Senior care and mobile businesses show promise along with niche food-focused operations.
Franchises are expected to experience modest growth at best this year. This from "The Franchise Business Economic Outlook: 2013" report and other sources.
Still, they should "outperform within many of the industries where franchises are concentrated," predicts Matt Haller, vice president of public affairs and chief of staff to the president and CEO at Washington, D.C.’s International Franchise Association.
Which franchise sectors will see the most growth—and, hopefully, success—through the balance of 2013? Haller, along with author, blogger, and consultant, Joel Libava ("The Franchise King"), and Jeff Elgin, CEO of FranChoice Inc., believe the following ten are strong possibilities.
1. Senior Care.
"Everyone you ask about this is going to mention senior care," Libava says. "It's still a really good sector for franchising. The numbers don’t lie and the demographics line up just as they should." That’s not to say it’s free of potential pitfalls. "What most people don’t realize about it is that it’s really a sales and marketing business. You need to be strong in both of those areas to make it work," Libava stresses. "Yes, there are plenty of potential customers, but you aren't going to get them if you don’t hit the pavement and create a referral network."
This franchise sector also involves the senior population. Libava sees a potential windfall for businesses that install ramps or handrails in or around people’s homes. "There’s definitely a need out there for these kinds of services, since more and more people are staying in their homes as they age, but I think they may need to be paired with other senior services."
3. Home- or Van-Based Service Businesses.
A few examples are Budget Blinds, CertaPro Painters, Fibrenew, Fish Window Cleaning, and franchises featuring pet- and children-related services, says Elgin. He considers these businesses especially appealing at the moment because they’re both low-investment and high-margin. "Since the financing marketplace basically went away four years ago, we’ve seen an explosion of focus on these types of franchises because many people can’t afford other more traditional fixed location opportunities without financing part of the initial investment."
4. Business Services.
Haller ranks this segment of the franchise industry among the top two sectors in both employment growth and growth of the number of establishments this year. "As corporate America continues to do well, the demand for franchise business service providers steadily grows," Haller maintains. Increased manufacturing and other such activities "will have a positive impact on a broad range of business services, which will continue to support the growth of franchises in this sector."
5. Commercial and Residential Services.
"With the accelerated movement in the housing market, spending on home improvement is increasing and the demand for residential and commercial services is growing rapidly too," says Haller, who expects this sector to grow by 2.8 percent this year. The continued sales of existing homes in 2013, he adds, "will mean more work for franchises that provide home care, from bathroom updates to lawn maintenance."
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6. Frozen Yogurt.
This has been one of the most talked-about sectors in franchising for the last three years, according to Libava. Perhaps as a result of all of that chatter, there are now over 25 different concepts in this particular space. "I have a feeling that it’s becoming crowded and increasingly difficult to differentiate one franchise from another," he says. "Still, I think it’s one to watch."
7. Gourmet Burgers.
Although this food-focused franchise sector also has been "hot" for a while now, Libava believes that just like frozen yogurt, the burger sector will continue to do well for some time to come. "A lot of people want burgers and fries, especially good ones." He considers upscale burger joints to be "a safe bet for people who want to get into food franchising and also have several hundred thousand dollars—because they’re big investments."
8. Various "Executive-Model, Rapid-Initial-Growth" Franchises.
A few examples of this sector are niche fitness franchises with a twist, like Kosama, or those that focus on massage and related services, such as Massage Envy. These businesses "typically have fixed locations and higher initial costs," Elgin says, but they also tend to attract lots of customers "and therefore start making money far faster than standard franchise businesses." Massage Envy is also like Target in that it brings affordable luxury to the masses...
9. Real Estate.
"The real-estate industry turned a corner last year and continues to add to that recovery in 2013," Haller says. Specifically, he adds, sales of new homes will increase 26.5% this year, up from the 19% increases seen in 2012 . "New building construction is expanding, vacancies are coming down, and rental activity is improving," Haller says.
10. Fast-Casual Restaurants.
A subset of traditional quick-service restaurants, these franchises "continue to be high on the list for strong ROI," according to Haller. "Consumers are always looking for convenience and value and, as a result, turn to less expensive food options." This particular sector should prove to be especially appealing for those looking to franchise, he adds, because of "the demand factor and [because] there are no limits to where you can open a quick-service restaurant."