The Top Four Trends in Franchising

June 6, 2019

The franchising industry has continued to mature over the last 10 years. Today, more than half of all franchise owners in the U.S. are run by multi-unit operators, some with hundreds of units and revenues in the tens of millions. Multi-brand franchisees (those with two or more brands) are also becoming more common. Many of these entrepreneurs are seeking out new geographical markets, diversifying their risk or increasing their cash flow. Here are the top four trends in the franchising industry today, with an eye toward areas of growth and future projections.

1.  Impact of “full employment”
The Federal Reserve Economic Forecast predicts that unemployment will decrease to 3.5 percent by the end of 2020. While high employment rates generally indicate an increase in wages and leads to confidence in consumer spending, it may have a negative impact on the number of franchises a franchisor is able to recruit. The low employment rate may present a challenge to franchise owners who struggle to find qualified labor. Franchisors who understand this dynamic will work toward becoming an “employer of choice” to help attract and retain talented staff from a thinning labor pool.

2.  Changing demographics
Major shifts in the U.S. population are having an impact on the franchising industry. Franchisors and franchisees alike need to adapt to the changing customer and employee base to find opportunities for growth.

  • Millennials are coming into their own as an economic force. This cohort of over 70 million present a huge opportunity for franchisors and franchisees who can provide goods and services targeted to their growing needs.
  • Baby boomers are starting to age and are demanding many new services. This is a prime market for franchisees in the areas of healthcare, anti-aging products, retirement planning, assistance with aging parents, legal and tax services, nutritional, fitness and cosmetic goods and services.
  • Seniors are living longer, more active lives. This trend will continue as the baby boomers age, creating a market for services in demand by this affluent, aging demographic. Home renovations for seniors, healthcare related services, health and fitness designed for aging bodies, and many other goods and services will continue to expand in the coming years.
  • Minority groups, such as Hispanic, African American, Asian and other ethnic minorities are continuing to grow. As members of these groups continue to rise in economic clout, their needs will continue to expand as well. Food, fashion, real estate, business services and many other goods and services will present new opportunities and challenges for franchise brands focused on serving them.

3.  Women franchise owners
In the past decade there has been a significant increase in the number of women franchise owners. According to FranNet, a franchising consultancy, the number of female franchise owners jumped by 83 percent between 2011 and 2017, while male ownership increased by 13 percent.

Women are attracted to franchise ownership for many of the same reasons men are – the ability to join a company with a proven track record, starting a business with established operating procedures, vendors, HR policies and other operational details that mitigate the risk of business ownership. But there may be another impetus behind this trend; many women are attracted to the ability to work a more flexible schedule than traditional employment opportunities, which is especially helpful if you are raising children or caring for elders. 

Women also tend to have strong communication skills, are good networkers and take a collaborative approach to team building, all good qualities for business ownership in general. Women report they are drawn to the idea of franchise ownership because they want to work as a team by being in business for themselves, but not by themselves.

4.  Growth segments
Future trends in franchise goods and services include the following markets.

  • Recession-proof brands:
    • Hair-cutting
    • Tax preparation
    • Accounting
    • Shipping and packaging
    • Child care
    • Elderly care
    • Pet care and services
    • Auto maintenance and repair
    • Home repair and renovation
    • Computer-related services
    • Real estate
    • Staffing and employment
    • Fast-casual restaurants
    • Used goods (clothing, sports equipment)
    • Electronic games
  • Green businesses, such as energy-reduction services for homes and the commercial sector, LEED-certified buildings made with recycled materials and that consume less energy will present opportunities for franchises. 
  • Fitness, health and personal care, especially tailored to children, Baby Boomers or seniors.
    • Gyms
    • Fitness centers
    • Nutrition consulting
    • Recreation and sports
    • Spas
    • Tanning centers
    • Healthy fast food

As franchise businesses continue to be seen as more sophisticated, competition for new franchises will continue to increase. Forward-thinking franchisors will create new and more innovative offerings which will attract new franchise talent. Franchise owners who carry a brand forward, build sales, profitability and sustainable growth will be rewarded in the future. 

Marsh & McLennan Agency (MMA) offers specialized franchise insurance and risk protection. We are devoted to helping franchise owners make their business stronger by reducing their risk. Our products, platform and experience equip us to provide value beyond what most agencies are able to deliver.

Contact us here to learn more about franchising industry business insurance.