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Have You Heard the Latest?

Want to build a hot business in 2003? These areas of franchising may be your best shots at getting there.
January 1, 2003
URL: http://www.entrepreneur.com/article/58110

Within the rankings of the Franchise 500® are companies, both new and old, spanning a variety of industries, from fast food to home improvement, clothing resellers to automotive repair shops. In 2003, some segments will rise above the rest, adding both franchisees and customers.

Working on the Franchise 500®, we at Entrepreneur get a first look at some of these emerging franchise trends, segments benefiting from the addition of new concepts, new customers and increased revenue. What have we noticed this year? Though on the surface, fresh-Mex fast-casual restaurants, senior care, child care, specialized fitness, tech consulting and home improvement may seem to have little in common, each of these segments is making plenty of noise in the world of franchising.

Mexican food in general has been growing in popularity nationwide, thanks in part to the country's growing Hispanic/Latino population, which has expanded 57.9 percent over the past 10 years and now accounts for 9 percent of the U.S. population.

Their influence is spreading to mainstream America, which now sees Mexican food as a welcome alternative to standard meat and potatoes--or, rather, hamburgers and french fries. Another timely boost to the market: Fresh-Mex chains like Desert Moon and La Salsa are luring customers with healthy fast food, offering menus featuring grilled steak and chicken and fresh vegetables.

Not wanting to be left behind, McDonald's added Mexican items like tortas to its menu a few years ago and now has a majority interest in Chipotle, a burrito bar concept, while Wendy's acquired Baja Fresh, a fast-casual grill franchise. "Mexican food is one of the fastest-growing segments in our industry," says Russ Smyth, president of McDonald's Partner Brands. "It was a great place to start when McDonald's began looking for ways to serve customers more variety in tastes and experiences."

The heat of the segment and the strength of McDonald's are definitely in Chipotle's favor. "Chipotle has grown significantly since we invested in them, and that growth will continue to accelerate," Smyth says. "Based on what we see in the market and the reactions of customers, there's tremendous future growth potential for Chipotle, particularly with the full resources of the McDonald's system behind it."

Counsel on Aging

Even stronger than the power of McDonald's is that of baby boomers, and two particularly strong service industries target this segment. By caring for aging parents and young children, senior- and child-service providers are giving boomers a hand. "We're a dual-income society--only one out of 10 families are one-income families," says Jerry Clum, founder and CEO of Comfort Keepers, a nonmedical senior-care franchise. "And whereas people used to provide assistance to their aging parents, it's more difficult now, because we're all so busy and, many times, hundreds, if not thousands, of miles away from each other."

Whether due to time or distance constraints, consumers are turning to franchises like Comfort Keepers to provide companionship, light housekeeping, meal preparation and other in-home services to seniors. When medical care is needed, companies like Right at Home Inc. fill the gap.

With our aging population, the need for medical and nonmedical senior-care services won't be lessening soon. "Unlike faddish concepts that have a short duration, there are few substitutes for this service," says Allen Hager, president of Right at Home. "Actually, [the market] will start getting really exciting in about 15 years." He's probably right, considering seniors 65 and over, who currently account for 12 percent of the U.S. population, will double in number over the next 20 years.

Meanwhile, children under 13 constitute about 20 percent of the population, pointing to a mature market for retailers like Once Upon a Child and USA Baby, and child-care companies like The Goddard Schools and Kiddie Academy.

Child enrichment programs, offering supplemental education and extracurricular activities, are also making an impact. Parents send children ages 5 to 17 to Drama Kids classes as a creative outlet, but find other benefits from the program. "We often receive letters from prior Drama Kids students in high school or college who thank us for building their speaking skills and their confidence," says president Doug Howard. "It's fun to keep track of their success and know we played a small role in it."

FasTracKids' goal is to prepare young children, ages 3 to 6, for school. This program works on communication skills, decision-making, teamwork and negotiation skills, to be used in elementary school and beyond. "This is very popular right now--even President Bush is talking about 'no child left behind,' which is exactly what we're doing," says Amy Kaufman, marketing manager for FasTracKids. "We're responding to the policies the government is giving--that's why we believe we'll grow even faster."

Tech Connection
Another segment that keeps growing is tech consulting. As more families buy computers and more small companies spring up, someone needs to provide the needed IT services. "We've targeted the largest sector of the computer industry--72 million households with one or more computers and the 10.5 million small businesses with 20 or fewer employees," says Walter Ewell, president of Geeks on Call.

While there's no shortage of demand for these services, technology-consulting franchises still have a hurdle to overcome. "Right now, the tech support industry is fragmented with 50,000 to 60,000 independent computer companies that range in size from one-person to 10-person shops," says David A. Milman, CEO of Rescuecom. Geeks on Call, Rescuecom and a few other tech support franchises are working to move the segment away from such a smattering of independents and create recognizable name brands.

Getting Physical

Rather than going up against mom-and-pop competitors, specialty fitness franchises are looking to occupy the same space as giants like Bally's and 24-Hour Fitness. By targeting groups that either aren't satisfied with or don't feel comfortable at traditional gyms, these franchises are making their mark.

Velocity Sports Performance works with athletes of all ages to increase speed, power, agility, balance, coordination and flexibility. "Traditional fitness clubs do not market to the youth market, nor do they cater to the specific performance needs of people who play sports," says David Walmsley, CEO of Velocity.

Women-only fitness centers are finding success reaching out to women who can use the local gym but don't want to. "We've created an environment for change," says Gary Heavin, founder and CEO of Curves International Inc., which franchises Curves for Women fitness centers. "Women are comfortable exercising in a community of other women. By offering them this community, we help them acquire the habit of fitness."

That's an Improvement
With home ownership rates climbing near 70 percent in the United States and $170.1 billion spent on renovation and beautification, the home improvement industry has an impressive base of willing and able customers. And there are plenty of franchises that are out to help these customers with their home projects large and small. An entire category of companies help build decks, repair fountains and consult homeowners on construction projects, and handymen are out there performing small tasks such as carpentry, general repairs, painting, wall-papering and more.

New on the Block
While established franchises work to stay on top of the trends, new franchises are also arriving, sometimes sparking trends of their own. Topz Restaurant is satisfying the cravings of health-conscious fast-food junkies by selling lean burgers and burger alternatives like chicken, turkey and veggie burgers. Pawsenclaws & Co. lets customers create a stuffed animal that's completely unique from head to toe, including wardrobe. V2K, The Virtual Window Fashion Store Inc., offers customers in-home window treatment sales and installations, using proprietary software to draw to-scale recreations of a room and fill in a variety of window fashion choices. With all these franchises exploring new ideas and niches and tapping into changing demographics and technology, 2003 has all the potential to be an outstanding year for franchising.

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