Top 10 Trends to Watch in Franchising

Written by Dan Monaghan.

Today there are millions of franchise businesses in over 300 business categories, so there literally is a business to suit every interest and niche. According to the 2015 Franchise Business Economic Outlook report, franchising as a whole will continue to thrive. It’s no surprise as people are increasingly finding their own opportunities rather than going the route of a traditional employee income model. 2015 marks the fifth consecutive year that franchising’s growth will outpace the U.S. economy, adding over 12,000 new franchise businesses, generating nearly $900 billion in economic output, and 247,000 new jobs. But what’s really hot in franchising right now, and what’s going to continue to grow for the remainder of 2015 into 2016? Here are the top 10 trends in franchising today, many of which reflect changing consumer patterns.

The list below is a combination of actual business categories and general business trends that are taking the world of franchising by storm.

Kids/Child Enrichment

We’ve seen this category blossom, and it will continue to thrive. Any business model related to enriching or expanding the world of kids (infants to high schoolers) is hot right now. It’s about getting kids moving, thinking, reading and believing in themselves. It’s exposing them to new experiences, in many cases going mobile, to where they are. These businesses provide a sense of accomplishment and community in a supportive environment. There are also franchises that fill a need for busy parents. This trend includes businesses that focus on:

• Fitness
• Sports
• Music
• Art
• STEM (science, technology, engineering and math)
• Child care/day care
• Tutoring (especially in the wake of the Common Core)

Baby Boomers/Seniors

Seniors make up another large category in franchising, with businesses expanding their services beyond home care to include:

• Patient advocacy
• Assisted living placement
• Non-medical home care
• Respite care
• Errand services
• Caregiver placement/recruitment
• Companionship
• Quality of life/wellness products

Pets

The pet industry is an estimated $60 billion industry in 2015, so you can guess that pet-related franchise businesses are thriving. There is an overall shift in thinking about our pets – they are seen as part of the family. With that comes pampering and care, presents at holidays, birthday celebrations, outfits, shampoos and care goods, and overall wellness products. The pet industry is a nearly recession-proof business because we’re seeing that people are spending money on their pets, no matter what. “Annual revenue growth in pet products and services is expected to climb by 4.4% through 2016. As the economic recovery kicks in, spending on our pets will continue to increase,” according to Franchise Help. The trend will follow the money, especially in big cities. Franchises in this category focus on:

• Pet pampering
• Specialized products and services
• Daycare
• Grooming (including mobile)
• Dog training and behavioral control
• Boarding
• ID tags
• Health insurance
• Wellness products (energy, organic, weight management, all-natural pharmaceuticals)
• Waste removal

Fitness

Fitness is becoming a huge category in franchising; fitness for all ages, interests and activity levels. While there are still the well-known fitness franchise brands like Gold’s Gym and Anytime Fitness, we’re now seeing smaller, more specialized fitness studios or businesses, often focusing on one specific activity. This includes franchises for:

• Kickboxing
• Yoga
• Pilates
• Boxing
• Jazzercise
• Rock climbing
• Women-only facilities
• Seniors
• Mom and infants
• Bootcamps
• Mobile fitness

Eco-friendly

This category of franchise business is all about “going green,” conserving natural resources, and limiting waste and energy use. The shift reflects a general feeling of moving from “fad” to “need.” It’s concern for the environment and our efforts to protect it, things like using all-natural products and ingredients, efficient and environmentally friendly production methods, limiting synthetics and toxins, and recycling. There is even a Green Franchise Directory where you can find the perfect fit. This is one category where Millennials (ages 18-34) are having a very big impact, and eco-friendly franchises encompass a wide-range of businesses, including:

• Organic food delivery
• Energy-efficient lighting solutions
• Environmentally friendly pest control, carpet cleaning, and landscaping solutions
• Fresh food cafes
• Healthy food vending machines
• Ink cartridge recycling
• Eco-friendly business products
• Organic or recycled clothing and furniture (upcycled)
• Event planning (reducing or eliminating waste and energy in events – venues, materials and accommodations)

Artisanal/Food

While food businesses seem to be the foundation of the franchising world (think, McDonald’s and Subway), we’re seeing a shift here, too. People are looking for an experience, not just something to eat. Now it’s about fresh, artisanal, healthier ingredients and options. So on top of the businesses you know all too well, this category includes:

• Vending machines with healthy snacks
• Locally sourced products
• Frozen yogurt
• Build your own concepts (assembly line formats, similar to Chipotle)
• Specialty sandwiches
• Upscale versions of the basics

Mobile marketing/technology

Mobile is rapidly taking over fixed Internet access (on home computers). Since there are now more mobile users than computer desktop users, mobile marketing is increasingly a key strategy for franchise owners. This means better, more effective ways to reach customers and influence their buying decisions through:

• Mobile apps
• Text messaging
• Social media engagement
• Ordering apps
• Websites that are optimized for mobile viewing
• Accepting payment from mobile devices
• Booking appointments through mobile apps
• Mobile check-in
• Branded ringtones

Franchisees are getting louder

Franchisees are making themselves heard. While the parent company, in many ways, calls the shots, the franchisees as a whole are extremely powerful and can be a tremendous influence on the franchisor. We’re now seeing franchisees “taking to the streets” and demanding change, and in many cases, they are getting that change. One recent example happened at the headquarters of McDonald’s. Franchisees banded together to demand operating changes as their profits began to dwindle. The result was the demise of the Dollar Menu, among other changes.

Not only are existing franchisees speaking up, but former franchisees are taking to the Internet to tell their experiences: whether to warn others from making the same mistake, to damage the reputation of the franchisor or to vent frustration. Regardless, the stories are out there, and it’s your responsibility to do the research and find out what’s happening with the franchise you’re investigating.

Millennial franchisees

In so many sectors of life, we see the impact of Millennials (ages 18-34), and franchising is no exception. The latest Census data showed some amazing facts: 66% of Millennials are interested in entrepreneurship, nearly 30% of all entrepreneurs are between 20-24 years old, over 25% are self-employed, and they launch 160,000 start-ups each month, according to the International Franchise Association (IFA).Because of this, the IFA has launched the NextGen Franchise initiative, a global competition to recognize and support the enormous contributions that young entrepreneurs have, and the impact of their contributions (this year with 450 applicants from 46 countries).

The IFA is also reaching out to this generation while they are still in school to introduce them to the benefits and possibilities of franchising. They are introduced into the different career paths that franchising offers through education, scholarship and leadership.

We’re seeing Millennials making a big impact on the last trend in our list, microfranchising.

Microfranchising

This is a model designed to help people get out of poverty. Microfranchising is similar to a traditional franchise, but with scaled-down start up costs so that it is affordable to people with a low income. It is a ready-made business opportunity model that someone can step into. It’s often referred to as a business in a box/bag/backpack, because in many cases, everything the person will need to start their business literally is provided in a bag, box or backpack. Initial training is provided, along with ongoing support and mentoring. Microfranchising is especially impactful in developing countries, where people do not have the skills or resources to start their own businesses from the ground up, but once provided with a ready-made business – complete with the supply chain, systems, any legal issues, licensing or real estate – they can provide a living for themselves and their families, and eventually expand their business and provide jobs to others. One important characteristic of microfranchises is that they are very reactive, ready and able to adjust to failure and improvement.

Franchising remains a strong business option that offers those with an entrepreneurial spirit a chance to launch their own business based on a proven, established model. As the above list proves, it is a dynamic, living business model that readily reflects and supports a rapidly changing world.

Dan Monaghan is co-founder of WSI, the world’s largest digital marketing agency network (founded in 1995), and director of Franchise Capital Corporation, a private equity firm investing in early stage franchise and technology companies.