Back to Basics: Trends Shaping Franchising
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Entrepreneur's 32nd Annual Franchise 500(R) is full of shake-ups and surprises. For starters, more than 10 percent of the top 500 franchises are companies that have never ranked before; some are relatively new to the scene, while others have been working their way up for years. Evolving industries led us to make some changes to our categories, such as the addition of "Apparel & Accessories" under Retail and the transformation of previous years' "Pub-Style Restaurants" category into "Sports Bars." And then, of course, there's our new No. 1: Hampton Hotels.
But the overall message of this year's ranking remains the same: It's all about the economy.
More important, it's all about how consumers and entrepreneurs alike perceive the economy. Some experts may insist that the recession ended more than a year ago, but the recession mentality is still holding strong--which means that franchises offering value-priced products or services that people can't live without continue to be the ones at the head of the pack. Even Hampton owes much of its success to travelers choosing the midpriced hotel chain over its more expensive competitors.
The good news is, whether you think we're still deep in the recession or believe the worst is over, franchises could play a key role in finally lifting us out of the quagmire for good. The companies in our Franchise 500(R) added more than 12,000 franchise units from 2009 to 2010. That translates to a lot of entrepreneurial dreams coming true--and a lot of jobs being created by those entrepreneurs, too. Just take a look at the 2007 Economic Census Franchise Report released this year, the first of its kind. It revealed that franchises accounted for $153.7 billion in total payroll and 7.9 million jobs.
Here's a glimpse of the trends making the biggest impact on franchising--and the economy at large--as revealed by this year's Franchise 500(R).
Quick-service restaurants fell just short of making up a full 20 percent of this year's top 500 franchises. Subway dropped from No. 1, but still made a more than respectable showing, and constant contender McDonald's was right there in the Top 10 as well. But this year they were joined by Denny's at No. 10--its best ranking in 25 years--proving that with a marketing emphasis on affordable family fare, full-service restaurants can compete in this economy, too.
More parents are returning to the work force to make ends meet, so child-care franchises continue to thrive, with seven companies in the Franchise 500(R). Leading the category is Goddard Systems Inc., which pushed its way into the top 100 for the first time, at No. 87. Goddard and several other child-care franchisors are particularly popular for the added value they offer parents by combining child care with educational services.
Fitness franchises are still going strong, with 11 companies ranked. And cost is still king: The top three franchises, Jazzercise, Anytime Fitness and Snap Fitness, each can be started for less than $100,000. But Jazzercise's continued dominance, along with the presence of two boxing franchises (CKO Kickboxing and LA Boxing) in the ranking, shows that consumers (and franchisees) may be craving more variety in their workouts as well.
With seniors as one of the fastest-growing segments of the population, franchises serving them have weathered the recession especially well. Twenty in-home care franchises ranked this year, with five making the top 100. Despite heavy competition, newcomers continue to rise as well, often differentiating themselves with added services such as medical staffing and assisted living placement. Senior-targeted services go beyond personal care, too; other franchises in the ranking offer assistance with retirement planning, estate sales and more.
Newly thrifty consumers have made resale stores the place to shop. Tops in the new "Apparel & Accessories" category is Plato's Closet, buyer and seller of young adult clothing, which made its best showing ever, at No. 102, thanks to the addition of 40 franchises. But don't think resales are for fashion only. British import CeX, which specializes in everything electronic--cell phones, video games, DVDs, computers and more--came in at No. 306 in its Franchise 500(R) debut.
Health & Wellness
The Franchise 500(R) offers more evidence of just how relevant healthcare is. Franchises providing chiropractic care and weight-loss services, among others, climbed upward in the rankings, apparently finding no shortage of doctors interested in partnering with franchisees--or even becoming franchisees themselves. Also performing well were franchises offering therapeutic massage and other spa services. Once considered luxuries, such services are now considered by many to be necessities during times of stress. It helps that franchises like Massage Envy, which rose to No. 64 this year, make them more affordable necessities, too.
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