Updated January 05, 2010
2010 the Year to Open a Franchise?
By Rob Reuteman
The Franchise King shares insight from his latest annual list of predictions.
As the economy continues to turn the corner in the New Year, according to one franchise expert it may be the right time for hopeful entrepreneurs to take the leap.
“If the banks start making more commercial loans available for franchise start-up businesses, 2010 looks to be a good year for the franchise industry,” said Joel Libava, known in the industry as The Franchise King for his role as matchmaker, lining up potential franchisees with suitable parent companies. “I hope more people will get into businesses of their own and hope banks can help things change.”
No question, meeting the needs and wants of 74 million aging U.S. baby boomers will be a dominant trend in the franchising industry for 2010 and for years to come, Libava said. He cited a demographic study done by AARP that concludes the oldest of the boomers will begin turning 65 in two years. Their numbers are expected to swell the ranks of retirees until 2030, when they’ll comprise 20 percent of the U.S. population.
“Medical advances will allow millions of retiring boomers to live longer, more productive lives,” Libava said. “The franchise industry has been starting to capitalize on this trend, with franchise concepts being launched to allow these retired folks to enjoy themselves, longer.”
Here’s some examples of such concepts that made Libava’s 2009 list of top franchise trends:
Companies Offering Incentives to Potential Franchisees
The State of Franchising in the Credit-Crunched U.S.
TRAVEL AGENCIES: Active boomers will want to travel, probably a lot. According to a new survey by the United States Tour Operators Association, 75 percent of its members predict international packaged travel will increase by about 18 percent in 2010. A little more than half of members said domestic packaged travel will grow by about 10 percent.
Libava likes one franchisor in particular: CruiseOne. CruiseOne franchisees enjoy the distinction of being with the top distributor of cruises in the world, World Travel Holdings.
FITNESS CENTERS: One way to live longer is to exercise regularly, but Libava warns: “Being a franchisor in a crowded market like fitness can’t be too enjoyable, unless you have a strong unique selling proposition.”
Out of the 20-plus fitness franchises to choose from, currently there are only a couple that cater specifically to the 50+ crowd. The one he likes most is Club 50 Fitness.
Another form of exercise popular on the senior circuit is golf. As Libava points out, that’s why retirement communities always seem to have easy access to beautiful golf courses.
“While there’s no shortage of nice little pro shops attached to public and private golf courses, there just aren’t that many branded retail stores that specialize in all things golf-related,” he said.
One he likes is Golf Etc., which not only sells things like golf clubs, golf shoes, and golf bags, but also provides golf club fitting and repair services.
SENIOR CARE: Libava counts 30 different senior care franchise offerings currently being marketed to prospective franchise owners. He thinks 2010 may be a year of consolidation in this industry, which provides much needed services to families in stressful situations.
“Comfort Keepers, HomeInstead and HomeHelpers are pretty dominant players in the non-medical senior care area,” Libava said. “Two of the senior care franchises that specialize in at home medical care include Brightstar Healthcare, and Interim HealthCare.”
Also, he points out that mobility is the key to freedom for senior citizens. If they can get into and out of their homes with minimal assistance, they can stay in their homes, instead of going to a nursing home.
“Rarely does a franchise stop me in their tracks,” Libava said. “But AmRamp did exactly that.”
AmRamp franchisees keep their clients mobile by selling, renting, and installing modular ramp systems that usually don’t require building permits when they are installed. They also have begun offering other senior care services.
Lending Predictions for 2010
Libava thinks 2010 will be a pivotal year for the franchise industry as a whole. The availability of small business loans for start-up franchises has been extremely challenging, but Libava is hopeful the situation should improve somewhat by the second half of the year.
“Loans are hard to come by,” he said. “A 750 credit score, which is stellar as far as I’m concerned, is now being looked at as a reason to turn down a loan. Obviously, to get a loan these days, stellar credit, collateral and biz experience are key.”
If new franchise unit sales remain slow, franchisors will really have to step-up their support of existing franchise owners, who pay the franchisors a percentage of their revenue in the form of royalty payments.
“Franchise unit sales, surprisingly, are only down a couple percent,” Libava said. “This is a pressing time for franchisors, since unit sales are expected to be light this year. If they are flat or down, franchisors will have to step up more for their franchisees. They’ll have to hire more field reps to help franchisees stay in business and get more customers. Franchise companies will be under more pressure this year to increase the revenue stream from existing units, not just by starting up new franchises.”
Social Marketing Predictions for 2010
More franchisors will use social media marketing techniques to get customers in the doors of their franchisees.
Libava offered a few examples:
Pizza Hut offers 20% off if you order their pizza with your iPhone, using their special iPhone application, which you’ll find on their own Facebook page.
A 60-year- old brand like Dunkin’ Donuts certainly uses the many social media marketing outlets available to help them get their message out. They have a Facebook fan page with more than 980,000 “fans,” and a Twitter account with more than 39,000 followers.
eMed-ID provides individuals and families with a personal computer storage device, uploaded with their complete personal health record, including medications, allergies, blood type and special conditions. In case of emergency, health professionals on the scene can view the patient’s information fast. This young franchisor is using social media marketing to get the word out about their franchise opportunity, Libava said. “Check out their powerful Facebook Fan Page and you’ll see what I mean.”
“FRANSPARENCY.” Today’s franchise buyers have an unprecedented amount of information at their fingertips, and they expect quick answers to their questions.
“They want more transparency from the parent company – I call it “fransparency,” Libava said. “They also want to be more in control of the franchise discovery process, and they won’t be rushed into making a buying decision.”