IFE Wrap-Up

IFE 1

Photos courtesy of IFE

In growth mode: The International Franchise Expo sparks a conversation

about franchise trends worth watching. 

By Bill Corbett Jr. 

With close to 800,000 franchise locations in operation in the United States, it is clear the nation’s entrepreneurial spirit is alive and well. Along with the number of operating franchises, the number of franchisors and the diversity of their offerings continue to expand into new sectors. To get a clear picture on current trends, it is critical to find out from the experts what they are observing today and where they see the industry going in the years to come. 

It is evident that the rapidly growing and strong U.S. economy as well as changing demographics are playing significant roles in the franchise marketplace. While baby boomers continue to be a major part of the consumer market, millennials and the younger Y and Z generations are having an impact as well. While recently exploring the International Franchise Expo (IFE) in New York City, the influence of technology and the growing desire for on-demand services beyond Netflix and Uber were apparent.

Technology, especially mobile technology, is a strong component of franchise growth in all sectors and in all regions of the United States. Franchises that leverage technology to give consumers of all ages the services and products they want, when they want them, are rising to the top. Mobile ordering, scheduling, membership management, marketing and customer communication are all being utilized by franchise companies. The development and focus on technology gives many franchises a competitive advantage that they did not have just 10 years ago. 

“It is clear that franchising is here to stay and today it seems that there is a model available for virtually anyone who is looking to get involved,” said Harold Kestenbaum, Esq., a franchise attorney and co-author of So You Want to Franchise Your Business. “We are seeing new concepts developed and traditional models reconfigured to meet new market demands. There are many choices and many financial options that open the door for entrepreneurs.”

‘Truly Amazing’

The diversity of franchise offerings was on full display at IFE, which ran May 30 to June 1 at New York’s Javits Center. A walkthrough of the event and a quick review of the directory demonstrated that there are thousands of concepts available to those who want to invest.

“It is truly amazing to observe and talk with the many franchise company reps exhibiting at the IFE show,” said Greg Demetriou, CEO of Lorraine Gregory Communications of Edgewood, N.Y. “Not only is the diversity of business types staggering but so is the varying level of sophistication. We saw some well-established brands presenting with highly refined marketing and technology designed to draw people in and wow them. We also observed companies on the opposite end of the spectrum. These companies had very modest presentations, many of which lacked polish. 

“We work with franchise companies and it is clear that some have developed proven and effective systems for presenting their concepts and benefits to prospects. Many lessons can be learned from observing these established brands,” Demetriou added. “Newer and smaller franchisors need to recognize that impressions made at shows, as well as online, are critical for success.” 

With an eye on consumers who are looking to meet an immediate need, franchises that provide home services are enjoying strong growth. This success comes in part from the ever-increasing use of technology that gives consumers the ability to take the uncertainty out of interactions with contractors and other service providers. Companies like Dryer Vent Squad cleans the vents of home clothing dryers, and IFE 2Maid Pro, a franchise that offers home cleaning, are capitalizing on technology to schedule appointments, make payments and build relationships with customers. 

“One of the major trends we are continuing to see with franchisees is the incorporation of technology and the use of the subscription and/or membership model,” said Stuart Levenberg of the Kensington Company, a franchise sales and consulting firm based in Roslyn, N.Y. “Whether it is a niche fitness club like Orange Theory; Lash Lounge, an eyelash extension franchise; or Hand and Stone, a massage franchise which uses the membership/recurring revenue model, the recurring revenue model has taken hold. By securing returning customers, the franchise owners create stability and the foundation for growth.” 

Beyond franchises that rely on memberships for recurring revenue, others are capitalizing on the desire to enhance health and get kids to be more active. The rise of handheld mobile devices, video games and the national youth obesity epidemic are contributing to this trend. 

Rock climbing, “ninja warrior” indoor obstacle courses and trampoline park franchises that offer family experiences are on the rise, as are restaurant concepts that focus on heathy eating. This is, in part, following the trend and the interest of parents across the nation to get their kids up, out and active. “Reducing obesity and experiencing different kinds of entertainment have fueled the growth of these activity-based franchise concepts,” said Ken Stein, founder of the Kensington Company and a nationally respected franchise sales expert. 

Where the Growth Is

“We are seeing franchises opening new locations across the nation, especially in retail malls that are struggling,” Kestenbaum said. “It’s clear that many consumers are not going to traditional malls to shop for retail products anymore. In addition, with the closure of many Sears locations and with Toys “R” Us closing its doors, there is a lot of large, quality space available. Franchises such as Altitude Trampoline Park, an indoor trampoline park, and USA Ninja Challenge, an indoor obstacle course, are leveraging this opportunity.” Kestenbaum also noted that franchises that serve seniors are also on the rise.

Although McDonald’s continues to be the No. 1 franchise in the world, many other restaurant and food concepts are emerging. This is happening even as some established brands are leveling off and others like Subway are reducing the number of stores in the United States. Likewise, the oversaturation of frozen yogurt shops led to its decline and the eventual closure of many stores across the nation. 

However, hamburger-focused concepts continue to pop up and some of the more recent entries to the market such as Smashburger (2007) and Bareburger (2009) are gaining strength.

“Americans love hamburgers; however, the goal is to create a new concept which is different,” Demetriou added. “This is a challenge and for some it seems as though they are only offering a new gimmick to get some quick traction and attention. We are concerned that for many this will only be a flash in the pan. This is why it is critical for those interested in purchasing a franchise to examine each franchise system’s marketing plans and budgets.”

Adds Stein: “There are some new and interesting concepts in the health food market that come with low overhead and are meeting the needs of health-conscious consumers. For example, pHountain, a clean water, greens, and detox concept is gaining traction. We know consumers are IFE 3concerned about water quality and healthy food. This franchise is capitalizing on it and doing very well.” 

Consumers, particularly younger consumers, have different interests when it comes to fitness. Boutique fitness studios and franchises that cater to specific types of training as well as offer constantly changing programs are seeing growth. Franchises such as Orange Theory and Australian-based F45 Fitness offer different training programs daily. Their programs include high-impact interval training with integrated technology for members. The ability of these franchise concepts to offer members a different exercise program each time they visit as well as technology that tracks heart rates and other vitals make them ideal for active people who love and want technology.

Competitive Advantage

“Technology is the continuing trend – and the competitive advantage – that franchises are focusing on today,” Levenberg said. “For example, it is almost impossible for an independent fitness club or even a local plumber to develop and implement mobile apps and technology that consumers want. Franchisors are using their resources and funds to develop and deploy consumer-focused technology. This is helping their franchisees grow, retain customers and even convert independents to their systems.” 

Other franchises in real estate, education and senior care continue to hold their own even as technology and other trends impact brick-and-mortar locations. RE/MAX the No. 1 real estate franchise in the world, remains in this position because they focus on giving their franchisees and their professionals the latest technology and tools. Using technology also supports RE/MAX’s brand growth as well as national and international name recognition. The power of branding remains a vital part of the value of franchising. In real estate this approach also supports attracting new real estate agents and enhances lead generation for them. 

Many franchises that are seeing strong growth are considered “home-based businesses” where owner/operators manage a small group, or even a large number of employees, remotely. These owners have little or no need for an office or facility since all workers go to job sites to perform their duties.

The key for the home-based or small franchise is the low cost of entry. Some home-based concepts can be launched for $50,000 or less. These models offer those looking for their own business the opportunity to set up with relatively low overhead and the potential to expand into new markets, regions or add additional units.

“We are seeing all demographics being represented in terms of who is purchasing franchises,” Stein says. “Ten years ago, we saw many people fleeing from the financial services sector and buying franchises as a way to replace income. Today we have millennials looking to own their own businesses, and we also see baby boomers looking for a second career or to make a new investment.”

Corporate Refugees

Although the economy is growing strong and unemployment numbers are at record lows, there are still periodic disruptions in business sectors and businesses do fail. Franchises are often a favorable option for an individual who has been displaced.IFE 4

“We see many corporate refugees looking to franchise as an option,” Levenberg said. “This trend continues during all business and economic cycles. We see these individuals coming to franchising with business skills and knowledge that they use as owner/operators or set up systems for absentee management of one or more franchise locations.”

It is clear that the franchise sector is impacted by changing trends as consumer habits change. This is a diverse and growing sector of the economy that offers opportunity for those who are willing to invest in it. There are more concepts available today than ever before and there is a franchise model for almost every motivated entrepreneur. 

However, as trends show, to succeed it is necessary to identify new approaches, adapt to the use of new technology and commit to studying and understanding changing consumer habits, needs and demands. We can safely predict that the growth of the franchise sector will continue, more people will be employed by franchise companies and certainly technology will continue to have a major impact on the way that franchises serve their customers. 

Bill Corbett Jr. is president of Corbett Public Relations and creator of "Grow Your Personal Brand." He can be reached at wjcorbett@corbettpr.com and followed on Twitter and Instagram at @wjcorbett.

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