Trend Watch: Child-Focused Franchises
As the popularity of kid-focused stores and services grows, you can bet the children's franchise biz is a promising place to play.
Eager to please, franchisors are catering to children's alterable moods and changeable interests, coming up with innovative ideas while serving the most basic of needs. Whether it's children's furniture, education or fitness, success for these franchises can usually be measured by the size of the customer's smile.
Franchises are also measuring the size of the market, as Census figures indicate there are approximately 40 million kids in the United States under age 10. Marketing expert and American Demographics founder Peter Francese also credits this industry's strength to better market research, directed to a more educated consumer. "The industry has prospered because of [companies'] abilities to target consumers and create products they want and will buy," he says.
Hot in the beginning, prosperous now and promising for the future, the children's franchise industry has attracted long-term players who have left their marks, have achieved financial success and now offer a wealth of insight for people wanting to get into this industry.
Knock Knock, Who's There?
For Fred Meyer, it was natural to take over the toy store his father had opened in Battle Creek, Michigan. In 1947, Meyer's father proved to be ahead of his time when he recognized an opportunity in selling toys to the baby boomers. In 1990, Meyer identified the growth potential in converting his father's business into a USA Baby franchise. His first priority was to find the right niche, and furniture represented a stable bet in the industry. But, as Meyer has discovered, staying up to date with the changing demographics of his clientele has been equally crucial. In the years since his father first opened the business, grandparents and older mothers have emerged as target customers.
Grandparents have become some of the most significant consumers in the industry. According to the AARP, people over 50 earn a total of almost $2 trillion annually and represent more than 50 percent of total discretionary spending power. In a 2002 study, AARP found that grandparents 80 and older are likely to spend $1,000 to $2,499 annually on their grandchildren. Meyer even incorporated them into his marketing strategy by using "Grandparents' Favorite Toy Store" as his slogan one year.
Another trend children's franchise owners point to is women having children later in life. Meyer has seen an increasing number of 40-year-old mothers-to-be who are more educated, more financially stable and more sure of what they want.
As long as babies need cribs, Meyer's niche is secure, but true prosperity requires staying current. "We want to make [the customer] feel good about shopping in our store," he says. Meyer predicts a 10 percent increase in sales for 2003, but while other USA Baby franchisees open their second and even their third stores, Meyer is happy sticking with his father's original store.
It's a Small World
Over the past 24 years, W. Berry Fowler has been a key player in the service segment of the children's industry. Once a student who nearly flunked out of college, Fowler has focused his energy on developing supplementary education programs for children who need extra help with reading, math and study skills.
Developing the idea of Sylvan Learning Centers, Fowler quit his job as a teacher to open the first center in Portland, Oregon, in 1979. Fowler sold the business in 1985 but reentered the educational segment of the industry in 1998. That's when he decided to open A Thousand Points of Knowledge, a franchise that works in conjunction with community organizations such as YMCA and Boys & Girls Clubs of America to build learning centers, providing affordable tutoring services for children.
Fowler has always seen promise in the industry, but only recently has the demand for educational services been rekindled. According to a study by the National Assessment of Educational Progress (NAEP), 68 percent of America's fourth graders score below the proficient reading level, while 37 percent score below basic. Secretary of Education Ron Paige announced in 2002 that America's 12th-graders rank among the lowest in math and science achievements when compared to other industrialized nations. "We need to prepare our kids to play on the most level playing field, by giving them all the skills and tools they need to be successful," says Fowler.
A Thousand Points of Knowledge franchisees have indirectly benefited from recent government legislation. As part of the No Child Left Behind Act signed in January 2002, funding is expected to increase 41 percent over fiscal year 2000, helping public schools provide extra help to disadvantaged children. Fowler has seen the impact, as schools begin to work in cooperation with supplemental education programs, and quarter-of-a-million-dollar contracts are presented to A Thousand Points of Knowledge franchisees. "The future of education will be a joint venture between the government and companies like mine," says Fowler.
Throughout his years as a franchisor, Fowler has never forgotten his primary goal of giving the extra but necessary attention to children who needed it as he once did. Fowler is also happy to see, with all his franchisees, he's not alone in advocating the importance of education. "The value of education is stronger than I've ever seen it."
On Your Mark...
Since they bought a My Gym Children's Fitness Center franchise in 1989, Corey Bertisch, 37, and Monique Vranesh, 35, have also seen an increase in customers aware of the need for programs like theirs. The National Institutes of Health report that one child in five is overweight, and more parents are seeking services offering children fitness. Meanwhile, the number of My Gym facilities has increased 15 times since 1990, resulting in approximately 120 operational franchises and two international facilities. But Bertisch and Vranesh have come to understand that, to remain strong in the industry, they have to do more than just expand. They must also address the changing lifestyles of America's kids.
A study by Nielson NetRatings reveals that approximately 20 percent of the active online population is between the ages of 2 and 17. Taking into account the prevalence of the Internet while maintaining the focus on fitness, Bertisch and Vranesh are working on a Web site that includes fitness tips of the day and reminders to encourage children to spend less time in front of the computer. The kids will also be given exercises at the gym they can download onto their computers.
To counteract the sedentary life-style that TV creates, Bertisch and Vranesh are also developing an interactive physical-fitness TV program for children ages 1 to 9. The show, a combination of a My Gym facility and the My Home Gym videotape series, is one of the first of its kind to not only entertain kids, but also motivate them to physically participate. "Everything is going to be interactive--the TV show, the Web site, anything that branches out from our primary product," says Bertisch.
Having just graduated from the University of California, Santa Barbara, when they purchased their My Gym Children's Fitness Center, Bertisch and Vranesh were eager to get started in the industry. "We wanted to combine our talents of working with children with being active and doing something that made a difference," says Bertisch.
The success of these franchises is based on one special ingredient: the care of children. "The great thing about our field, our business of kids, is that it just continues to grow," says Bertisch. "No matter what the economy [is like], people continue to spend money on their kids."