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.

By Sara Wilson

Opinions expressed by Entrepreneur contributors are their own.

Eager to please, franchisors are catering to children'salterable moods and changeable interests, coming up with innovativeideas while serving the most basic of needs. Whether it'schildren's furniture, education or fitness, success for thesefranchises can usually be measured by the size of thecustomer's smile.

Franchises are also measuring the size of the market, as Censusfigures indicate there are approximately 40 million kids in theUnited States under age 10. Marketing expert and AmericanDemographics founder Peter Francese also credits thisindustry's strength to better market research, directed to amore educated consumer. "The industry has prospered because of[companies'] abilities to target consumers and create productsthey want and will buy," he says.

Hot in the beginning, prosperous now and promising for thefuture, the children's franchise industry has attractedlong-term players who have left their marks, have achievedfinancial success and now offer a wealth of insight for peoplewanting to get into this industry.

Knock Knock, Who's There?

For Fred Meyer, it was natural to take over the toy store hisfather had opened in Battle Creek, Michigan. In 1947, Meyer'sfather proved to be ahead of his time when he recognized anopportunity in selling toys to the baby boomers. In 1990, Meyeridentified the growth potential in converting his father'sbusiness into a USA Baby franchise. His first priority was to findthe right niche, and furniture represented a stable bet in theindustry. But, as Meyer has discovered, staying up to date with thechanging demographics of his clientele has been equally crucial. Inthe years since his father first opened the business, grandparentsand older mothers have emerged as target customers.

Grandparents have become some of the most significant consumersin the industry. According to the AARP, people over 50 earn a totalof almost $2 trillion annually and represent more than 50 percentof total discretionary spending power. In a 2002 study, AARP foundthat grandparents 80 and older are likely to spend $1,000 to $2,499annually on their grandchildren. Meyer even incorporated them intohis marketing strategy by using "Grandparents' FavoriteToy Store" as his slogan one year.

Another trend children's franchise owners point to is womenhaving children later in life. Meyer has seen an increasing numberof 40-year-old mothers-to-be who are more educated, morefinancially stable and more sure of what they want.

As long as babies need cribs, Meyer's niche is secure, buttrue prosperity requires staying current. "We want to make[the customer] feel good about shopping in our store," hesays. Meyer predicts a 10 percent increase in sales for 2003, butwhile other USA Baby franchisees open their second and even theirthird stores, Meyer is happy sticking with his father'soriginal store.

It's a Small World

Over the past 24 years, W. Berry Fowler has been a key player inthe service segment of the children's industry. Once a studentwho nearly flunked out of college, Fowler has focused his energy ondeveloping supplementary education programs for children who needextra help with reading, math and study skills.

Developing the idea of Sylvan Learning Centers, Fowler quit hisjob as a teacher to open the first center in Portland, Oregon, in1979. Fowler sold the business in 1985 but reentered theeducational segment of the industry in 1998. That's when hedecided to open A Thousand Points of Knowledge, a franchise thatworks in conjunction with community organizations such as YMCA andBoys & Girls Clubs of America to build learning centers,providing affordable tutoring services for children.

Fowler has always seen promise in the industry, but onlyrecently has the demand for educational services been rekindled.According to a study by the National Assessment of EducationalProgress (NAEP), 68 percent of America's fourth graders scorebelow the proficient reading level, while 37 percent score belowbasic. Secretary of Education Ron Paige announced in 2002 thatAmerica's 12th-graders rank among the lowest in math andscience achievements when compared to other industrialized nations."We need to prepare our kids to play on the most level playingfield, by giving them all the skills and tools they need to besuccessful," says Fowler.

A Thousand Points of Knowledge franchisees have indirectlybenefited from recent government legislation. As part of the NoChild Left Behind Act signed in January 2002, funding is expectedto increase 41 percent over fiscal year 2000, helping publicschools provide extra help to disadvantaged children. Fowler hasseen the impact, as schools begin to work in cooperation withsupplemental education programs, and quarter-of-a-million-dollarcontracts are presented to A Thousand Points of Knowledgefranchisees. "The future of education will be a joint venturebetween the government and companies like mine," saysFowler.

Throughout his years as a franchisor, Fowler has never forgottenhis primary goal of giving the extra but necessary attention tochildren who needed it as he once did. Fowler is also happy to see,with all his franchisees, he's not alone in advocating theimportance of education. "The value of education is strongerthan I've ever seen it."

On Your Mark...

Since they bought a My Gym Children's Fitness Centerfranchise in 1989, Corey Bertisch, 37, and Monique Vranesh, 35,have also seen an increase in customers aware of the need forprograms like theirs. The National Institutes of Health report thatone child in five is overweight, and more parents are seekingservices offering children fitness. Meanwhile, the number of My Gymfacilities has increased 15 times since 1990, resulting inapproximately 120 operational franchises and two internationalfacilities. But Bertisch and Vranesh have come to understand that,to remain strong in the industry, they have to do more than justexpand. They must also address the changing lifestyles ofAmerica's kids.

A study by Nielson NetRatings reveals that approximately 20percent of the active online population is between the ages of 2and 17. Taking into account the prevalence of the Internet whilemaintaining the focus on fitness, Bertisch and Vranesh are workingon a Web site that includes fitness tips of the day and remindersto encourage children to spend less time in front of the computer.The kids will also be given exercises at the gym they can downloadonto their computers.

To counteract the sedentary life-style that TV creates, Bertischand Vranesh are also developing an interactive physical-fitness TVprogram for children ages 1 to 9. The show, a combination of a MyGym facility and the My Home Gym videotape series, is one of thefirst of its kind to not only entertain kids, but also motivatethem to physically participate. "Everything is going to beinteractive--the TV show, the Web site, anything that branches outfrom our primary product," says Bertisch.

Having just graduated from the University of California, SantaBarbara, when they purchased their My Gym Children's FitnessCenter, Bertisch and Vranesh were eager to get started in theindustry. "We wanted to combine our talents of working withchildren with being active and doing something that made adifference," says Bertisch.

The success of these franchises is based on one specialingredient: the care of children. "The great thing about ourfield, our business of kids, is that it just continues togrow," says Bertisch. "No matter what the economy [islike], people continue to spend money on their kids."

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