Current Trends in the Franchising Industry

McDonald's, one of the most recognized franchise businesses in the world, was started by Ray Kroc in Des Plaines, Illinois in 1955. The brand has come a long way since, and so has the franchising industry. In many ways McDonald's is a pioneer of franchising.

Like McDonald's, the franchising industry has matured over the years. It has learned lessons along the way, embraced new ways of conducting business, survived a pandemic, and become 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 the recipes and secrets that made a particular brand successful. Franchise owners were essentially single-unit owners. They were their own bosses, hands-on with everyday operations, and made enough income from their franchise business to provide their families with a decent lifestyle.

Over the years franchisors came up with new models that let potential franchisees own multiple units or hold exclusive rights for a particular territory or state. As a result, a large share of franchise units in the United States today are owned by multi-unit operators. A franchisee is no longer grilling sandwiches or flipping burgers in one store. A franchisee today typically manages a fleet of stores employing staff and store managers, while they focus on strategy and growth.

Another trend that has picked up over the last few years is multi-brand franchisees. These franchisees typically own the franchise rights of two or more brands. The franchising model has come a long way. Now is a good time to evaluate the current trends in franchising, potential growth areas, and where franchise businesses are headed in the next few years. Let's dive in.

Trends in the Franchising Industry

Make the most of the conveniences people got used to during the pandemic

The restaurant and hospitality industry suffered during the pandemic. Many quick-service restaurant franchises responded with solutions that kept customers convenient and the business making money. Some of the conveniences that became popular and remain in demand are curbside pickup, online ordering and delivery, and outdoor dining areas. From an operations perspective, communication tools like Delightree and video conferencing let franchisors manage locations remotely and stay in closer contact with franchisees. These changes were born out of necessity, and franchise owners have realized their benefits, so they will continue to integrate them into the business model.

An environmentally conscious way of conducting business

We are living in times when we have come to realize the importance of protecting the environment and preserving natural resources. This renewed focus on being socially responsible has made franchisors and franchisees rethink how they conduct business and communicate with their target audience. Franchise chains are now taking initiatives like sustainable packaging and bring-your-own-cup programs to generate less waste. Advertising and marketing campaigns are designed to meet the expectations of a more socially conscious audience. Diversity, inclusion, accountability, and sustainable business practices are now a must-have. Businesses that build these into their company culture are the ones that will survive, franchise businesses included.

Changing demographics

Consumers and the available employee pool are very different today from what they were in the '70s, '80s, and '90s, or even in the early 2000s. Franchisors and franchisees need to embrace this change and tune their policies, workplace culture, and overall approach to employee and customer management. The US consumer and employee pool includes millennials, baby boomers, seniors, and minorities. The products and employment opportunities this broad spectrum of people demands need to be addressed, and this changing demography presents many new business opportunities for the franchising industry. Millennials make up a large share of the population, many beginning their careers or raising young families, which creates demand for goods and services tied to their growing needs. Aging baby boomers are creating a market for health and fitness programs, financial and retirement planning, elderly care, and anti-aging products and services. Seniors are creating a booming market for healthcare delivered at home or in assisted living facilities, home renovations, and customized fitness programs. These changing demographics will help dictate which industries go the franchising way.

Sectors where the franchise model is successful and growing

Nothing in life comes with a guarantee. Still, there are areas 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, you could consider sectors where franchising is booming.

Service and food: Recession-resistant businesses such as salons, accounting and legal services, logistics, child and pet care, auto maintenance and repair, home repair, and computer-related services will always be in demand. Quick-service restaurants, dairy farms, poultry farming, grocery chains, and food-related consumables stay 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, and dieticians are in great demand given the rise in childhood obesity and busy, stressful lifestyles. If you are a dietician or fitness trainer looking to create your brand and expand your business, a franchising 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 a good work-life balance and a sense of security at work. For someone starting out in the business world, going the franchising route makes a lot of sense. Your past experiences, interest areas, and these trends can help you decide on the first steps. Whichever franchise you consider partnering with, do your own due diligence and thorough research.