Based on U.S. census bureau statistics, over 4.4 million new businesses started in the U.S. in 2020 – literally, the highest amount ever on record in U.S. history and almost 25 per cent increase from 2019 – mind blowing! 2021 continued with similar exponential growth in entrepreneurship with over 500k new businesses in January alone. With all of this growth in entrepreneurship, we’ve seen similar growth in franchising. For those folks that have entered entrepreneurship for the first time, franchising offers a valuable and effective way to start a new business with support and guidance from the franchisor.
Who makes up the majority of the franchisee’s buying franchises in today’s market?
Franchisees who have invested since March of 2020 come from all walks of life and areas of the U.S. and Canada as they do in most time periods in franchising. But what is unique about today’s buyer is the influence of COVID on many sectors of business has also driven people into the market who otherwise may have stayed at their job or current business. COVID has in a sense forced many people to pivot to a new line of work and created urgency for franchise buyers. Most recently, Franchise Marketing Systems has a client, Dumpster Today, which rents dumpsters for construction jobs and residential clean outs. The Franchise launched in 2021 and has sold its first seven franchise territories. Of those buyers, over half were people who either owned a successful business which was shut down by COVID or lost a job due to COVID and were looking for a new opportunity. Essentially, the majority of this new franchise brand’s growth has come because of COVID driving people into franchising. We have seen this in many instances where people who may have at one point looked at their job or career as being safe and consistent and then something like COVID happens and they realize that they don’t have the stability they once thought they did and therefore can justify the risk to start their own business or franchise.
The demographics of franchise buyers are increasingly more and more diverse and broadly defined which is great. Women, minorities and people of all ages are investing in franchises and taking the first step towards owning a business. This can also be seen on the franchisor side, an amazing influx of minority owned franchise systems can be found across the country including brands such as Salon 809, Morning Dew Massage, Joe’s Gourmet and Masti Indian Restaurants. The diversity and growth of all population segments in franchising showcases the opportunity for literally anyone to join the franchise industry and benefit from business ownership.
So, what segments in franchising have grown and trending in today’s market?
The interesting thing with the pandemic is that we’ve seen a fluctuation in market segments depending on what is the current status of COVID. When the pandemic first set in, Fitness, Food Service and Retail models took a major hit as understandably, people were concerned about investing in franchises that required the customer to go into a location. On the other hand, service franchises grew at an enormous pace. Painting, Roofing, Fencing, Landscaping and other service segments in franchising literally took off as people rushed into these “Pandemic Proof” industry segments and bought franchises as fast as they could find the right brand to invest in.
Now, in 2021, it seems that food service, fitness and some of the more traditional brick and mortar-based franchises have returned to high levels of growth and prosperity as well. People are investing in all segments it seems and have gotten past the concerns related to the pandemic and there have been monumental success stories throughout the year including several franchise systems taking the brand Public and multiple large franchise system acquisitions by Private Equity firms. Virtually every franchise brand has had exceptional growth in 2021 and many franchise brands have broken records for sales activity. Some brands that are particularly exciting and have really taken the market by storm this year.
Anodyne Pain Management is a pain management services clinic which provides wellness services to clients from a retail location model. The brand has added 30 new franchise units during the pandemic and is picking up momentum with an increased demand for health and wellness services. Green Earth Pressure Washing is a commercial pressure washing services franchise that has been able to cover the entire state of Florida with new franchise locations, the brand is well positioned to scale over the coming years. Teaspoon Boba Tea has added over 50 new units since the pandemic and is taking the Boba tea market segment by storm. Kika Stretch, a boutique fitness and wellness services brand has grown to almost 20 units during the pandemic and is also picking up momentum. The industry segments are diverse, unique and showcase how much growth there is in the franchise industry overall.
One thing for certain is that even with the pandemic, franchising is alive and well and the market is doing as well as it ever has. Both franchisors and franchisees have been able to expand their businesses and brands during the global fight with COVID. We have also seen a rise in businesses and brands which specifically provide services related to managing COVID. Florida based franchisor, Titan Remediation offers a COVID Sterilization service franchise which provides services to residential and commercial clients throughout the Southeastern U.S. and with the growth in demand, the franchise model was developed to offer franchisees a low cost, service based franchise system that could help people with the growing demand for COVID relief services. Along with several other brands including Citrusolutions and Safe Spray, the opportunity to scale a business offering services for COVID sterilization, the consumer market demand for these services has driven franchise growth and innovation.
Chris Conner has spent the last decade in the franchise industry working with several hundred franchise systems in management, franchise sales and franchise development work. Chris is a franchise consultant and has a specialized focus in franchise development and franchise consulting work. Mr. Conner leads the Franchise Marketing Systems team in franchise consulting and franchise development projects. He holds a B.S. from Miami of Ohio in Oxford and an MBA in Finance from DePaul University.