Thinking of Buying a Franchise? These Four Industries Are Flaming Hot Right Now
Turns out eating breakfast, working out, riding a rollercoaster and getting a job have something in common.
Ordering eggs, working on your biceps, visiting theme parks, and finding a new job. What do these areas of life have in common?
Here's the answer: They're all features of thriving franchise categories, and they're growing for the same reason. Business is excellent in the breakfast, fitness, recreation, and staffing/recruiting businesses. Each provides a form of stability — for consumers and franchisees alike! — during turbulent and unpredictable times.
Consider this: When someone grabs coffee on the way to work, improves their physical condition, plays with their kids, and seeks better employment, they are in the process of creating a happier, healthier overall existence.
But this isn't just anecdotal. Entrepreneur knows these categories are thriving and has the data to prove it. Every December, we publish a list of 10 areas in franchising where, based on an analysis of industry trends and year-over-year growth, we expect to see continued success. This year, breakfast, fitness, recreation, and staffing/recruiting are among those we identified, as they appear to be thriving in spite of — or, in some cases, because of — challenging economic conditions.
So where do the greatest opportunities lie, and what exactly is driving each of these four categories to grow? We investigated what's happening, and the answers are here.
→ Why Breakfast Is Such a Hot Category
Joe Thornton, president of Scooter's Coffee, admits that sometimes, you're just in the right place at the right time.
"There's probably not many businesses that can say they're recession-proof or pandemic-proof, but we've certainly showed signs of being both those things," he says.
Consumer behaviors shifted dramatically during the pandemic for lunch and dinner — and are continuing to shift for those typically more expensive meals amid rising inflation. But a lot of people have kept their breakfast habits. They're hitting a drive-thru for coffee and a to-go meal. They can't imagine starting their day without their usual order.
That continuous consumer demand is driving brands like Scooter's Coffee into tremendous growth.
"We have about 488 locations. We'll be at more than 600 by the end of 2022 and approaching 1,000 stores at the end of 2023 into early 2024," Thornton says. "This is a business where people come to you almost every single day. Coffee is a habit. We believe that this daily connection, the speed — it breeds loyalty."
Mark Siebert, founder of iFranchise Group, says the breakfast model can be particularly appealing to franchisees. To start, breakfast is easier to staff amid labor shortages; that's because these restaurants close after lunchtime, instead of serving food all day (and therefore requiring more people). Also, franchisees aren't stuck at the store late into the night.
"They can be home in time to see their kid's baseball game and have dinner at the family table," Siebert says.
Ricky Richardson, CEO of Eggs Up Grill — which saw same-store sales climb 18% in 2022 versus 2021 — says breakfast can also be a more sustainable habit for consumers in tough economic times. They may give up fancy dinners or drinks at the bar, but they'll still take the family out for Sunday brunch.
"We have about a $12.50 check on a per-person basis," Richardson says. "That gives us a breadth of appeal if things slow down in the economy."
Ken Bates, who opened the first Eggs Up Grill franchise in Tennessee in March 2022, and who signed a deal for four more in the area, says he intentionally chose the breakfast category when returning to franchising after selling 24 Little Caesars in four states.
"It's a growing segment, and the limited hours of operation make a lot more sense at this point in my career," Bates says. "It's another way for families to get together or coworkers to get together without the pressure or expense of a dinner."
→ A Franchisee Says…
Troy Hart spent 25 years owning hotel franchises, but pivoted during the pandemic. He and his partners bought 40 Scooter's Coffee territories in Wisconsin, and opened their first in October 2021. By late 2023, they expect at least 20 to be open.
Why did you choose a breakfast franchise?
We looked at home health care, all kinds of things. Completely coincidentally, my daughter was a barista at Scooter's, and she would tell me about her day. I could see that the 16-to-35 demographic loved being in the coffee business. Coming from the hotel space, often people don't want to clean rooms or work in hotels. The enthusiasm of people wanting to work in the business was exciting to me.
How are your locations doing so far?
They're performing just as Scooter's suggested they would.
What's your strategy for so many openings?
We're building up the people part of our team ahead of our store openings. That's the key in this labor market.
→ Why the Fitness Category Is So Strong
Fitness franchises got shellacked during the pandemic. Many locations didn't survive.
But for those that did, they saw opportunity: Consumers took a hard look at their own level of fitness, and many decided to get healthier. "That's something the fitness industry has really taken to heart," says Matt Haller, president and CEO of the International Franchise Association. "They spent a lot of money promoting that mindset. You see it in a lot of the advertising."
Once gym doors were able to open again, their business started exploding — and it has yet to stop. "It has created a world where the average fitness franchise has a great return on their business," says Christopher Pena, cofounder and president of Body20, which offers technology-based personal training.
And those returns are growing as we get further from the worst days of the pandemic. In April and May 2021, for example, Body20's two grand openings brought in about $47,000 and $48,000, Pena says. By September 2021, that figure for a grand opening had jumped to more than $65,000. As of November 2021, it was around $103,000.
But this isn't just a matter of demand, Pena says. It's also about sound business practices — which, ironically, the pandemic also helped to promote. Body20 is a great example of that. When the pandemic shutdowns closed all its locations, the Body20 corporate team stepped back to reevaluate how its locations operate. They reworked systems to place a stronger emphasis on back-of-the-house task management. That helps franchisees focus on the two key drivers of success in their business: membership acquisition and retention.
For instance, a Body20 franchisee used to need four to six hours every two weeks to do payroll, including calling all the employees and figuring out scheduling. Now that time commitment for a franchisee can be down to 15 minutes every two weeks.
"We brought in a bunch of software pieces and connected them, so the manager sets the schedule, the employee checks in and out on their phone, the hours automatically roll into our provider, and all you have to do every two weeks is log in and say those hours are correct," Pena says. "When you have to get creative in hard times, it doesn't mean those things don't also work in good times."
→ A Franchisee Says…
Helen Martin was a competitive golfer in her youth who met Stretch Zone founder Jorden Gold at a professional golf event where she was a spectator. She became a licensee in 2014, and then converted to a franchisee in 2016. As of October 2022, she has 22 locations in Florida, Texas, and North Carolina.
What makes Stretch Zone different?
Their table is patented with a stabilization system. It's like having another set of hands.
Are the services for athletes?
This is for everybody. I had always been an athlete, so I understood stretching. You tweak a muscle, and the coach is on the sideline stretching it. Jorden said, "Athletes have all these specialists and equipment. Think about all the people in the stands. That's your target market."
How will you achieve more growth?
I try to buy a whole market instead of just opening one store. I can share economies of scale with human resources, marketing — I can buy a radio ad and spread it across five stores instead of one.
→ Why the Recreation Category is So Fun
People always want entertainment. If they have less money to spend, they'll just seek out entertainment closer to home.
That reality has driven a boom in recreation franchises, as the pandemic (and then an uncertain economy) continues to affect recreational travel. "People are doing staycations or 'daycations' in local markets where they can have a lot of fun," says Jay Thomas, who spent 30 years as an executive with Six Flags before joining Urban Air Adventure Park, where he's now brand president and CEO and has perfectly positioned the company for staycation times.
And what happens after staycation times? No problem, Thomas says: As more people discover the parks, they'll realize that they are great for family events no matter what's happening in the world. "Parents will figure out how to have great birthday parties for their kids," Thomas says. "They're not going to miss out on the opportunities to share those memories."
In addition to having a measure of economic resilience, the recreation segment also has long-term interest from consumers, says Mark Siebert, founder of iFranchise Group. That's fueling a lot of innovation in the space and broadening the experiences that franchisees can offer.
"Initially, we saw things like trampoline parks," Siebert says. "Now it's things like pickleball parks that are popping up to target folks who wouldn't be very good on a trampoline."
To his point, franchise brands in the recreation space are now as wide-ranging as The Foam Garage, which promises a foam-filled party experience; Dart Wars, which is an indoor Nerf battle arena; iSmash, which has rooms filled with things people can smash and splatter; Freedom Boat Club, which lets members use fleet boats instead of buying them; and Board & Brush Creative Studio, which provides workshops for DIY woodworking.
Many of these businesses appeal to consumers with children, which is a key point when talking about brand resilience in uncertain economic times, says Matt Haller, president and CEO of the International Franchise Association.
"These are ways for kids to occupy themselves beyond traditional after-school activities," Haller says. "When people start making trade-offs, they don't necessarily want to make trade-offs that affect the development of their children. These things are about enrichment and development. They'll trade down when they go out to eat, maybe go to a less expensive place, but they'll still pay the monthly fee for their kids."
→ A Franchisee Says…
Abby Hussey and her husband, Scott, owned a preschool franchise for a decade before they sold it and opened an Urban Air in 2019. In late 2020, they opened a second Colorado location, and in early 2021, they bought an existing Urban Air nearby. They also have a fourth territory near Denver.
Why did you double down on Urban Air during the pandemic?
When Covid hit and we were restricted even more, our kids had their physical play and ability to connect with friends restricted even more. Because they couldn't celebrate their birthdays and special events, it became even more of a burning desire among families to do what our tagline is: Let 'em fly.
And now with family budgets stretched, what is your local strategy?
Our parks are in areas where families can join. They can say, "There's always something going on at Urban Air. What's new this month?"
Image Credit: Andrey_Popo | Shutterstock
→ Why the Staffing Category Says, "You're Hired!"
In 2022, an International Franchise Association report found that 90% of franchised businesses felt a moderate to significant impact from inflation, including labor costs.
"Nobody can find labor," says Matt Haller, the IFA's president and CEO. "Small businesses aren't going to have in-house recruiters or HR departments, so they need help."
And where are they going to get that help? Many turn to staffing and recruiting franchises, which have been addressing shortages for years — and are now seeing very good business.
"We're breaking year-over-year records," says Vinny Provenzano, vice president of franchising at Express Employment Professionals, which put more than 586,000 people to work last year across 860 locations.
For this reason, more prospective franchisees are becoming interested in the space, too. At ATC Healthcare Services, for example, CEO David Savitsky says his company's in-network sales have risen about 100% this year versus 2021. Many franchise buyers are coming from the corporate world and finding that their skills easily transfer.
These are also easy businesses to set up and run, says Rebecca Rogers Tijerino, president of Spherion Staffing & Recruiting, which has a $40,000 franchise fee. "In a more heavily-invested model with something like brick and mortar, it can take a while to get there. With us, you can be up and running in four to five months."
Franchisees say they're seeing strong results. Andy Fuller, who with his wife, Erin, bought an existing Express Employment Professionals franchise in September 2020, says his overall business is up 38% over 2021, and he's still bullish. "With the economy, who knows? But you still have an aging workforce," Fuller says. "There will be more jobs open than people to fill them."
It's also a business that, in some cases, can be run part time. Karrie Powell, a full-time nurse who opened an ATC Healthcare Services franchise in South Carolina this year, says she sees the same pattern continuing in nursing.
"If they want to work a contract that's a week, they can do it," she says. "If they want the contract that's three weeks, great. As a nurse, there's nothing worse than working short, without enough staff."
→ Two Franchisees Say…
Ebony Walker had 22 years of human resources experience. Fritz Valsaint came from procurement and consulting. The two longtime friends partnered to open a Spherion Staffing & Recruiting franchise in South Atlanta in September 2022.
How did you land in franchising?
Valsaint: We went to SCORE, a network of business mentors, and said, "We need somebody who has been there, done that, and can give us some pointers."
Walker: We found somebody with 30-plus years of experience. He advised us to look into franchising.
Why did you choose South Atlanta as your location?
Walker: To serve local communities. Some people think blue-collar employees are lower educated or only have certain skills, but we want to change that perception. We don't want companies to see these people as just forklift drivers or packers. We want them to envision that packer becoming an operations manager or a general manager.
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