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The only constant in life is-you guessed it-change. Knowingthis, we make it our mission every December to cast our eyes intothe future and predict the hot businesses for the year ahead. Ourpredictions are based on a combination of research, expertise andpure gut instinct.
This year, these factors point to 14 stand-out businesses for1998. We've written about several of them in Entrepreneur-weeven touted a few last December as hot businesses for 1997. Yet anew year brings a new set of opportunities for such 1997 picks asspecialized staffing and job training/retraining, so don't passover these selections in your haste to explore such hot-businessnewcomers as mail order health care and wraps.
We also encourage you to take note of the underlying trendsinfluencing our roundup of 1998's hot businesses. Credit anaging population, for instance, for generating a demand for adultday services and assisted living facilities. And thank ahealth-conscious (albeit time-hungry) public for raising theprofile on juice bars and soup restaurants.
Not enough to satisfy your appetite for hot trends? Good. Onceyou pore over the top businesses, take time to sift through thecornucopia of cultural goings-on we peg as significant for 1998 in"Heads Up" on page 110. Think pampered pets. Thinkcaffeine. Think germ warfare. And so goes the ever-changing trendlandscape.
Juice Bars
Although they're not exactly a new trend, juice barscontinue to pack a hefty punch in the beverage world. Indeed, whatbegan as sort of a pick-me-up drink for exercise enthusiasts hasevolved into a mainstream favorite. It is, attest juice-barentrepreneurs, a drink that suits the taste buds of young and oldalike.
"The product doesn't have any one specificdemographic," says Jim Millican, 36, co-founder with brotherRobert, 29, of Chapel Hill, North Carolina-based Smoothieville Inc."It runs the gamut."
Launched last year, Smoothieville blends blueberry-coloredcountertops and raspberry-colored stools with a menu of smoothiesfeaturing ingredients as diverse as strawberries and peanut butter.Says Jim, "It's kind of a '90s version of the maltshop."
And yet, it's also kind of not. The frothy concoctions thattoday's juice-bar operators serve up aren't intended asdessert 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," saysJim, "and as a healthy alternative to fast food."
Smoothies are selling so well that one recent estimate puts theindustry into the $300 million sales category by the year 2000.Smoothieville itself, according to its owners, conservativelyexpects to enjoy a 25 percent increase in sales next year andshould have three locations up and running by the time you readthis.
The options, it seems, are endless. "You can become more ofa full-service restaurant and serve wraps and other healthysandwiches and soups [in addition to smoothies]," says Jim,"or you can get more involved with vitamins and supplementsand stick with smoothies."
Ladies and gentlemen, start your blenders.
Home-Meal Replacement
Leave work, pick up the kids, drop off the drycleaning, getgas . . . Time-starved consumers continue tomake home-meal replacement one of the hottest trends in today'smarketplace. Whether it's a personal chef service, asupermarket offering prepared meals or a grocery store/restauranthybrid ("grocerant"), the food offered by thesealternatives to traditional fast-food fare is being gobbled up.
"Convenience is everything in our world now," observesRichard Heyman, founder of Foozi, a Brentwood, California-basedfood establishment that features everything from a takeoutrestaurant and a gourmet deli to an espresso bar and a refrigeratorstocked with freshly made meals. "Home-meal replacement givescustomers options."
Heyman, who likens Foozi to the grocerant concept popularized byEatzi's in Texas, plans to open a second Southern Californialocation of his six-month-old business in early 1998. "Thedemographics are wide open," he says of his customer base."Everyone's [coming here]."
Indeed, market research firm NPD Group reports that morerestaurant meals were taken out than eaten in last year.Recognizing this, supermarkets included in a recent Food MarketingInstitute study expressed an intention to offer prepared meals inan overwhelming 82 percent of their stores this year. And evenhome-meal replacement industry pioneer Boston Market is testing anew variation of its concept featuring an increased emphasis onmeals designed to heat (and eat) at home.
Of concern to home-meal replacement entrepreneurs, naturally, ishow much such high-profile competition will eat into their ownsuccess. Heyman, for one, isn't worried. After all, convenienceand high-quality food hit the spot.
Day-Care Centers
When child day-care centers were just starting out withtentative baby steps some 30 years ago, American families were lessthan enthusiastic about them-most kids were still cared for by aparent or relative, and only one in 20 children was in day care. Inrecent years, however, those figures have undergone a dramaticchange: Of the 20 million children in the nation under age 5, onein three is cared for in part at a day-care center. "What thismeans is that the middle class has accepted [day-care] centers as anormal part of the social fabric," says Roger Neugebauer,publisher of Child Care Information Exchange, a tradepublication that tracks the industry.
That's good news for entrepreneurs hoping to latch ontosuccess in one of the nation's fastest-growing industries. Andthat trend should persevere: The number of women entering the workforce continues to rise; 4 million babies are born each year; andday care is still the number-one choice for parents, despite itsaverage $4,000 per year/per child cost, according to theChildren's Defense Fund, a nonprofit child advocacyorganization.
To succeed, centers must offer more than just child's play.Recent brain research supports the importance of stimulation anddevelopment in the first six years of life. In addition toproviding an educational environment for toddlers, today'sday-care centers offer expanded services: More and more haveextended their hours to include evenings and weekends, and many aretaking education beyond preschool age and teaching elementarygrades.
But with a dearth of qualified workers, entrepreneurs face thechallenge of acquiring a staff prepared to meet the public'sdemand. "The 18- to 26-year-old age group in the population isshrinking, and that's where we get 90 percent of ourteachers," says Neugebauer. Nonetheless, experts predict amarket growth rate of 5 percent to 10 percent over the next fiveyears. Here's looking after you, kids.
Internet Marketing
Companies nationwide are becoming familiar with building andhosting Web sites. But many are discovering that marketing theircompany over the Net doesn't end with the launch of their Websites: The next logical step is to find new ways to increasetraffic 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' growingconfidence in e-commerce are spurring rapid growth in the Internetmarketing industry. According to Internet marketing research firmForrester Research Inc., Internet advertising will grow from $480million in sales this year to $1 billion in 1998.
Some Internet marketing companies help businesses build Web sitetraffic by setting up links to other sites or developing newcontent or services; others create software programs and servicesto help companies conduct direct-marketing campaigns via e-mail orspecialize in Web advertising. Internet marketers' backgroundsare diverse, ranging from direct-marketing experts to softwareprogrammers and Webmasters. With such a wide array of expertise,industry insiders suggest entrepreneurs supplement any areas theymay be lacking in with experienced personnel.
To succeed, entrepreneurs must go the extra mile. Says DaleDougherty, president and CEO of Songline Studios Inc., an onlinepublishing firm and publisher of Web Review Magazine,"Companies need to [find] ways to develop meaningfulrelationships [with visitors] on the Internet."
Soup Restaurants
If television's most talked-about comedy talks about yourindustry, there's reason to smile. That's the lesson souprestaurant entrepreneurs have learned following the broadcast ofthe now-legendary "Seinfeld" episode that centered arounda cantankerous soup chef nicknamed the "Soup Nazi." AsJerry and friends hankered after the Soup Nazi's bowls of soup,the American public was reminded of its fondness for this simmeringdelicacy.
Not that the soup restaurants of today are serving up the simplechicken noodle brew that Mom used to make. "We're takingsomething that's been around for hundreds of years andredefining it," explains Carla Ruben, 35, co-founder of theNew York City-based Daily Soup Inc. chain. "We're makingit more of a meal. We try to imagine the customer taking the soupand putting it on a piece of bread and making it a sandwich,"elaborates Ruben, who is partners with Peter Siegel, 29, and BobSpiegel, 36.
And, no, neither the lunchtime crowd of working professionalsnor the dinner crowd of hungry families spoons up, say, arun-of-the-mill vegetable soup. Ingredients as exotic (and ample)as spicy Moroccan chicken and Thai chilled melon with peanuts arenow thrown into the pot.
"It's something people have wanted for a long time-itjust wasn't available," says Ruben, whose eight New YorkCity Daily Soup locations serve some 8,000 people every day."It's healthy. It's nutritious. It'sfilling."
And it's hot (so hot that we wrote about it last month inour "What's Hot" column). With Americans reputed toslurp up more than 10 billion bowls of the stuff every year, soupis enjoying a popularity that entrepreneurs are happy to translateinto 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 thecountry," says Will Weisman, a partner in the SanFrancisco-based World Wrapps Inc. food chain. "Wraps areshowing up on the menus of a lot of national food chains, and a[growing number] of small independent restaurants throughout thecountry are focusing on wraps."
Skeptics who once considered the handheld delicacies-unusualingredients wrapped in flavored tortillas or pitalikeflatbreads-too exotic for mainstream American tastes are singing adifferent tune of late. After all, if no less a national brand thanKFC is getting in on the wrap act, then there's clearly awidespread demand.
Widespread enough, in fact, to encourage supermarkets to beginstocking prepackaged wrap products. "The bottom line is,it's a great way to eat," says Weisman, who has 27 WorldWrapps locations on the West Coast. "[Wraps are] portable-andyou can put a wide variety of ingredients in them."
Indeed, due to the growing trend of eating in cars, theportability of wraps is undoubtedly a plus for ever-mobile andever-busy Americans. Yet don't underestimate the value ofwraps' image as a healthy-and, not incidentally,tasty-alternative to the sandwich. And, too, note how many wraprestaurateurs are beginning to offer smoothies as an addedattraction for customers.
Speaking of added attractions, the fledgling wrap entrepreneurmight consider offering a few-particularly in light of increasedcompetition in the industry. Think of it this way: As mainstreamacceptance of wraps grows, more companies are diving into thewater. Even still, this isn't a market easily wrapped up.
Professional Employer Organizations (PEOs)
Most small-business owners would agree-they didn't gointo business to deal with the daily administrative details ofmanaging a staff. And yet, as their business expands and the numberof employees increases, that's exactly what they end updoing.
Enter PEOs, formerly known as employee leasing companies. Theseorganizations shoulder the responsibilities of human resources,benefits consulting and other administrative services forbusinesses-and have become so popular they're growing at a rateof as much as 30 percent per year. "We allow thesmall-business owner to focus on the business of their business andlet 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 helpingsmaller businesses, the trend for the future is to attract largercompanies-even Fortune 100 corporations-as clients. According tothe experts, that means the sky's the limit for this industry."The fact that 97 percent of our market has not even beenpenetrated means there's a dynamic future ahead," Yagersays.
But success is not a given, despite the fact that the marketremains largely untapped. "One of the biggest obstacles is theamount of education needed to [run a PEO] right," says PaulSarvadi, co-founder of Administaff, a PEO in Houston. "On thesurface, it looks very simple. But the reality is, it's verycomplex."
Tracy Gaulding, a Houston Kwik Kopy franchisee and Administaffclient with two stores and 35 employees, is glad he chose to use aPEO. Although in business since 1990, he brought Administaff onboard just nine months ago-transferring payroll, worker'scompensation, termination, benefits and other functions to the PEO.Says Gaulding: "I've thought about [not using a PEO], butI would dread having to do it [all by myself] again."
Specialized Staffing
Every year, the staffing services industry outdoes itself byachieving record-setting sales. Consider its history, reported byStaffing Industry Report newsletter: Industry revenues in1991 totaled just $31.4 million. By 1996, that figure had more thandoubled to $74.4 million, and this year's revenues areprojected to pass the $85 million mark.
Staffing services have made themselves indispensable by bringinghighly skilled individuals to a variety of businesses. In the past,specialized skills were limited to a few areas, such as clericalsupport. Today, employees run the gamut from information technologyexperts to chief executive officers. "The concept of[staffing] services has proved itself," says Bruce Steinbergof the National Association of Temporary and Staffing Services."It enables businesses to immediately adjust their staffinglevels to meet demand."
Ensuring their workers are properly skilled stems from one ofany successful staffing company's top priorities: training.Every year, the industry spends an average of $350 million toupgrade its employees' skills. And just as there's a trendtoward broadening skills, there's also an inclination to expandthe types of arrangements available. Temp-to-full-time services andoutsourcing services, in which the staffing company hires andmanages an entire function within an organization (such asmarketing), are also on the upswing.
Will all this activity leave any room for newcomers? "It isa highly competitive industry," Steinberg confirms, "butthere's still room for new people."
Job Training/ Retraining
Technology, corporate downsizing and welfare reform are morethan buzzwords for '90s-style business; they are forcescontributing to the rapid growth of one of the decade's hottestbusinesses: job training and retraining. The U.S. Bureau of LaborStatistics identifies job training as one of the fastest-growingsmall-business-dominated business sectors, predicting the industrywill grow 43 percent between 1994 and 2005.
Employees who have been edged out of a job and those who wouldlike to telecommute but don't know the first thing about thetechnology required to do so are finding that updating their skillsis imperative, says Sharon Canter of Milwaukee-based Manpower Inc.,which provides employee training from the clerical level all theway up to high-end technology skills.
While Manpower and its ilk are more recognizable in thejob-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 theyspecialize in a selected skill set, [they can] succeed."
Specializing becomes even more imperative when you consider thatin addition to competing with corporate giants, small firms will bein the arena with community colleges and government organizations,which offer free or low-cost training. What to specialize in? BLSreports that computer-related education is the most common type oftraining received. If you take this route, be sure your technologyof choice is going to be around for a while.
Not tech-savvy? Opportunities exist in training for jobpreparation, 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 endresult is supposed to be lower prices for consumers and a morecompetitive marketplace, creating plenty of opportunities forentrepreneurs.
Take California, for example. Competition is scheduled to beginin the Golden State January 1, and 108 companies and individualshave registered with the state's Public Utilities Commission tobecome nonutility electric service providers. Those registeringrange from large, established utility providers to small,entrepreneurial ventures. Though the new industry is still in itsformative stages, there is one source for entrepreneurs interestedin electricity reselling to turn to: the Power MarketersYearbook, available through the Edison Electric Institute inWashington, DC.
"I think we can lower the price of electricity for ourexisting customers," says John Kamp, president of Manteca,California-based Kamps Propane. Kamps operates nine stores inCalifornia that sell propane gas primarily to consumers in smalland rural towns. Kamps' director of marketing, Foster Fluetsch,is also exploring purchasing cheaper electricity from anout-of-state producer.
"If the customer just wants reliable electricity at thelowest possible price, small companies can do better. They havelower overhead and can basically be virtual entities," saysJim Rodier of Concord, New Hampshire-based Freedom Energy CompanyLLC. His company is one of the few small businesses involved in apilot project in New Hampshire that gives residents the right tochoose the company from which they purchase electricity.
For a small firm to be successful, Rodier says you have toeducate yourself about the changes. "I also think it'simportant to wait until there is more clarity, until you see whatthe new structure of the industry is going to be."
Rodier adds that waiting also allows small-business owners toavoid initial price-gouging. But once this phase passes, theopportunities in this sector could prove electrifying.
Recycling Consulting
Talking trash is big business for recycling entrepreneurs.According to David Kirkpatrick, founder of KirkWorks, anenvironmental economic development firm in Durham, North Carolina,1996 revenues for the resource recovery industry were $14.3billion. "I think that's probably an underestimate,"says Kirkpatrick, whose firm organizes recycling investment forumsand conducts economic impact studies.
Industry growth has been largely centered in thepost-consumer-waste sector, fueled by concern for the environmentand limited landfills. A sign of that growth is the increasinginterest in investing in start-up recycling firms. KirkWorks helpedorganize an annual investment forum in 1995; by late 1998, it willparticipate in four annual events nationwide. And that could bejust the tip of the trash heap-er, iceberg.
Assisted Living Facilities
If you haven't realized it yet (and if you're a regularreader of this magazine, there's no way you could have missedit), the growing number of seniors in America is creating a needfor health-care businesses the likes of which we've never seenbefore. Assisted living facilities mark another segment of thistrend, spurred by the demand for environments that promote wellnessand quality of life.
More and more seniors are turning to assisted living facilities,which provide support in daily activities and health care but allowthe elderly to age with dignity. In contrast to nursing homes andother types of institutional care, assisted living residencesresemble 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, eatingand dressing to bathing and getting around town. This model of carefocuses on residents' well-being and independence, says KarenWayne, president and CEO of the Assisted Living Federation ofAmerica (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 itnoticed a sharp rise in demand for the services. With 40 Minnesotalocations, Rem plans to construct at least two more assisted livingproperties in the near future. "People want to remain in ahome setting and still be cared for," says president ThomasMiller, who runs Rem with his brothers Craig and Douglas.
Competition is keen, so take heed: Operating a facility iscapital-intensive. Entrepreneurs must research location,demographics and regulations. Despite the challenges, the outlookis good: ALFA estimates that this year's industry sales ofabout $13.5 billion will double by 2000.
Mail Order Health Care
For years, health-food stores, pharmacies-even infomercials-havecatered to Americans' obsession with their health. Now,companies that distribute health-care items by mail are finding afirst-class opportunity in this robust market. Take a growingdemand for health products, the convenience and privacy of goodsdelivered to your door, and built-in repeat orders, and it's nosurprise that sales for the mail order health-care industry havegrown more than 10 percent each of the past five years to reach arecord $6.1 billion in 1996.
"All the makings for opportunity are present," saysJohn Schulte, chair of the National Mail Order Association."The lifestyles of Americans are very favorable to sellingthese products."
Everything from facial moisturizers and lumbar cushions toantacids fill the catalog pages of the 560-plus mail orderhealth-care businesses in the United States. Bestselling categoriesare drugs and vitamins, adult products, aids for people withdisabilities, physical fitness products and health programs(including diets).
Schulte recommends creating programs like monthly clubs to setyour business apart. Entrepreneurs also need to researchregulations and become familiar with key industry players and basicmail order techniques. Once they've mastered the basics, mailorder entrepreneurs are finding that what's good for customersis good for business.
Adult Day Services
Although knowledge about adult day services isn'twidespread, the industry has actually been around since the 1970s.Born of a need to provide seniors with health, social and supportservices, the industry is gaining momentum, fueled by longer lifespans and an older population. In fact, the National Adult DayServices Association (NADSA) estimates there are about 4,000 adultday service centers operating in the United States.
"Adult day services are a solution to a lot of problems inthe health-care arena," says NADSA director Mary BruggerMurphy. "It's a very logical and cost-effective way ofdelivering services."
Adult day service centers assist seniors with either minimal orextensive needs; some centers specialize, caring for those withAlzheimer's disease, for example. While many operate inhospitals or clinics, others are freestanding businesses. Typicaladult day service centers provide nursing care, transportation,meals, social activities and assistance with daily livingactivities like eating and bathing.
Because adult day service centers are still one of the best-keptsecrets around, educating the market about your business andrecruiting new candidates can be a challenge, Murphy warns.Therefore, making contacts with local health-care agencies that canprovide you with referrals is key to building a healthybusiness.
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, NH03301-4956, (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
