Heat of the Moment

Our in-depth look at the current state of franchising
Magazine Contributor
9 min read

This story appears in the January 2000 issue of Business Start-Ups magazine. Subscribe »

Whether it's due to the unattractiveness of preparing chicken Kiev after a 14-hour workday or the increasing impossibility of squeezing a social life into a measly 24 hours, consumers are screaming for relief. Franchises whose business it is to lighten consumers' life load--financially or time-wise--are the ones poised for dramatic growth in 2000 and beyond. Hence, McDonald's position at the apex of our Franchise 500 this year.

The Golden Arches' victory is not so surprising, considering consumers spent about $970 million daily on food prepared away from home in 1999, according to the National Restaurant Association. It seems Nike's "Just Do It" has been replaced with "Just Do It For Me." New trends in franchising reveal how you can answer this cry of a new era.

Let's Get Physical

Let's face it: Those Bally's commercials (even the one with the "older" woman who resembles actress Linda Hamilton in Terminator 2) don't make the average American woman want to run for the spinning room, swarming with sweaty male and female twentysomethings wearing spandex. The huge growth Jazzercise Inc., Curves for Women and Lady of America all experienced in 1999 proves the demand is very high for women-only fitness center franchises that are as comfortable and supportive as they can possibly be.

The National Sporting Goods Association estimated that 53.4 percent of all the people who hit the fitness clubs in 1998 were women. If given the option to break a sweat in a welcoming environment vs. a mecca of 90210 lookalikes, where do you think they'd rather go?

Investing In The Future

Any number of elements could explain why franchised centers that either tutor children in basic subjects or offer attention-grabbing activities in subjects like science and art are quickly multiplying. Columbine-induced fear has highlighted the need to get children every bit of extra attention--or else. And the bar for college-worthy SAT scores is getting higher. According to Jerry Wilkerson, president of Chicago-based franchise executive management search firm Franchise Recruiters Ltd., "We're not going to be able to build enough of these facilities in the next three to five years to handle the market. When [children's educational] franchises open, they're completely subscribed. People go on a waiting list as soon as they hear a place is being built." To satisfy demand, expect to see more centers opening in storefront locations, offering special-emphasis learning, such as computer training.

And since the trend dictates that learning prevails over play, the Sylvan and Huntington Learning Centers of the world are attractive franchise options for educators who need a break from public schools.

Listen To Your Elders

"Huge" is how Wilkerson sums up the market for franchises geared toward seniors. The mere fact that 20 percent of the U.S. population will be over the age of 65 by 2030, according to the Administration on Aging in Washington, DC, illustrates the wealth of emerging opportunities.

"You're going to see a lot of opportunities to service the well-aged senior," agrees Michael Seid, managing director of franchise advisory firm Michael H. Seid & Associates LLC in West Hartford, Connecticut. "They're not going to be as old at 80 as the generation before was at 60." Still, given less-nimble limbs and fading sight, services like nonmedical senior care--where clients are aided with grocery shopping, house cleaning and food preparation while still living in their own homes--are booming. Franchisor Home Instead Senior Care found that one-quarter of all U.S. households care for either elderly relatives or friends; of that total, 52 percent work full time. Rather than opt for traditional retirement homes, the trend will be to turn to franchises providing non-medical senior care. And while in-home medical care for seniors has not faded away, Wilkerson notes the industry faces a lack of state-licensed laborers.

And the opportunities don't stop there. With retirement lasting longer than ever, look for franchises focusing on golf and travel (cruises, especially) to be reinvigorated in the coming years.

Hairy Situation

Nearly every hair-care franchise included in our listing increased its number of units from last year. There's such a thing as over-saturation in a given market, but all in all, the risk is small. "[The industry] is still growing because if there's a business that's fairly recession-proof, it's hair," says Seid. "People need haircuts when they're working and also when they're not working. They're on a tighter budget but want to treat themselves. [A haircut] is less expensive than a massage or facial."

At least as long as the provider is a Supercuts or Great Clips Inc.-style establishment where the affordable haircut reigns supreme. "What we haven't seen," says Seid, "is the emergence of a higher-end chain."

What you will see, according to Wilkerson, is an increasing number of smaller stores strategically located in business environments abundant with people from 8 a.m. to 6 p.m. The problem is staffing them: Again, state licensing requirements for cosmetologists have left the labor pool shallow. But demand will no doubt send a slew of new hopefuls to cosmetology school. Says Wilkerson, "Everyone needs to get a haircut. We'll never get away from that."

Home Is Where The Heart Is

The experts and this year's Franchise 500® are hinting at something major: The home is a place of joy, stress and change--and franchises spanning several sectors can profit. Whether it's real estate, home inspection, home remodeling or maintenance, any service that helps consumers build a fine nest is in high demand. What's going to turn the whole thing upside down and then right side up again is--you guessed it--the Internet.

"All the big, national real estate franchisors are looking at [adding home design and remodeling options to their businesses], but it's like turning a very large boat in a bathtub," says Wilkerson. "You're going to find real estate moving into the retail environment, with Internet technology providing [everything from] virtual house shopping to design. The contractor, builders, product suppliers--right down to the Culligan man--will all be inside the computer system network at a real estate broker's site, ready to order when consumers buy the house."

Sound tricky? The trickier part, according to Wilkerson, is getting franchisees to embrace virtual real estate. "This will surpass the renewal license stages many [real estate franchises] go through for such a frustrating period of time," he says. Yet new blood may emerge because of it. "[Future] franchises in real estate may not be sold to a broker," says Wilkerson. "They may be sold to someone who's more experienced in personal retail-service marketing, who will then hire brokers to run the stores for them."

Although most maintenance franchises--from window washing to carpet cleaning--will probably remain in their non-Net environment, Wilkerson predicts they'll experience exciting growth this year. Be it a homebased business owner or a single, working parent, he says, people have neither the time nor the inclination to take care of all these chores themselves.

Stayin' Alive

Call it imperialism. Call it the armed forces. In franchising, we call it strength via dual-branding and mergers and acquisitions. Take a look at how franchisors have transformed and teamed up this past year:

  • Houston's Deck the Walls Inc. changed its name to Franchise Concepts Inc. after acquiring Framing & Art Centre and The Great Frame Up, and entering into a joint venture with Ashley Avery's Collectables.
  • Diedrich Coffee Inc. became the second-largest company in the specialty retail coffee market after ac-quiring Coffee People Inc., which franchised the 281-unit Gloria Jean's Gourmet Coffees concept.
  • To diversify its market reach, leverage infrastructure and serve more customers worldwide, McDonald's acquired Midwestern pizza chain Donatos Pizza Inc. and London-based sandwich chain Aroma Ltd.
  • Combined sales of $3 billion in 1999 were the result of a merger between the Pennzoil Co. (parent company to Jiffy Lube International) and Q-Lube Quaker State Corp. Pennzoil-Quaker State Co. is now one of the largest automotive consumer products companies in the world.
  • Farmington Hills, Michigan-based A&W Restaurants Inc. signed a multimillion-dollar deal to merge with Lexington, Kentucky's Long John Silver's Restaurants Inc. Reason? Dual-branding pluses.
  • Other dual-branding alliances: Great American Cookies and Freshens Smoothie Co., and PostalAnnex+ and U-Haul. Santa Ana, California-based Winchell's Donut House is currently seeking dual-branding opportunities with fast-food franchisees.

The aligning of franchisor forces has only just begun--strange combinations are ahead. "It's not just tacos with ice cream anymore," says Wilkerson. "Different industries that have some kind of nexus [will unite] to keep consumers from going somewhere else." We're talking dry cleaning and video rentals. Oil changes and take-out. Add a drive-thru to that equation, and Wilkerson predicts some happy time-pressed individuals.

Great Expectations

This year, franchising faces extreme change. Franchisees must deal with the strong possibility that their respective franchisors will broaden their marketplace by selling their goods and services on the Internet. "It'll be very difficult for [franchisees] to understand that `Internet' means there's no territory," says Seid. "One of the trends you're going to see down the road is a more rapid acceleration of nonterritorially protected franchises."

And, like Fort Lauderdale, Florida-based Arby's Inc. and Nashville, Tennessee-based Shoney's Inc., you may encounter many more franchisors selling their company stores either to focus their primary attention on franchisees (as in Arby's case) or to get rid of stores performing at less-than-spectacular standards. "Franchisors are finding it hard to manage the labor requirements and responsibilities [of company-owned units] from a distance," says Wilkerson.

Management and training within franchise companies will also be examined with a closer eye--all in an effort to better serve the ever-important consumer. And the sudden recognition of America's astoundingly large Latino community is at the very forefront of training reform. "If you're going into franchising today, you'd better learn how to speak Spanish," says Wilkerson. And not just for your customers' sake but to communicate with an increasingly Hispanic employee pool. "If you don't," warns Wilkerson, "someone else is going to get them. And they're also going to get the consumers to go with them."

As you can tell, accommodation is the key to the new century. Cater to society--give customers that one-stop shop they've always wanted. Embrace technology, because, quite frankly, if you don't, everyone else will. Wilkerson puts it in a nutshell: "The real future of franchising will be to provide fast, focused, friendly, as well as flexible, service." And consumers will eat it up.

Contact Sources

Franchise Recruiters Ltd., (708) 757-5595, franchise@worldnet.att.net

Michael H. Seid & Associates LLC, 94 Mohegan Dr., West Hartford, CT 06117, mhseid@msn.com

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