Many times, when I meet someone and we make small talk, I am asked what I do for a living. When I tell them I am a franchise coach, their response is “what businesses are hot right now?”. They want to know what is the next big thing that will make money and be a great success story. It is very similar to the stock market when people want to jump in and buy the stock that is on the rise.
People have been and always will be attracted to what is new and popular. That is the case with business opportunities, including franchising. Over the years, I have seen a lot of concepts that have been considered trendy and became quite profitable for many years. At the same time, there have been other franchises that draw a lot of attention but are unable to sustain its initial success. Regardless, prospects need to be wary about trending franchises and do the proper research to figure out if it will have staying power.
While trendy business concepts may be prevalent and generate a lot of discussion, people should know they also come with a considerable amount of risk. All you have to do is look at examples from a couple of decades ago to see cases of hot new ideas with tremendous buzz that ultimately failed.
In the 1990’s, consumer demand for bagels increased, which led to the opening of bagel restaurants. Everywhere you looked, there was Bruegger’s Bagels or Einstein Bros. Bagels popping up. Eventually other restaurants responded by simply adding bagels to their menus. It then became difficult for the businesses serving only bagels to survive when so many other restaurants then started serving bagels as well.
In the early 2000’s, eBay stores were all the rage. They sold thousands of these and people had plans to open an eBay store and get rich. After the initial wave of popularity, the stores fizzled out. Home meal replacement companies were very trendy several years ago but many of them have now gone out of business.
What are some examples of franchises that are currently trending? Paint and sip locations are a relatively new phenomenon in which you paint pottery or artwork while having a glass or two of wine with friends. Another business that is currently popular is cryotherapy chambers, which uses cold temperatures as treatments to various ailments. Same goes for the surge in cannabis stores selling marijuana in states in which it is legal.
So how do we know if any of these are good business opportunities worth exploring or are a flash in the pan that will quickly run its course? I always recommend to people that they should ask themselves “is it an industry?” or is it just a cool idea or menu addition? Try to look ahead 10 years into the future and determine what the business will look like at that time.
In applying this approach to the example of cryotherapy chambers, do we see a vision or future where there are cryotherapy businesses all over the country? Will there be enough demand for their services where people will continue to seek treatment to the point it will become a successful stand-alone business?
I personally have a hard time imagining that. I think cryotherapy still be used 10 years from now, but it is essentially a menu addition. If cryotherapy continues to be popular, a doctor’s office can add that service, or a franchise like Massage Envy could add a chamber to every location if they desire. It then looks like the case of bagel restaurants suffering when other stores start adding bagels to their menus. Given its current popularity, I would expect thousands of cryotherapy franchises sold, but I would be very surprised if cryotherapy becomes a sustainable sector.
The case of cannabis stores is another very interesting example of a trendy business. There have been many stores that have opened in recent years and successfully capitalized on the legalization of marijuana in certain states. As we look 10 years from now, will people continue to smoke cannabis? Yes, absolutely, I’m positive they will. But then the question is, how will the industry evolve?
That is something I can’t quite answer, but I do ask myself several things regarding the industry. In the coming years as more states legalize marijuana, the federal government will change the laws and make it legal. So, what happens at that point? My guess is all the big businesses that are currently selling tobacco will all get into the cannabis industry. They have already positioned themselves for this by purchasing manufacturing facilities. Cannabis may be sold by a wide variety of locations and there may not be a need for stand-alone cannabis shops. It is difficult to completely project the future of marijuana sales in this country, but this case is an interesting situation to consider.
This is not to say that all trendy business opportunities will be doomed to fail over time. The fitness industry is trendy with new popular forms of exercise. If we go back and ask if this concept is an industry and will it still be around in 10 years, the answer is clearly yes to both. It has been a successful business for years and I can’t imagine a decade from now, people will not have an interest in personal fitness. You will just want to make sure the particular concept has staying power. In looking at exercises such as Pilates and yoga, they have been successful for a long time and that should continue to be the case in the future.
Any kind of franchise opportunity requires research and due diligence on behalf of the potential owner to try to gauge the likelihood of it being a successful venture. That is certainly the case with a trending franchise. Franchises require a significant financial commitment and you will want to make sure the business will continue to have customers and will be profitable over the long-term before buying in.
Rick Bisio is a leading franchise coach with FranChoice, the creator of the FDD Exchange and the Franchise Glossary and the co-host of Rick Bisio’s Franchise Focus. Since becoming a franchise coach in 2002, Bisio has assisted thousands of aspiring entrepreneurs nationwide explore the dream of business ownership.