Franchising for Growth: Truths and Trends

The growth of franchising is indisputable. Yet, while many business owners have elected to expand their companies through franchising, the owners of many other privately held businesses may be intimidated by the perception that the franchising industry is simply too saturated or too highly competitive to give them a chance to succeed. But what's the truth? Is there enough room for your business? Do you have to start out with a hundred locations to be a success? What are some of the latest business trends responsible for the growth of franchising?

Questions Answered For You

  • Where is franchising headed, and why is it a great opportunity for business owners to grow their brands?
  • How has social media affected franchising?
  • What are some industries that have really taken off, or types of franchise businesses that have seen a lot of growth?
  • Is there any truth to the thought that the really successful franchise opportunities are only the big names that people recognize?

 

If you do the right things, create the right value proposition, create raving fans, and if you have passionate leadership and individuals willing to invest in the proper systems and belief in supporting your franchisees ... you could take your business anywhere.

- James Channer

Key Takeaways

  • Franchising as an industry is booming. The number of small-business owners who are making preparations to grow their companies through franchising has been increasing.
  • It's important for a franchise organization and a potential franchise buyer to have values and behaviors that are properly aligned.
  • With respect to franchise growth and development, more and more individuals who desire a business that will allow them to continue with their current employment and generate other income in other places turn to franchising opportunities.
  • When you join a franchise, you're joining a community of franchisees that are there to help you grow your business in that individual franchise.

Read Full Interview

Jeff: Dispelling the myths and understanding the trends to help your franchise business flourish. Whether you're a franchisee, franchisor or a private business owner considering franchising your brand, you've come to the right place.
 

From our studio in Southern California, with guest experts from across the country and around the world, this is “Deal Talk,” brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.

 
Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on “Deal Talk” it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
Right now if you think of franchising as an industry it's booming. So much in fact that more and more small business owners each day, perhaps just like you, are making preparations to grow their companies, their own brands through franchising. But there are a lot of myths out there that may prevent some business owners from taking that step, or prevent aspiring entrepreneurs, for example, from owning and operating the location of an existing franchise brand, perhaps a legacy brand that has seen nothing but success throughout its history.
 
To help us dispel some of those myths as well as talk about the trends contributing to franchise growth is Mr. James Channer, senior franchise business adviser with Your Franchise Success, LLC. James Channer, welcome to “Deal Talk.” It's good to have you on.
 
James: Jeff, fabulous to be here. Really jazzed and excited. Thanks so much.

For individuals that are current business owners, I really encourage them to evaluate their business, do a valuation, take a look at not only the dollars and cents of your business but take a look at what your consumers are saying, what your clients are saying, and explore your business with respect to franchising.

Jeff: You're welcome. Thank you for answering the call, so to speak, James. We were glad to have an opportunity to chat with you a little bit. I am intrigued though a little bit about your company, about your organization, fill us in a little bit as kind of an icebreaker, about what Your Franchise Success is all about.
 
James: Thanks, Jeff. So YFS, Your Franchise Success, we're a professional franchise adviser. Our core business is to help folks all across North America, individuals that are interested in redefining their career, finding their purpose in business ownership through franchising. So we take those individuals and provide a very educated, very structured due diligent process to evaluate franchise opportunities. We also have been in franchising for nearly 60 years, our advisers and management team. We also then do help franchise companies emerge into franchising through franchise development consulting assistance. So we'll help them evaluate who are the ideal candidates to be joining their franchise and assisting them in recruiting and finding those franchisees.

 
Jeff: Very good. And toward the end of the show we're going to give you, our audience a chance to jot down a telephone number and maybe a website so you can interface with the folks over there at Your Franchise Success, and maybe connect with James for an opportunity to speak with him and maybe talk about some future opportunities that he can point you toward, as far as franchise ownership is concerned.
 
And we're going to start off by talking about the myths of franchising, James, and we got to know a little bit about you, and it all of a sudden kind of conjured up in me an idea about, and I think I heard this some time ago, and they said the only way that you can be successful as a franchise owner/operator is to have had some past history with a franchise ownership, whether that be as the past owner of a franchise business or as an employee working for a company with franchise locations. Is that true or is that just a myth?
 
James: It's just one of those myths that are out there, Jeff. We do hear that a lot with respect to having to have particular industry experience. What's so great about franchising particularly now here in the 21st century here and now in 2016, Jeff, is that there's over 3,000 franchise concepts in well over a hundred industries in the United States, a little less than Canada, about 1,400 franchise concepts in Canada. All of those franchise organizations, those franchise concepts are looking for individuals that have transferable skills, management skills, communication skills, leadership skills, ability to lead teams, ability to manage finances and administration.
 
And so there are so many individuals currently today in corporate America and corporate Canada that have built tremendous reputations and have built experiences in their career, and there are so many franchise concepts that are looking for those types of individuals to run and lead their business within their franchise organization.

 
Jeff: So really, what you're talking about here is what's important skill sets, personality, character, and just kind of overall ability. If you've shown that you have kind of exhibited success in your past then there's some opportunities out there for you because the space is so huge.
 
James: Oh yes, absolutely. You touched on kind of the values and characters. And that's what we're really finding here at Your Franchise Success. We take individuals through a discovery process, really a character assessment and personality aptitude test that's called the spot on profile. We look at individuals’ values because what we're finding today in franchising is that it's so important for a franchise organization and those respective potential franchise buyers to have that alignment, that the values and then those motives and behaviors are going to be properly aligned. Where, for example, there are many franchise organizations out there today that are doing a contributor type of model in their business concept.
 
Tutor Doctor is an example of a company that I've had a long history with, we work very closely with here at Your Franchise Success. Tutor Doctor is an in-home tutoring franchise that’s done very well for the last 10 or plus years. Hundreds and hundreds of franchisees across North America and abroad. But the key thing that they look through in their discovery process and selection process of finding the right franchise partners is individuals that aren't just looking to make money but also looking to make a difference.
 
Because in their business they're doing in-home tutoring to students of all ages really almost across the globe now because they're in so many countries. But it's very important for them to find those individuals with those contributor type of values, that it means something for them to see individuals, young children and their parents realize success in their children's education. And so that's just one example of so many different types of franchise opportunities that are really ensuring that there's an alignment between the value sets of their organization and their culture and their franchise partners.

 
Jeff: One of the things that we continue to trumpet on this program, James, each and every show, is the need to always be on the lookout for opportunities to improve value, improve value on our businesses. Because at some point in time, let's face it, unless we just ... work is our number one priority and passion in life, and that's what we want to do until we finally just drop dead one day walking down the hall from the coffee room.
 
James: Whoa, that's a little more...

 
Jeff: Well, that's some strong coffee out there as you know these days, James. But I think the thing is we're always looking for ways to improve the value of our company so that we can get that premium value one day when we sell our business whenever that might be. And a lot of companies are just in their growing phases now. Some people have been in business for 20 years and they're still looking for ways to grow their companies. And one of those ways to do that is through franchising.
 
One of the myths that are out there is a guy or a lady who's owned their own business, it could be a beauty shop or it could be a tire store, whatever the case may be, there's no way that I could possibly franchise this business because it's just not possible to take an existing privately held business and grow it through franchising because it's just way too competitive.
 
James: You know there's certainly that myth and what I would say to individual business owners, currently entrepreneurs, is to really take the time to talk to people in franchising. There's such a great community of franchising. I've been in franchising now in nearly 18 years, I love it. And one of the things I love about the franchising community is that it’s a community of individuals that come together to help one another. The best practices that are shared from franchisor A to franchisor B is significant.
 
And they're such a great association, the International Franchise Association, IFA, in the United States, and the Canadian Franchise Association here in Canada, great associations. There's just so much best practices and information shares that goes on. And so let me share a little bit of that.

 
Jeff: Please, if you would.
 
James: For individuals that are current business owners, I really encourage them to evaluate their business, do a valuation, take a look at not only the dollars and cents of your business but take a look at what your consumers are saying, what your clients are saying, and explore your business with respect to franchising. So let me give you a little bit of story of one company that's done that.
 
Companies called The Middle Spoon in a place that a lot of people haven't heard, Halifax, Nova Scotia. Halifax, Nova Scotia, Jeff, is literally you come out of Maine, cross the border, go a bit further east, boom, you're going to end up in Halifax. And so Halifax, Nova Scotia, about 20,000 people. There's a couple there, Lacey and Ciaran Doherty, that started a concept called The Middle Spoon Desserterie & Bar.
 
They would franchise this business. And what's cool about their business is it's fresh desserts made daily from scratch, with love, just like your grandmother used to do. And they've added in that same type of care to cocktails. So they're kind of a bistro dessert meets kind of high, upscale, speakeasy.

 
Jeff: My question is, what do we have to do to get one of those down here in Southern California where I am?
 
James: It would blow up, and here's the crazy thing, which just shows the limitless possibilities of franchising. One of their first franchisees after they've kind of grown in their own neck of the woods there in Eastern Canada, their first U.S. franchise location is in Houston, Texas, 2,500 miles away.

 
Jeff: Wow.
 
James: That's the power of franchising. Think about it. Here are all these folks in a Southern State, 2,500 miles away from where the concept was founded, but it just speaks to if you do the right things, if you create the right value proposition, if you create raving fans, if you have passionate leadership and individuals that are willing to invest in the proper systems and belief in supporting your franchisees the right way, you could take your business anywhere. And they're a perfect example of that.

Today, right now, franchising is the fastest growing sector within all sectors of the economy. Franchising now provides more jobs than any other sector in the U.S. economy.

Jeff: That man right there is James Channer. And James is talking with us from north of the border today, in the Toronto, Canada, region. James, senior franchise business adviser with Your Franchise Success, LLC. Shorten that to YFS. You're listening to “Deal Talk,” my name is Jeff Allen.
 
Good to have you in once again. James, continuing with our discussion here on the myths of franchising, so many people are caught up in the big names of the franchise world. And so you have a number of people who are interested in business ownership perhaps for the first time. And you have those business owners who are considering maybe doing other things.
 
Maybe they're selling their own privately held company but they need to do something else and they're a little bit leery about getting into the franchise world because they know that only the biggest names in the world are the really successful opportunities out there and they don't want to enter what they've deemed to be kind of this corporate structured kind of a thing. Is there any truth to that whatsoever about the franchise opportunities, the really successful ones are really only the big names, heritage, legacy names that people hear out there?
 
James: Listen, Jeff, there's certainly a lot of success in franchising with respect to the mega brands that have been really the forefathers of franchising, from your McDonald's and your 7-Eleven's, and even the next generations in terms of your Supercuts and Great Clips, and again, large, thousands and thousands of locations, great brands.
 
But most of the franchise concepts out there today, the average franchise system has less than a hundred franchisees. And so here at YFS we're working with hundreds of franchise companies, but we do find there are several really A+ opportunities that have 50, 100, 150 franchisees, or maybe even just a few hundred. So there's certainly a lot of upside in terms of their growth potential that have well-established systems that have been in business for a long time. But we talked about a little bit of trends. So certainly I would say that individuals that you want to be looking at, long sustainable curves of growth within the particular industries that you want to consider.
 
So one of those industries that we've heard a lot of discussion about in terms of statistics with respect to demographics in the aging population is senior care. So currently over the last 10 or 15 years there's been a tremendous amount of senior care growth activity in terms of both independent businesses and then franchise concepts in that space. And there are many very good successful franchise organizations out there in that space, others well over 40 franchise concepts in that sector. But they're only at the tip of the iceberg, because as you and I well know our parents are getting older and it takes more effort, and time, and money for us to care for them.
 
And they also have strong balance sheets and personal wealth and income, and they want to also enjoy life. And so we certainly see that that particular sector has still a significant amount of growth. Right At Home is one of those companies that we work like many others here at YFS that's again one of those very strong, well-respected leaders within that industry, and again, that's just to name one. What we really do is look at the individual's values, and as I mentioned before, identify which one of those companies in that sector would be a good fit, but I would say, Jeff, that certainly a sector that has been franchised and certainly more and more growth in terms of brand and market cap is going to happen within franchised businesses within that sector specifically.
 

Jeff: We're a little bit over halfway through on this segment of “Deal Talk,” and when we come back we're going to talk more to James Channer with YFS, and we're going to talk about the trends in franchising and really perhaps some of those trends that are really contributing to franchising success across the board. You're listening to “Deal Talk,” my name is Jeff Allen. And we'll be right back after this.
 
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Jeff: I'm Jeff Allen with James Channer, senior franchise business adviser at your Your Franchise Success, LLC in the Toronto area. And we want to talk now, James, about trends in franchising. We talked about the very top of the program about how franchising is just exploding all over the place and you mentioned that yourself and you're kind of right there at the front lines, you can see it.
 
But let's talk about some of the things in franchising right now that have become noteworthy, that may be contributing to franchise success regardless of the industry that you're in.
 
James: Right. Great question. One of the things that we're seeing with respect to franchise growth and development are individuals coming into franchising that desire a business that will allow them to continue with their current employment. And so many franchisors, franchise concepts over the last several years have begun to define and really expand their business ownership models, where the actual owner operator doesn't just have to be the individual that's fully in the business day-to-day running the business but could also be an individual whose going to be an owner executive that's actually working on the business and managing a manager, and allowing that business to really be operated by an individual who isn't a specific franchisee that signed the franchise agreement.
 
And so we in franchising call those owner executive models that have a semi-absentee component. And we've seen those types of businesses expand quite rapidly and for obvious reasons. It gives an additional layer of security in terms of the financial income that an individual, a new franchisee continue to earn at their current day job, but then give them the ability to build that wealth and equity within their own business over time.
 
And so their business is in the personal care category to niche categories, and even other new developing categories, a concept called Pro Martial Arts that does confidence and development self-discipline and honing athletic skills in a healthy and fun environment in a martial arts club environment where the program director and the individuals that are working in that facility with children, a lot about anti-bullying and self-confidence programs kind of tied into a martial arts model.
 
Those individuals running that business isn't the individual that owns that particular franchise, that particular franchise owner, and they like individuals that come in and purchase not only one location but are committing to opening two, three, four or five locations, that actual investor is still operating in other, in either their own business or possibly working for a big corporation. And so we're seeing a lot of that.
 
It's very popular in the hair care industry as well. Big brands like Supercuts and Great Clips, Sports Clips, these are all national brands that we all hear on the radio and see in our local communities. And many of their franchise owners, actually exclusively their franchise owners are individuals that have other jobs and are generating other income in other places. And because those companies have found, those franchise concepts have found that the particular values and skill sets, and the financial wherewithal, and the acumen that those particular individuals have are the types of franchise partners that they want to attract.

 
Jeff: And so really these people are investors. They see themselves as inventors or investing in their own future and perhaps those of their family members but they're not actually in it for a career. Now there may be those individuals who at the end of the day end up taking more of a hands-on role down the line, and we've talked to a couple of people here on “Deal Talk” who did just that, as a matter of fact. They had their own jobs as you talked about before, they became a little bit more involved in the business after they left their first careers, very interesting. What about some key industries that have really taken off, or types of franchise businesses that you've seen a lot of growth in, James, in your experience?
 
James: Yeah, great question. Certainly the personal care and health and wellness are industries that are seeing a significant amount of just overall growth. Because, let's be honest, when we look at ourselves, we want to continue to pamper ourselves and feel good about ourselves, and there's so many different ways to do that, both from an emotional and spiritual standpoint, to a physical and health and well-being standpoint. And so currently we continue to see significant amount of growth in that area.
 
One concept that I'm going to be meeting with here with the next week or two to kind of discuss their plans for growth was referred to me that I'm really excited about is Fuzz Wax Bar here out of Toronto, a couple of downtown locations. Their concept is simple, they focus on one thing and one thing only, waxing. A Fuzz Wax Bar, all they do is waxing. They do female waxing, which is obviously very big for that gender, but also male grooming has become a significant growth sector. Because, again, males, we become more vain. I don't know about you, Jeff, but certainly we see men doing pedicures and such.

 
Jeff: Not me there, James. You won't see me in one of those places, I'm just telling you.
 
James: Hey, listen, buddy, it is a growing segment particularly for millennials and folks that are younger than you and I.

 
Jeff: And we'll never understand it, would will we, James? But it's true. It's absolutely true, and I know a couple of guys that I had worked with, prior organization, and that was just part of their routine, man, that's what they did.
 
James: Yeah. I get a trim here, a waxing there, it's happening. I mention the Fuzz Wax Bar because there's also another time with respect to the trends in franchising that the two founders of this business are millennials, two female entrepreneurs that are millennials. And so the millennials are certainly coming into franchising, not only as franchise owners but also as in terms of franchisees owning and operating their own business. But there are also individuals that are coming in as franchisors, founding businesses and then franchising them.
 
That's what's really exciting, that the future outlook of franchising is very bright because millennials are looking at empowerment through entrepreneur and business ownership both as franchisees and also franchisors, founding companies and growing them. So really exciting time across North America here that we're seeing.

 
Jeff: James, you know, we're kind of running short on time, so we want to go ahead and just wrap up the last couple of minutes here, which is just a couple more questions for you. You know we're becoming so socially connected across the world and this is something that has really become a 15-20 year phenomenon really, almost two decades old now where Facebook, Twitter, LinkedIn, Google+, whatever other types of social media, Instagram, that you use or that you participate in. We're one world now, and it would seem to me that this would be an area where franchise businesses would really be able to take advantage and use social media for marketing and promotional benefit that would really help to kind of jump and increase sales traffic into the stores and contribute to their success. Have you seen this as well?
 
James: Oh absolutely. And it really kind of speaks to the marketing strategy, the business strategy of franchising, to really dominate markets. When you look at one of the core elements of franchising, every franchisee contributes. And this varies from a dollar, to two, to three dollars depending on that particular franchise organization. They're contributing that into a marketing fund. So for every sale dollar that a location generates they're putting a penny or two pennies into a fund. So you think about it, if you've got even 50 franchisees, and it's a business that is typically generating a million dollars in sales just because of the type of business that it’s in, that's $50 million generated by 50 franchicees that are generating a percent or 2% of that gross amount into an ongoing fund. And so that really kind of then really magnifies and just kind of jolt amount of steroids with respect to branding equity and awareness, and just drawing in fans on all these social media sites from a regional basis, right down to the local basis.
 
So back to your point earlier, so if you're an independent business owner today and you're looking at your business, that's one of the powers of evaluating your brand for franchising. Because you're actually going to be providing support, and training, and guidance to individual owner-operators, and they're going to contribute back a penny or two pennies of every dollar back into a fund that collectively you're going to be able to use for the benefit of every independent business owner in your brand. That's the power of franchising.

That's the power of franchising. It's leveraging those experiences and those resources to build better businesses for more success for all of us.

Jeff: A couple of key takeaways that you can leave us with, James, here as we wrap up our discussion today about franchising, where it's headed, why it's a great opportunity for business owners to grow their brands.
 
James: Yeah, absolutely. What I would say is that both in Canada and the United States right now the individuals that are working that aren't in their own business are considering it significantly. I looked at some statistics here earlier today, 55% of all Americans want to own their own business. Seventy percent of high school students want to start a business. This is when I talk about millennials. My 18-year-old son who's going off to university, he's talking about when he gets out he wants to run his own business. That's what's happening today.
 
So the future franchise and business ownership is bright, which I think should attract more and more businesses to evaluate franchising for some of the points that we've made that we talked about earlier. And then individuals that want to start and own and operate their own franchise, as I mentioned earlier, that there's thousands and thousands of different franchises and a lot of different industries.
 
But here's what we know about the economy, that today, right now, franchising is the fastest growing sector within all sectors of the economy. Franchising now provides more jobs than any other sector in the U.S. economy. So franchising is growing. And then within franchising, regardless if you're in a Fuzz Wax Bar, or The Middle Spoon, or Tutor Doctor, or Pro Martial Arts, you're joining a community. You're joining a community of franchisees that are associates that are there to help you grow your business in that individual franchise. But then you're joining a bigger community of thousands of franchisees across the state, and thousands, and tens of thousands of franchisees across that country.
 
That's the power of franchising. It's leveraging those experiences and those resources to build better businesses for more success for all of us.

 
Jeff: James, if we've got anybody out there who'd be interested in contacting you to find out more about what your organization can help them do in terms of setting up their own franchise, or getting them placed, potentially helping them get placed into a situation where they could own their own franchise business, how can they reach you?
 
James: Absolutely. You can jump on our website at yourfranchisesuccess.com. Please feel free to fill out an information request, and we'd love to get in touch with you, or at info@youfranchisesuccess.com. And if you're in there in the continental United States, give us a call at our Michigan office at 248-496-2893, again that's 248-496-2893. Or if you happen to be on the north of the border like me, give me a call at 519-501-3743, again that's 519-501-3743. It's been excellent and a lot of fun to be chatting with you today, Jeff.

 
Jeff: James Channer, franchise business adviser at Your Franchise Success, LLC. Thank you for joining us. We appreciate it.
 
James: I appreciate it. Have a great day.

 
Jeff: Tell a friend about “Deal Talk” in addition to morganandwestfield.com. You can find us on iTunes, Stitcher and Libsyn. “Deal Talk” has been brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen. As always, I enjoyed having you with me today. Thanks so much for listening and let's talk again soon.
 
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