Let’s face it: we all want to win, to be the first to greet the fluttering black-and-white checkered flag. Just as in auto racing, it takes a certain kind of entrepreneur to join in the $1.5 trillion franchise race. But before you leave the pit, you must know the territory.
This year, black enterprise identifies five hot franchising sectors based on accelerated growth and opportunity (see chart). What is unique about our choices is that all can be found in the services sector. And according to Darrell Johnson, president and CEO of FRANdata, an Arlington, Virginia-based company that monitors franchising activity across the country, demand for service-oriented franchises will continue to surge.
“They’re following what the economy is asking them to do,” Johnson says. “People are asking for more businesses to service the home and family. So what you have is a lot of service businesses picking up the franchising model because it’s easy to replicate and allows businesses to leverage their brand marketing and advertising programs.” Any one of these sectors may put you on the fast track to profits. Your basic formula for success: find the right vehicle, learn the rules of the road, and burn rubber. After reviewing the landscape with the International Franchise Association (www.fran chise.org), we found five areas that will put you in the driver’s seat:
Specialty/Gourmet Foods (Retail Foods)
Entrepreneurs with an appetite for growth should look to the specialty/gourmet food sector. According to a 2007 National Association for the Specialty Food Trade (NASFT) study, this segment took in $38.5 billion in retail sales in 2006, a 13.1% increase from 2005. Burgeoning consumer demand and an array of specialty food products have been primary contributors to sales growth.
“Manufacturers are making it easier for people to have a high-quality meal,” says Denise Shoukas, NASFT’s communications director. “Whether it is prepared foods in a store or the make-your-own-meal [stores], it just makes it so much more convenient for the _consumer. And they can have a restaurant-quality meal at home, so that helps too.” FRANdata listed nine specialty/ gourmet retail franchises among its top 100 (culled from information about 800 franchise brands and based on unit percentage growth for 2006).
Shoukas says franchisors realize the profit potential in reaching food aficionados. “People are looking for higher quality experiences with food,” she says. “And that’s based on interest in healthier foods, things that can enhance their lives.”
Nikki King-Martin of Hanover, Maryland, co-owner of two My Girlfriend’s Kitchen franchises, has benefited from this growing trend. She was introduced to this opportunity in July 2006, when the mother of two–Makayla, 3, and Malani, 19 months–and her husband, George Martin, a 39-year-old computer programmer, reviewed the company’s Website in hopes of solving their daily dinner dilemma.
The couple discovered a service where customers could purchase uncooked dinners from an extensive menu and then visit a location to assemble the meals they’ve selected. The store, which has a full-service kitchen, provides customers with all the ingredients to prepare their dishes at an average cost of roughly $3 per serving.
Customers then take their entrées home, where they can cook them at their leisure.
The Martins were so sold on the concept that in a matter of months they decided to own a franchise. To date, six of 64 My Girlfriend’s Kitchen units are black-owned (The Martins were the first blacks to purchase a franchise).
Their initial startup cost for the 2,000-square-foot store in Jessup, Maryland, was $35,000 to begin the process, a part of the total investment costs that range from $245,000 to $450,000, depending on the region and facility size. These fees go toward designating a territory, build-out expenses, equipment package, work supplies, and architectural plans and design.
But through serendipity, the couple was able to buy an existing store in Gambrills, Maryland–the No. 1 My Girlfriend’s Kitchen franchise in the country–as they were trying to get their first location off the ground. Their attorney and accountant Paul Wright handled the purchase and became the couple’s business partner, owning 15% of the outlet. “The first day I was there by myself and finally stepped back, I was like ‘Oh my gosh! We’re about to be entrepreneurs,'” says King-Martin. “I’m turning a passion into a profit and just loving what I do.”
With average monthly traffic of 300 customers, the Gambrills operation grossed $460,000 from April 2006 to December 2006. And during the first six months of 2007, the location generated another $308,000 in gross revenues. The Martins anticipate revenues of about $50,000 per month or roughly $600,000 in sales for the year. The Jessup store is scheduled to open this month.
“Their energy, enthusiasm, confidence, positive spirit, and ability to network in their community are what they bring to the company,” says Jennifer Jackenthal, co-founder and CEO of My Girlfriend’s Kitchen. “Our job is to help them make money doing something they love.”
According to the IFA, franchises to watch in this category include Juice It Up! (www.juiceitup.com), My Girlfriend’s Kitchen (www.mygirlfriendskitchen. com), and Rita’s Water Ice (www.ritasice.com).
In-Home Healthcare (Health and Fitness)
Providing for the needs of senior citizens and those with debilitating illnesses is expected to be a booming industry for years to come. With a variety of franchising models to choose from, in-home healthcare furnishes clients with supplemental care (transportation, running errands, light housekeeping, etc.) within the comforts of their own home on an hourly, daily, or weekly basis.
Experts say one of the reasons franchising has grown so quickly within this sector is that it generates solid, consistent cash flow. “The Medicare system has been very stable and favorable to home health operators for basically the last four or five years,” says Derrick Dagnan, a senior research analyst with Avondale Partners L.L.C., a Nashville, Tennessee-based investment banking firm. “And the cost [of in-home care] to the government is a lot less than if that patient were to be in a higher acuity setting of care like a nursing home or a rehab hospital.”
Another reason is the rapid growth in the number of senior citizens. The U.S Census Bureau projects a significant increase of this group between 2010 and 2030 due, in large part, to the aging baby boomer population. In fact, the first set of boomers will turn 65 in 2011. As a result, the older population is expected to be twice as large in 2030 as it was in 2000, growing from 35 million to 72 million or nearly 20% of the total U.S. population.
The development of in-home medical technologies, substantial cost savings, and patients’ preference for in-residence care has turned this small segment of the healthcare industry into “one of the fastest growing parts of the economy,” according to the U.S. Department of Labor.
According to the IFA, franchises to watch in this category include Comfort Keepers (www.comfortkeepers.com), Home Instead Senior Care (www.home instead.com), and Homewatch Caregivers (www.homewatchcaregivers.com).
Fitness Centers(Health and Fitness)
Experts assert that as more Americans become knowledgeable about the benefits of a healthy lifestyle and find ways to reduce a myriad of mental and physical aliments, the fitness boom will continue. And legions of franchisees will be able to bulk up revenues. Based on the increase in the number of units, three fitness centers ranked in the top 20 of FRANdata’s listing last year; eight centers ranked in the top 100 based on percentage growth.
And with nearly 40 different fitness franchi
se brands currently available to choose from, health and fitness will continue to demonstrate its strength in the marketplace. In fact, the general health sector realized franchise unit growth of a muscular 23.5%.
According to the IFA, franchises to watch in this sector include Gold’s Gym (www.goldsgym.com), Kinderdance (www.kinderdance.com), and Liberty Fitness (www.libertyfitness.com).
Computer Repair (Computer Products and Services)
Growing numbers of franchisees have become wired into information technology–from computer troubleshooting to network support. And these operations, which serve businesses of varying sizes as well as residential customers, can be found in shopping malls, electronic stores, or through catchy toll-free numbers.
Rob Enderle, president and principal analyst with the Enderle Group, a San Jose, California-based tech consulting firm, says the packaging and franchising of computer support has provided entrepreneurs with a phenomenal opportunity. Exposure, high quality, and customer satisfaction will be the factors that drive the longevity of these franchised operations.
Another advantage for prospective franchisees: Startup costs for some of these ventures can run as low as $18,000. And not every franchisor recruits a “geek.” However, those deficient in tech skills may want to partner with an IT-savvy professional to run the day-to-day operations.
Enderle credits the trend of IT franchises (such as the Geek Squad) joining forces with large cha
in stores (such as Best Buy) with boosting popularity among consumers. “There has been an increasing need for consumers to get all of this wonderful stuff they bought to actually work and, in some cases, work together,” he says.According to the IFA, franchises to watch in this category include 1-800-905-GEEK (www.1800905geek.com), Concerto Networks (www.concertonetworks.com), and Geeks in a Flash (www.geeksinaflash.com).
Automotive Repair/Parts/ Service (Automotive)
Some franchisees have gained a solid foothold through the automotive repairs arena. For one, it’s a fertile environment. Large numbers of consumers are holding on to their cars longer while others seem more likely to purchase pre-owned vehicles. According to a 2007 National Automobile Dealers Association report, new-vehicle sales for 2006 were 16.5 million, a near 3% decrease compared to 2005 unit sales. And nationwide, franchised new-car dealers sold more than 19 million used vehicles last year.
Judging by these figures, car owners seeking out automotive repair and _service facilities for routine maintenance and upkeep will make for a strong market. And there are a myriad of nationwide franchise automotive repair and service chains that offer parts, and/or full-service repair at rates more reasonable than dealerships and often with a quick turnaround.
“Automotive franchises are kind of coming in and taking over. Convenience and cost are the main factors,” says Larry Hecker, president of the Automotive Maintenance and Repair Association, a Bethesda, Maryland-based group of repair shops, parts, and equipment suppliers, car companies, consultants, and other organizations that represent the automotive repair _industry. “People like convenience, so if an independent repair shop is closer and _cheaper than the dealer, they will use it.”
The impact these franchises have on the automotive industry goes beyond _vehicle sales. Total service and parts divisions of nationwide franchised dealerships also report a decrease in sales, going from $85 billion in 2005 to $80.5 billion last year. NADA attributes the decline to the steady increase of competition from independent service stations and quick-lube centers, which of course cuts into dealerships’ service work–a prime _opportunity for prospective franchisees.
According to the IFA, franchises to watch in this category include Matco Tools (www.matcotools.com), Meineke Car Care (www.meineke.com), and Midas International (www.midas.com).
–Additional reporting by Nicole Norfleet
FASTEST-GROWING FRANCHISE SECTORS
Specialty/Gourmet Foods: 130.7%
Auto–Electrical and Battery: 29.6%
In-Home Health Care: 28.3%
Health–General: 23.5%
Business–General: 21.2%
Window Repair and Services: 18.1%
Computer–Other: 16.9%
Truck Rental: 16.2%
Window Treatments: 14.3%
Computer Repair 14.3%
Source: FRANdata (www.frandata.com). Percentages are based on unit growth,
year-end 2005 through year-end 2006.