Twice a year we invite over 100 franchise brands to send their best people to brief us on the state of their business. Mid July we had 126 brands brief us, over 300 franchise professionals represented those brands. Here are some of my takeaways. My clients get a deeper dive into these, and other, topics.
First, some industry wide trends.
Franchise lead flow is down overall for franchisors that develop their own lead flow, but in some cases lead quality is up.
What does this mean to you? Well, if you are looking for franchises you may find franchise salespeople that are more eager to “sell” rather than qualify candidates to be offered a franchise. Make sure you follow a good investigative process and focus on gathering a lot of quality information rather than getting sold the sizzle. Review those FDD’s closely.
Franchise brands operate in a very competitive lead market, the best of those brands often have access to candidates referred by people like me who build relationships, get referrals and have a public presence that candidates reach out to. Those brands have either held steady or grown their activity and are under less stress right now. Many of the brands we spoke to this month are growing at robust rates.
Options are growing. There were thousands of franchise brands before this year, there are more now. As you look at new or emerging brands be sure to consider them from a business perspective instead of a raving fan perspective. This means to consider the cycle any particular business may be on, the team at the franchise office that will support you and the infrastructure they have built. Most importantly, can they replicate the model, can they teach it to you and will they be there to give you all the support you need for years to come.
Real Estate continues to be a competitive part of the start up process, though it may be easing a bit. We are hearing that while it still takes a little time to find the location a franchisee wants, the lease negotiations and tenant improvement funds are getting better slowly. I would still plan on 6 months to a year to find a site, negotiate a lease and build out in most cases. There are definitely more exceptions popping up, we occasionally hear of a small site with modest build out opening in just a few months.
Finding staff is improving slowly. Trends in the market are working in favor of finding staff and the old pipeline of hourly, especially entry level, workers is slowly rebuilding as we expected it to. Some of the side-gig opportunities like Door Dash have diminished so the workers that left hourly jobs for side-gigs are returning and new employees are entering the market.
“There’s riches in the niches”, I heard this more than once in these meetings. While cute and fun to say, I don’t know about riches, but there is definitely opportunity.
Franchise brands have been focused on big urban and suburban markets for a long time, now brands are figuring out how to serve smaller markets well. I spoke to a few brands, both services and retail, that are building solid locations in small towns.
Over time, with the move to big box stores and malls, a lot of National brands left small towns. Now that malls and big box stores are getting competition from online shopping, they are closing some of their big expensive locations and local consumers don’t have those options within reach.
I am seeing high service, high quality, offerings that fit rural towns as well as they do those larger markets. One of them, when I asked, listed towns like the metropolis of Tupelo, Mississippi as home to two very successful locations. Tupelo has a population under 40,000 people with an average income that is often half of larger suburbs. Yet, it is in that niche that a franchisor is finding loyal customers for a high-end product in two locations, and that was one of ten towns they rattled off.
That said, large brands are having great success as well. Select brands in fitness, home services, commercial services, insurance services, senior services, food, beauty, wellness and medical are hitting home runs daily. What makes them stand out is often the quality of the organization they have built behind the franchisees.
Franchise portfolio brands are also growing strong. These are the franchisors that have multiple brands, usually on a theme, like home services or fitness. They have the advantage of building one infrastructure to support multiple brands. Their franchisees also have multiple brands to leverage for growth.
The long and short of it seems to be that there is strength in strength, that the best companies are leveraging their assets and growing fast.
What is your success story? Let’s go find it!
George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.
Contact the Franchising USA Expert George’s Hotline 703-424-2980.