One of the most popular franchise businesses globally – McDonald’s was started by Ray Kroc in Des Plaines, Illinois way back in 1955. The brand has come a long way since and so has the franchising industry. McDonald’s has over 37,000 outlets spread across 120 countries. It is in a way a pioneer of sorts of franchising.
Like McDonald’s the franchising industry too has matured over the years, learned many lessons along the way, embraced changing times and ways of conducting business, survived through a pandemic, and today is one of the most sought-after business models for budding entrepreneurs.
Evolution of the Franchising Industry
The franchising model initially started out as giving an individual the right to use the brand name, branding, store format, and all the recipes and secrets that made a particular brand successful. Franchise owners were essentially single-unit owners, their own bosses, hands-on with everyday operations, and made enough income from their franchise business to provide themselves and their families with a decent lifestyle.
Over the years franchisors came up with new models which enabled potential franchisees to own multiple units or have exclusive rights for a particular territory or state. As a result, more than half of all franchise units in the United States today are owned by franchisees who are multi-unit operators with revenues running into millions. A franchisee is no more grilling sandwiches or flipping a burger in his store or traveling door to door to provide services. A franchisee today typically manages a fleet of stores employing staff and store managers, while they themselves primarily focus on strategy and growth.
Another trend that has picked up over the last few years is multi-brand franchisees. These franchisees typically own franchise rights of two or more brands. The franchising model of business has indeed come a long way. Now is a good time to evaluate the current trends in franchising, potential growth areas for franchise businesses, and where are they headed in the next few years. Let’s dive in!
Trends in Franchising Industry
Make the most of the conveniences people got used to during the pandemic
There is not an iota of doubt regarding how the restaurant and hospitality industry suffered during the pandemic. However, many quick-service restaurant franchises came up with a plethora of solutions for the convenience of their customers and of course for the business to continue making money. Some of the conveniences that became popular and continue to be in demand as we recover from the pandemic are curbside pickup, online ordering and delivery, and outdoor dining areas. From a business operations perspective adapting to communication tools like Delightree, video conferencing that enables seamless management of franchise locations remotely, and better communication between the franchisor and franchisee seem to be the new normal of managing franchise businesses. These changes and conveniences which were born out of necessity will continue to be a part of the franchise business model. Franchise business owners have realized the many benefits of these conveniences and hence will continue making the most of them by integrating them into their business model.
An environmentally conscious way of conducting business
We are living in times where we have come to realize the importance of protecting the environment and preserving our natural resources. This renewed focus and awareness on protecting and preserving the environment, and being socially responsible has made franchisors and franchisees rethink how to conduct business and communicate with their target audience. Franchise chains are now taking initiatives like sustainable packaging, and bringing your own cup for coffee kind of initiatives in a bid to generate less waste. The advertising and marketing campaigns are designed to meet the expectations of a more socially conscious audience. Diversity, inclusion, accountability, and sustainable business practices are no more good to have but rather a must-have. Businesses that integrate these into their company culture are the ones that will survive, franchise businesses included. Running an environmentally conscious business enterprise is the future.
The consumers and the available employee pool are way different today from what it was in the ’70s, ’80s, and ’90s, or for that matter even in the early 2000s. Franchisors and franchisees need to embrace this change and tune their policies, workplace culture, and their overall perspective of both employee and customer management for successful innings ahead. In short, they must change with changing times. The US consumer and employee pool comprises millennials, baby boomers, seniors, and minorities too. The kind of products and employment opportunities this broad spectrum of people demands needs to be addressed. This changing demography presents many new business opportunities for the franchising industry. There are nearly 70 million millennials in the states who are beginning their careers or are somewhere mid-way and raising young families. This media and internet generation presents a huge opportunity for franchisors and franchisees to provide goods and services related to their growing needs. The baby boomers now aging are creating a huge market for services like health and fitness programs, financial and retirement planning advice, elderly care services, educational and counseling service for young adults, anti-aging products and services; and a lot more. Seniors are creating a booming market for healthcare-related services, delivered at home or in assisted living facilities, home renovations for seniors, customized health and fitness programs for their aging bodies, etc. Simply put, these changing demographics will drive or dictate which industries should go the franchising way.
Sectors where the franchise model is successful and growing
Nothing in life comes with any guarantees, however, there are few areas in life where one can succeed more than others. If you are a franchisor planning to start a new business on a franchise model or a franchisee looking to invest in a franchise business, you could consider investing in sectors where franchising is booming.
Service and food: Recession-proof businesses such as salons, accounting and legal services, logistics, child and pet care services, auto maintenance and repair, home repair, computer-related services, etc will always be in demand. Quick-service restaurants serving fast-food, dairy farms, poultry farming, grocery chains basically any food-related consumables will always be in demand no matter how the economy is doing. Investing in these franchises is a safe bet.
Health, fitness, and personal grooming: Gyms and fitness centers, spas, sports clubs, healthy food chains, dieticians and nutritionists are in great demand given the rise in childhood obesity and extremely busy and stressful lifestyles. If you are a dietician or fitness trainer looking to create your brand and expand your business, a franchising business model may be a perfect choice.
The way forward
We are living in strange times. Doing your own thing and being your own boss seems like the best way to have that perfect work-life balance and a sense of security with regards to work. However, for someone starting out in the business world going the franchising route makes a lot of sense. Your own past experiences, interest areas, and these trends can help you decide to take the first steps. But, whichever franchise you consider partnering with do your own due diligence and thorough research.