Top Picks
This story appears in the December 1997 issue of Entrepreneur. Subscribe »
The only constant in life is-you guessed it-change. Knowing this, we make it our mission every December to cast our eyes into the future and predict the hot businesses for the year ahead. Our predictions are based on a combination of research, expertise and pure gut instinct.
This year, these factors point to 14 stand-out businesses for 1998. We've written about several of them in Entrepreneur-we even touted a few last December as hot businesses for 1997. Yet a new year brings a new set of opportunities for such 1997 picks as specialized staffing and job training/retraining, so don't pass over these selections in your haste to explore such hot-business newcomers as mail order health care and wraps.
We also encourage you to take note of the underlying trends influencing our roundup of 1998's hot businesses. Credit an aging population, for instance, for generating a demand for adult day services and assisted living facilities. And thank a health-conscious (albeit time-hungry) public for raising the profile on juice bars and soup restaurants.
Not enough to satisfy your appetite for hot trends? Good. Once you pore over the top businesses, take time to sift through the cornucopia of cultural goings-on we peg as significant for 1998 in "Heads Up" on page 110. Think pampered pets. Think caffeine. Think germ warfare. And so goes the ever-changing trend landscape.
Juice Bars
Although they're not exactly a new trend, juice bars continue to pack a hefty punch in the beverage world. Indeed, what began as sort of a pick-me-up drink for exercise enthusiasts has evolved into a mainstream favorite. It is, attest juice-bar entrepreneurs, a drink that suits the taste buds of young and old alike.
"The product doesn't have any one specific demographic," says Jim Millican, 36, co-founder with brother Robert, 29, of Chapel Hill, North Carolina-based Smoothieville Inc. "It runs the gamut."
Launched last year, Smoothieville blends blueberry-colored countertops and raspberry-colored stools with a menu of smoothies featuring ingredients as diverse as strawberries and peanut butter. Says Jim, "It's kind of a '90s version of the malt shop."
And yet, it's also kind of not. The frothy concoctions that today's juice-bar operators serve up aren't intended as dessert items-though some consumers treat them as such. Rather, these whipped-up juices are touted as meals in and of themselves. "We like people to think of [smoothies] as a meal," says Jim, "and as a healthy alternative to fast food."
Smoothies are selling so well that one recent estimate puts the industry into the $300 million sales category by the year 2000. Smoothieville itself, according to its owners, conservatively expects to enjoy a 25 percent increase in sales next year and should have three locations up and running by the time you read this.
The options, it seems, are endless. "You can become more of a full-service restaurant and serve wraps and other healthy sandwiches and soups [in addition to smoothies]," says Jim, "or you can get more involved with vitamins and supplements and stick with smoothies."
Ladies and gentlemen, start your blenders.
Home-Meal Replacement
Leave work, pick up the kids, drop off the drycleaning, get gas . . . Time-starved consumers continue to make home-meal replacement one of the hottest trends in today's marketplace. Whether it's a personal chef service, a supermarket offering prepared meals or a grocery store/restaurant hybrid ("grocerant"), the food offered by these alternatives to traditional fast-food fare is being gobbled up.
"Convenience is everything in our world now," observes Richard Heyman, founder of Foozi, a Brentwood, California-based food establishment that features everything from a takeout restaurant and a gourmet deli to an espresso bar and a refrigerator stocked with freshly made meals. "Home-meal replacement gives customers options."
Heyman, who likens Foozi to the grocerant concept popularized by Eatzi's in Texas, plans to open a second Southern California location of his six-month-old business in early 1998. "The demographics are wide open," he says of his customer base. "Everyone's [coming here]."
Indeed, market research firm NPD Group reports that more restaurant meals were taken out than eaten in last year. Recognizing this, supermarkets included in a recent Food Marketing Institute study expressed an intention to offer prepared meals in an overwhelming 82 percent of their stores this year. And even home-meal replacement industry pioneer Boston Market is testing a new variation of its concept featuring an increased emphasis on meals designed to heat (and eat) at home.
Of concern to home-meal replacement entrepreneurs, naturally, is how much such high-profile competition will eat into their own success. Heyman, for one, isn't worried. After all, convenience and high-quality food hit the spot.
Day-Care Centers
When child day-care centers were just starting out with tentative baby steps some 30 years ago, American families were less than enthusiastic about them-most kids were still cared for by a parent or relative, and only one in 20 children was in day care. In recent years, however, those figures have undergone a dramatic change: Of the 20 million children in the nation under age 5, one in three is cared for in part at a day-care center. "What this means is that the middle class has accepted [day-care] centers as a normal part of the social fabric," says Roger Neugebauer, publisher of Child Care Information Exchange, a trade publication that tracks the industry.
That's good news for entrepreneurs hoping to latch onto success in one of the nation's fastest-growing industries. And that trend should persevere: The number of women entering the work force continues to rise; 4 million babies are born each year; and day care is still the number-one choice for parents, despite its average $4,000 per year/per child cost, according to the Children's Defense Fund, a nonprofit child advocacy organization.
To succeed, centers must offer more than just child's play. Recent brain research supports the importance of stimulation and development in the first six years of life. In addition to providing an educational environment for toddlers, today's day-care centers offer expanded services: More and more have extended their hours to include evenings and weekends, and many are taking education beyond preschool age and teaching elementary grades.
But with a dearth of qualified workers, entrepreneurs face the challenge of acquiring a staff prepared to meet the public's demand. "The 18- to 26-year-old age group in the population is shrinking, and that's where we get 90 percent of our teachers," says Neugebauer. Nonetheless, experts predict a market growth rate of 5 percent to 10 percent over the next five years. Here's looking after you, kids.
Internet Marketing
Companies nationwide are becoming familiar with building and hosting Web sites. But many are discovering that marketing their company over the Net doesn't end with the launch of their Web sites: The next logical step is to find new ways to increase traffic and boost sales. To help companies get the word out, Internet marketing companies are stepping up to the plate.
The expansion of the Internet and companies' growing confidence in e-commerce are spurring rapid growth in the Internet marketing industry. According to Internet marketing research firm Forrester Research Inc., Internet advertising will grow from $480 million in sales this year to $1 billion in 1998.
Some Internet marketing companies help businesses build Web site traffic by setting up links to other sites or developing new content or services; others create software programs and services to help companies conduct direct-marketing campaigns via e-mail or specialize in Web advertising. Internet marketers' backgrounds are diverse, ranging from direct-marketing experts to software programmers and Webmasters. With such a wide array of expertise, industry insiders suggest entrepreneurs supplement any areas they may be lacking in with experienced personnel.
To succeed, entrepreneurs must go the extra mile. Says Dale Dougherty, president and CEO of Songline Studios Inc., an online publishing firm and publisher of Web Review Magazine, "Companies need to [find] ways to develop meaningful relationships [with visitors] on the Internet."
Soup Restaurants
If television's most talked-about comedy talks about your industry, there's reason to smile. That's the lesson soup restaurant entrepreneurs have learned following the broadcast of the now-legendary "Seinfeld" episode that centered around a cantankerous soup chef nicknamed the "Soup Nazi." As Jerry and friends hankered after the Soup Nazi's bowls of soup, the American public was reminded of its fondness for this simmering delicacy.
Not that the soup restaurants of today are serving up the simple chicken noodle brew that Mom used to make. "We're taking something that's been around for hundreds of years and redefining it," explains Carla Ruben, 35, co-founder of the New York City-based Daily Soup Inc. chain. "We're making it more of a meal. We try to imagine the customer taking the soup and putting it on a piece of bread and making it a sandwich," elaborates Ruben, who is partners with Peter Siegel, 29, and Bob Spiegel, 36.
And, no, neither the lunchtime crowd of working professionals nor the dinner crowd of hungry families spoons up, say, a run-of-the-mill vegetable soup. Ingredients as exotic (and ample) as spicy Moroccan chicken and Thai chilled melon with peanuts are now thrown into the pot.
"It's something people have wanted for a long time-it just wasn't available," says Ruben, whose eight New York City Daily Soup locations serve some 8,000 people every day. "It's healthy. It's nutritious. It's filling."
And it's hot (so hot that we wrote about it last month in our "What's Hot" column). With Americans reputed to slurp up more than 10 billion bowls of the stuff every year, soup is enjoying a popularity that entrepreneurs are happy to translate into lucrative businesses. Thanks, Jerry.
Wraps
What's the rap on wraps? They're still hot-decidedly so. "We're continuing to see wraps proliferate across the country," says Will Weisman, a partner in the San Francisco-based World Wrapps Inc. food chain. "Wraps are showing up on the menus of a lot of national food chains, and a [growing number] of small independent restaurants throughout the country are focusing on wraps."
Skeptics who once considered the handheld delicacies-unusual ingredients wrapped in flavored tortillas or pitalike flatbreads-too exotic for mainstream American tastes are singing a different tune of late. After all, if no less a national brand than KFC is getting in on the wrap act, then there's clearly a widespread demand.
Widespread enough, in fact, to encourage supermarkets to begin stocking prepackaged wrap products. "The bottom line is, it's a great way to eat," says Weisman, who has 27 World Wrapps locations on the West Coast. "[Wraps are] portable-and you can put a wide variety of ingredients in them."
Indeed, due to the growing trend of eating in cars, the portability of wraps is undoubtedly a plus for ever-mobile and ever-busy Americans. Yet don't underestimate the value of wraps' image as a healthy-and, not incidentally, tasty-alternative to the sandwich. And, too, note how many wrap restaurateurs are beginning to offer smoothies as an added attraction for customers.
Speaking of added attractions, the fledgling wrap entrepreneur might consider offering a few-particularly in light of increased competition in the industry. Think of it this way: As mainstream acceptance of wraps grows, more companies are diving into the water. Even still, this isn't a market easily wrapped up.
Professional Employer Organizations (PEOs)
Most small-business owners would agree-they didn't go into business to deal with the daily administrative details of managing a staff. And yet, as their business expands and the number of employees increases, that's exactly what they end up doing.
Enter PEOs, formerly known as employee leasing companies. These organizations shoulder the responsibilities of human resources, benefits consulting and other administrative services for businesses-and have become so popular they're growing at a rate of as much as 30 percent per year. "We allow the small-business owner to focus on the business of their business and let us focus on the business of employment," says Milan P. Yager of the National Association of PEOs.
But while in the past PEOs focused almost solely on helping smaller businesses, the trend for the future is to attract larger companies-even Fortune 100 corporations-as clients. According to the experts, that means the sky's the limit for this industry. "The fact that 97 percent of our market has not even been penetrated means there's a dynamic future ahead," Yager says.
But success is not a given, despite the fact that the market remains largely untapped. "One of the biggest obstacles is the amount of education needed to [run a PEO] right," says Paul Sarvadi, co-founder of Administaff, a PEO in Houston. "On the surface, it looks very simple. But the reality is, it's very complex."
Tracy Gaulding, a Houston Kwik Kopy franchisee and Administaff client with two stores and 35 employees, is glad he chose to use a PEO. Although in business since 1990, he brought Administaff on board just nine months ago-transferring payroll, worker's compensation, termination, benefits and other functions to the PEO. Says Gaulding: "I've thought about [not using a PEO], but I would dread having to do it [all by myself] again."
Specialized Staffing
Every year, the staffing services industry outdoes itself by achieving record-setting sales. Consider its history, reported by Staffing Industry Report newsletter: Industry revenues in 1991 totaled just $31.4 million. By 1996, that figure had more than doubled to $74.4 million, and this year's revenues are projected to pass the $85 million mark.
Staffing services have made themselves indispensable by bringing highly skilled individuals to a variety of businesses. In the past, specialized skills were limited to a few areas, such as clerical support. Today, employees run the gamut from information technology experts to chief executive officers. "The concept of [staffing] services has proved itself," says Bruce Steinberg of the National Association of Temporary and Staffing Services. "It enables businesses to immediately adjust their staffing levels to meet demand."
Ensuring their workers are properly skilled stems from one of any successful staffing company's top priorities: training. Every year, the industry spends an average of $350 million to upgrade its employees' skills. And just as there's a trend toward broadening skills, there's also an inclination to expand the types of arrangements available. Temp-to-full-time services and outsourcing services, in which the staffing company hires and manages an entire function within an organization (such as marketing), are also on the upswing.
Will all this activity leave any room for newcomers? "It is a highly competitive industry," Steinberg confirms, "but there's still room for new people."
Job Training/ Retraining
Technology, corporate downsizing and welfare reform are more than buzzwords for '90s-style business; they are forces contributing to the rapid growth of one of the decade's hottest businesses: job training and retraining. The U.S. Bureau of Labor Statistics identifies job training as one of the fastest-growing small-business-dominated business sectors, predicting the industry will grow 43 percent between 1994 and 2005.
Employees who have been edged out of a job and those who would like to telecommute but don't know the first thing about the technology required to do so are finding that updating their skills is imperative, says Sharon Canter of Milwaukee-based Manpower Inc., which provides employee training from the clerical level all the way up to high-end technology skills.
While Manpower and its ilk are more recognizable in the job-training arena, there is plenty of room for entrepreneurs. "Smaller companies should specialize because they are not [likely] to have the resources larger companies have to do [broad-based] training," says Canter. "But if they specialize in a selected skill set, [they can] succeed."
Specializing becomes even more imperative when you consider that in addition to competing with corporate giants, small firms will be in the arena with community colleges and government organizations, which offer free or low-cost training. What to specialize in? BLS reports that computer-related education is the most common type of training received. If you take this route, be sure your technology of choice is going to be around for a while.
Not tech-savvy? Opportunities exist in training for job preparation, customer relations and occupational safety.
Electric Utility Opportunities
The way people think about electricity is about to change, thanks to a nationwide effort to restructure the industry. The end result is supposed to be lower prices for consumers and a more competitive marketplace, creating plenty of opportunities for entrepreneurs.
Take California, for example. Competition is scheduled to begin in the Golden State January 1, and 108 companies and individuals have registered with the state's Public Utilities Commission to become nonutility electric service providers. Those registering range from large, established utility providers to small, entrepreneurial ventures. Though the new industry is still in its formative stages, there is one source for entrepreneurs interested in electricity reselling to turn to: the Power Marketers Yearbook, available through the Edison Electric Institute in Washington, DC.
"I think we can lower the price of electricity for our existing customers," says John Kamp, president of Manteca, California-based Kamps Propane. Kamps operates nine stores in California that sell propane gas primarily to consumers in small and rural towns. Kamps' director of marketing, Foster Fluetsch, is also exploring purchasing cheaper electricity from an out-of-state producer.
"If the customer just wants reliable electricity at the lowest possible price, small companies can do better. They have lower overhead and can basically be virtual entities," says Jim Rodier of Concord, New Hampshire-based Freedom Energy Company LLC. His company is one of the few small businesses involved in a pilot project in New Hampshire that gives residents the right to choose the company from which they purchase electricity.
For a small firm to be successful, Rodier says you have to educate yourself about the changes. "I also think it's important to wait until there is more clarity, until you see what the new structure of the industry is going to be."
Rodier adds that waiting also allows small-business owners to avoid initial price-gouging. But once this phase passes, the opportunities in this sector could prove electrifying.
Recycling Consulting
Talking trash is big business for recycling entrepreneurs. According to David Kirkpatrick, founder of KirkWorks, an environmental economic development firm in Durham, North Carolina, 1996 revenues for the resource recovery industry were $14.3 billion. "I think that's probably an underestimate," says Kirkpatrick, whose firm organizes recycling investment forums and conducts economic impact studies.
Industry growth has been largely centered in the post-consumer-waste sector, fueled by concern for the environment and limited landfills. A sign of that growth is the increasing interest in investing in start-up recycling firms. KirkWorks helped organize an annual investment forum in 1995; by late 1998, it will participate in four annual events nationwide. And that could be just the tip of the trash heap-er, iceberg.
Assisted Living Facilities
If you haven't realized it yet (and if you're a regular reader of this magazine, there's no way you could have missed it), the growing number of seniors in America is creating a need for health-care businesses the likes of which we've never seen before. Assisted living facilities mark another segment of this trend, spurred by the demand for environments that promote wellness and quality of life.
More and more seniors are turning to assisted living facilities, which provide support in daily activities and health care but allow the elderly to age with dignity. In contrast to nursing homes and other types of institutional care, assisted living residences resemble a homelike environment, much like apartment living. Residents get to live in the comfort of their own "homes" while receiving help with everything from taking medication, eating and dressing to bathing and getting around town. This model of care focuses on residents' well-being and independence, says Karen Wayne, president and CEO of the Assisted Living Federation of America (ALFA).
Rem Inc., a residential services company in Edina, Minnesota, has been building and managing multiresident buildings since 1967. Five years ago, it moved into the assisted living arena when it noticed a sharp rise in demand for the services. With 40 Minnesota locations, Rem plans to construct at least two more assisted living properties in the near future. "People want to remain in a home setting and still be cared for," says president Thomas Miller, who runs Rem with his brothers Craig and Douglas.
Competition is keen, so take heed: Operating a facility is capital-intensive. Entrepreneurs must research location, demographics and regulations. Despite the challenges, the outlook is good: ALFA estimates that this year's industry sales of about $13.5 billion will double by 2000.
Mail Order Health Care
For years, health-food stores, pharmacies-even infomercials-have catered to Americans' obsession with their health. Now, companies that distribute health-care items by mail are finding a first-class opportunity in this robust market. Take a growing demand for health products, the convenience and privacy of goods delivered to your door, and built-in repeat orders, and it's no surprise that sales for the mail order health-care industry have grown more than 10 percent each of the past five years to reach a record $6.1 billion in 1996.
"All the makings for opportunity are present," says John Schulte, chair of the National Mail Order Association. "The lifestyles of Americans are very favorable to selling these products."
Everything from facial moisturizers and lumbar cushions to antacids fill the catalog pages of the 560-plus mail order health-care businesses in the United States. Bestselling categories are drugs and vitamins, adult products, aids for people with disabilities, physical fitness products and health programs (including diets).
Schulte recommends creating programs like monthly clubs to set your business apart. Entrepreneurs also need to research regulations and become familiar with key industry players and basic mail order techniques. Once they've mastered the basics, mail order entrepreneurs are finding that what's good for customers is good for business.
Adult Day Services
Although knowledge about adult day services isn't widespread, the industry has actually been around since the 1970s. Born of a need to provide seniors with health, social and support services, the industry is gaining momentum, fueled by longer life spans and an older population. In fact, the National Adult Day Services Association (NADSA) estimates there are about 4,000 adult day service centers operating in the United States.
"Adult day services are a solution to a lot of problems in the health-care arena," says NADSA director Mary Brugger Murphy. "It's a very logical and cost-effective way of delivering services."
Adult day service centers assist seniors with either minimal or extensive needs; some centers specialize, caring for those with Alzheimer's disease, for example. While many operate in hospitals or clinics, others are freestanding businesses. Typical adult day service centers provide nursing care, transportation, meals, social activities and assistance with daily living activities like eating and bathing.
Because adult day service centers are still one of the best-kept secrets around, educating the market about your business and recruiting new candidates can be a challenge, Murphy warns. Therefore, making contacts with local health-care agencies that can provide you with referrals is key to building a healthy business.
Contact Sources
Administaff Inc., (888) 245-2800, http://www.administaff.com
Assisted Living Federation of America, 10300 Eaton Pl., # 400, Fairfax, VA 22030, (703) 691-8100
Child Care Information Exchange, P.O. Box 3249, Redmond, WA 98073, (800) 221-2864
Children's Defense Fund, http://www.childrensdefense.org
Daily Soup, (212) 633-1800, http://www.dailysoup.com
Foozi, 11662 San Vicente Blvd., Brentwood, CA 90049, (301) 996-2700
Forrester Research Inc., (617) 497-7090,
Freedom Energy Co. LLC, 2 Eagle Sq., Concord, NH 03301-4956, (603) 229-0029
Kamps Propane, 9811 E. Moffat Blvd., Manteca, CA 95336, (209) 823-8924
KirkWorks, (919) 220-8065, http://www. kirkworks.com
Manpower Inc., 5301 N. Ironwood Rd., Milwaukee, WI 53217, (414) 906-6253
National Association of PEOs, http://www. napeo.org/peo
National Adult Day Services Association, 409 Third St. S.W., 2nd Fl., Washington, DC 20024, http://www.ncoa.org/nadsa
National Association of Temporary and Staffing Services, (703) 549-6287, http://www.natss.org
National Mail Order Association, (612) 788-1673, http://www.nmoa.org
Rem Inc., 6921 York Ave. S., Edina, MN 55435, (612) 925-5067
Smoothieville Inc., P.O. Box 2835, Chapel Hill, NC 27515, http://www.smoothieville.com
Songline Studios Inc., (707) 829-6500, http://www.songline.com
Staffing Industry Report, http://www.sireport.com
World Wrapps Inc., 1000 Brannan St., #401, San Francisco, CA 94103, (415) 703-9600
