It’s All About Growth

60 Franchisors Flew in to Meet With Me
Here Are My 7 Big Takeaways

It is a rare opportunity to meet with a franchisor’s executive team one on one, but to do it outside of formatted business meetings where everyone’s guard is down and you get the real inside story is an opportunity not to be missed for an industry professional that advises candidates on which franchise brands are the best targets in the market.

Our fifteen thousand candidates have benefitted from this market intel for over a decade.

In January I had an opportunity that comes to me a couple times a year to spend a few days with executive teams from some of the top brands in the US. The biggest benefit to our candidates was the behind the scenes knowledge we gained by spending time with this elite group of industry insiders.

The first note is that the industry overall is doing quite well. Common themes in every conversation were about growth, not just growth in franchise development but growth of their franchisees. Year over year performance at the unit level looks very strong in well-established and healthy franchise brands. We like to see that existing owners are on strong growth trends as it indicates market activity, franchisee satisfaction and franchise system refinement.
The strongest brands in the market seem to be those that made a very strong commitment to support, training and growth over the past 5-7 years.

A small but growing trend is that for what may be the first time in history we are seeing large investment funds considering franchise opportunities just like any other candidate. This is not the fund considering buying the parent company, or existing operating units, they have been doing that for years. We are seeing occasional instances were these investment funds are considering and buying undeveloped franchise licenses, often multi-unit/territory.

From an advisory point of view they are interesting because they are also frequent users of the expertise and resources we offer, they see the benefit of expert guidance to move
quickly and accurately in their decision making.

The brands we saw operating very successfully covered a range of markets. There is not one unique growth trend, there are many. A franchise buyer should feel confident that there are successful
businesses to be found that fit their abilities and how they want to work. As always, though, expert guidance increases their odds for finding the right match.

The restaurant business remains as exciting as it is complicated. This is a very market and real estate driven category. There are good brands to be had, the quest is for a unique concept that will stand out among the competition but is not a passing fad. If we look to long standing trends we are seeing evolutions within major established categories like burgers and pizza.

The challenge this brings up is that the competition in that space is brisk and when a new type of food appears and is successful the competitors show up fast. The key to success in these evolutionary food concepts is to find well-funded brands that can build a big footprint fast and overcome any hurdles they find along the way.

The smaller underdogs may eventually grow, but they will often be losing prime sites to whoever dominates the market in their category. The more common game plan for the smaller brands is to be acquired by the market leader.

If we step outside the restaurant business but remain focused on retail brick and mortar options there are some really exciting options as well. In this category you might find interesting options in travel, fashion, fitness (a hot evolutionary segment if you pick carefully) and consumer services. The lower start-up costs, higher margins in these businesses and simplicity in their models make them great targets for the more risk adverse or empire builder. While location will matter, it is not quite as critical as in the restaurant business since marketing can drive feet through the door.

Possibly some of the most interesting trends in franchising are among those brands that corporate executives are using to pursue replacing their incomes. These are more executive, even semi-absentee, in nature. They tend to cover multi-unit, regional or entire markets in their territory awarded and have large consumer or business client bases to pursue. These are empire building opportunities with big potential, but the total start-up cost may be no more than opening a single fast food restaurant!

Within these empire building opportunities you might find concepts like home services, construction, disaster recovery, business services as we as Master franchises and Area development opportunities where you play a much larger role in the franchisors system.

All in all a lot of golden nuggets of opportunity out there, but you have to find the right one.

In one of the conversation I had with an old friend we were talking about each of our 20+ years in the franchise business. What we decided is that at no point in history was it a better time for anyone to be considering franchises than right now. Whether employed, unemployed, business owner or investment fund there is a franchise that can help you meet your goals. The breadth of options combined with the growth in expertise and capability is unmatched in any other segment of our economy.

With employees now less secure than business owners it is a perfect storm of opportunity within the franchise space. Great franchise brands await those that have management skills, operating experience and possibly some marketing or sales exposure. Those brands offer up world class training and support as they have a vested interest in your success.

The last note on the health of the industry I will pass along is that top franchisors are being very selective, they are not offering franchises to every candidate that comes along. They are seeking the best and brightest as they want to build big healthy brands. That willingness to pass on candidates that are not the right fit, who may not succeed, may be the healthiest trend I saw.

Mr. Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both
startup and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.

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