9 minute read
George Knauf
actionable trends in Franchising
ENTERING 2022
George Knauf is a highly sought after, trusted advisor to many of the top franchise ownership groups in the world. with over 25 years of experience in both start-up and mature business franchise operations he is uniquely qualified to advise individuals that have dreamed of Building their own empires. whether you have an existing portfolio or searching for your first franchise, he can help you to pursue your dreams. www.MyPerfectFranchise.com
This time of the year the multiunit and multi-brand owners I advise on their growth strategies are winding down the current year and call to ask what the actionable trends are coming up in the next year that they should be positioning their investments for now.
Currently operating businesses will need to adapt to trends in staffing and supply chain, in most cases these are clear and solvable puzzles, though sometimes require a little creativity from owners and franchisors. Most operating franchises have made these adjustments and are thriving today.
As we look at the market there are opportunities that already existed as well as those that are trending upwards now. Some are likely shorter term, others longer term so as we look at growth opportunities we need to keep in mind that one brand may have a shorter optimum investment timeframe than another.
Big trends:
American families saved at a very high rate, by some accounts they have put an extra $2Trillion into savings over and above the normal saving rate during the past couple years. They are now spending that money fast, catching up on experiences missed. That travel, dining, shopping, etc is driving the economy and inflation.
There are higher costs for some goods and supplies. Employee turnover will be higher as employees are leveraging their new power from being in high demand. Entry level pay will be higher and more
jobs will be created at this level and in the mid tier. Those employees will have more money to spend. Stores that have to keep a lot of inventory on hand will have to plan carefully and buy further ahead.
Farming has never been easy, but has been made harder due to events out of the control of farmers.
What do you do with all of that?
It’s time to grow. Times of greatest turmoil are where the biggest opportunities exist. As you look at the market you will see current needs that people with money and desires have. They want experiences like travel, dining out, going to the gym. They have increased home value and want to capture it and move or just fix up what they have to enjoy their time at home more. They may have an increased focus on health and wellness. Their kids may have the need for tutoring assistance to get back on track in school. Their parents may have a need for home care if they want to avoid assisted living for a period of time. Let’s dive into some key areas and because space is limited here, I will take your calls and emails to answer your strategy questions, my info is below. Food, while always in demand I would be cautious in this category and primarily focus on fast food or quick service meal options. Full-service restaurants have challenges around real estate and staffing. In some cases frozen or baked treats can be added to the list but remember they are highly cyclical so be in early and out fast.
Gyms/Fitness/Wellness, especially boutique options, were strong going into Covid and are scaling up again fast. Some of the brands in this space didn’t just survive the past couple years, they thrived and added units. A lot of us are coming out of the past couple years like it was one big holiday buffet, the growth of that business could be measurable as we get active again. Home improvements are at all-time highs. Three things drive that growth. Home value increases are driving both sales and improving living space to enjoy. We are seeing companies focus in both of those directions. One franchise does nothing but prep homes for sale. It has always been hard to be a homeowner calling the local independent Chuck in a Truck home handyman guy. They barely resemble a business, are hard to track down, hard to manage and sometimes leave you with a bad experience. Consumers want a predictable outcome, good experience and quality work. This is a great time to look for top players in this space. More and more we are seeing the medical community try the franchising model. They are potentially as perfect for each other as chocolate and peanut butter. Choose carefully as the quality of franchisor matters, medical talent can be hired, but this space has opportunities. On the horizon we see tech companies blending with the franchise model as they discover franchisees with a vested interest in their business and local market can do more than employees or overseas call centers.
There is more detail to note in these categories and other markets not outlined here. The key idea is that every market has needs and customers. If you look closely at trends and where those needs are you can find business gems that will be great additions to your portfolio.
owning a Franchise:
Five challenges to consider
It’s a dream of millions of Americans: Running your own business. In fact, in 2020, ambitious people launched a record 800,000 new U.S. companies, capping a decade of steady growth in new business starts.
That increase in business starts clearly underscores the appeal of being an entrepreneur rather than clocking in as someone else’s employee. You might be surprised to learn that opening a franchise is one of the most common ways people enter the small business market. However, there is more to franchising than simply paying a fee to an existing company for the right to operate under their name. As attractive as owning a franchise sounds, there are a number of things to consider before making the leap into business ownership.
take a realistic Approach
Every year, P3 Cost Analysts brings a new slate of franchisees into our business. When we do that, we learn about the challenges that our partners often face. Everyone likely knows that starting a business requires motivation and diligence. More than that, each potential new business owner should think through the pluses and minuses of what’s ahead.
In our experience, these are five of the challenges to consider.
#1: Franchises Are expensive
Even with the most well-known brand name franchise, it will take time to be profitable. Start-up expenses include the franchise fee plus costs such as labor, supplies, equipment leases, rent, marketing and much more. Bottom line is, you’ll need cash above and beyond the franchise fee to be able to start operations.
At P3 Cost Analysts, even though our franchise fee is relatively low and there are few operating expenses for owners, we recommend new franchisees have at least 12 months of financial resources as a foundation to launch their businesses.
#2: Finding the right employees
It’s no secret that right now job openings are at an all-time high. In an employees’ market, many people are leaving their current positions for better offers, consequently leaving other jobs unfilled for longer periods of time. New business owners need to consider if they’ll be able to find enough good people to do the job right, therefore it’s imperative to take a realistic look at the prospects. Because the bulk of our auditing work occurs through our headquarters, our
“Even with the most well-known brand name franchise, it will take time to be profitable. Startup expenses include the franchise fee plus costs such as labor, supplies, equipment leases, rent, marketing and much more.” “As attractive as owning a franchise sounds, there are a number of things to consider before making the leap into business ownership.”
franchisees typically don’t face the hiring dilemma that others do. That means they can put more focus on making contacts and generating new business. We’ve heard from many of our existing franchisees that because they don’t have to manage employee teams, they have more opportunity to develop large, recurring revenue streams. Our owners who want to realize growth while still hiring can do so largely free from the risk and exposure that traditionally comes with scaling.
#3: you’re Buying a system, not a Brand
Typically, when purchasing a franchise what you are actually buying is a proven system. Yet, many franchisees think they’re buying into a brand. However, there are only a few American brands that have broad recognition, such as McDonald’s or Starbucks. By understanding that you’ve bought a system, you have better positioned yourself to make your business a success. Through our 30 years of developing our auditing and cost-saving techniques, we’ve seen the value of having a proven system. With that, we can transfer our knowledge to our franchisees, which ultimately gives them an advantage as they launch their business.
#4: Failure can Be costly
Because there is a fee to become a franchise owner, many people wonder if they should instead funnel that fee into opening a business on their own for less. The problem with that thinking is that there is a cost that comes with trial and error.
In our case, our franchise fee takes into account our years spent experimenting with products, marketing techniques, hiring practices and other business processes. Whereas, people who start their business from scratch must navigate all that on their own. Moreover, since it’s virtually impossible to determine the time it will take to figure these things out, that makes it even more difficult to accurately forecast the cost of trial and error. In the end, mistakes made within a solo business will likely amount to a much greater expense than a franchise fee.
#5: it’s not for the Faint of heart
Sure, the daily grind of working for someone else can take its toll, but it also brings a sense of comfort and security. When you’ve got a stable place of employment, you’ve likely got the general assurance of a regular paycheck and other benefits. It can be hard to give up that predictable environment for the unknowns that come with entrepreneurship.
Owning your own business means everything rests on your shoulders — a daunting collision of dreams and reality. Here’s where the potential entrepreneur must put aside fantasy in favor of a selfcheck about their ability to undertake the focus, drive and discipline required to build a successful business.
opportunity Prevails
Ultimately, owning a franchise can be a streamlined approach to being in business for yourself. From gaining the support of seasoned professionals who’ve already been down the road of starting a business to buying into a proven system of success, joining a franchise has many upsides. And, it provides an advantage for franchise business owners to realize long-term success that may elude the solo entrepreneur.
If you’d like to learn more about franchise opportunities with P3 Cost Analysts, contact us by phone at 1-877-843-7579 or send an email to info@costanalysts.com.
