Choosing the Best Franchise For You- Will it be Trending or Trendy? You Do the Homework
Trending Franchises 2022
As any entrepreneur will tell you, doing the proper amount of homework and researching a brand can make a big financial difference. One very important nugget that’s important to decipher is the difference between “trending” and “trendy.”
Simply put, trendy is something that is new and hot in the moment. Trending is something that is steadily growing in popularity with possibilities for staying power and long-term success. Question is—how do you know?
The first step is figuring out if the concept is an industry or a product. I often go back to the bagel business in the 90’s when everyone was excited about bagels. Turns out, bagels, delicious as they are, are not an industry. Bagels are a product and pretty much anyone can add a bagel to their menu. Although bagels themselves are here to stay, bagel-only establishments either reinvented themselves with additional offerings on the menu or they fizzled.
The next step is to determine if a concept is economically viable. Back in the early 2000’s eBay stores were very popular. Nobody looked at their economic stability. They hadn’t really been invented yet and there wasn’t a set of economics that worked. Although they were a great idea, many eBay stores went away just because they were not financially feasible. The average product would have to be $200 just to make a profit.
There are some ideas out there that have worked, like women’s-only fitness. A fitness center targeting women was non-existent until Curves came out. Curves saw a need and filled that gap. The result was great business, and they are celebrating 30 years of providing a niche experience to women. What Curves essentially did, was to create more of a business model issue than a segment issue. Women’s-only fitness continues to be a strong segment and has evolved, paving the way for boutique fitness concepts positioned for long-term success.
A well-constructed industry has been created, opening the door for strong trending franchises like Xponential fitness. From my vantage point, Xponential has done an amazing job in regard to consolidating boutique fitness with a robust back-end system. Again, there was a solid foundation to build on.
You can’t ignore the trends. Service-based businesses are hot, have been for at least a decade and will continue to thrive thanks to market demand. These are businesses like insulation, gutters, roof replacement, window coverings, garage refinishing, and remodeling. There are hundreds of service-based home concepts that work out of offices, work out of homes and best of all, are low-cost. They are performing well, economically, with a good return on investment. There is an economic need for these businesses. With inflation up, housing prices still unattainable for many, and the economy unstable, consumers are more apt to make necessary repairs and improvements on their current homes.
Due to the COVID-19 pandemic, these types of concepts expanded at more than 8% per year. While many other concepts were closing or shrinking, these businesses exploded. There are a lot of reasons, structurally speaking, why they will continue to do well. They compete very well in large market spaces in which there is highly fragmented competition.
The “It” Factor
So, what is the “it” factor? What makes a certain type of franchise or emerging industry trendy? What makes people stand in to sign franchise agreements regardless of viability?
There are several things.
- The industry itself matters. If it is in the restaurant industry or something that is considered sexy, there will be a lot more interest. Let’s face it, if there’s a cool new concept restaurant that’s showing up on celebrity Instagram accounts, everyone wants in on that investment.
- A new idea or a new product tends to catch people’s attention. Restaurants that serve poke bowls, for instance, are very popular and trendy. I’m personally not convinced it is going to last, but it is very trendy.
- Look for what is in high demand. If it is an ice cream shop and there is a line of people standing out front every Saturday night then everyone will get excited and want to invest.
- Lower investment opportunities tend to get people more excited than higher investment opportunities. They are more attainable, because there are more people who can invest $150,000 dollars than a million dollars.
- People are also more interested in storefront businesses. It doesn’t mean those are better business opportunities, but they are more popular in the eyes of prospects.
Study the Franchise from Many Angles
What prospective franchisees should understand is that change is inevitable. What’s working now, may not be viable long term. Conversely, trends can be cyclical and what’s old is new again.
There are many variables that come into play. Right now, for example, the cost of metal has gone up dramatically. Any business that deals with metal, such as containers for junk removal, has had their P&L impacted.
In a down economy, investors tend to focus on lower cost office or home-based businesses. They don’t want to get into leases in a down economy. In an up economy, you see more interest in storefront businesses.
Trends, economics, the general sense of what is happening in a community really does affect what is trending, for entrepreneurs looking for a lucrative franchise. People need to do their homework to know the proper combination of opportunity and staying power. Additionally, having a sense of history can also be helpful in predicting the future.
Rick Bisio is one of the countries most respected franchise coaches and author of the Amazon best seller, The Educated Franchise – 3rd Edition. Since becoming a franchise coach in 2002, Bisio has assisted thousands of aspiring entrepreneurs nationwide through franchise resales and helping them explore the dream of business ownership.