It looks as though franchise businesses are going to have another banner year with 2015 projected to be the fifth consecutive year of expansion for the industry.
The sector is expected to outperform the overall U.S. economy again by generating a 5.4% increase in economic output, bringing the total to $889 billion.
The companies that were ranked in Entrepreneur’s 26th annual Franchise 500 alone added a total of 16,229 new franchise units between 2013 and 2014.
So which types of franchises are driving all that growth?
Many assume the growth is from quick service restaurants – and to a certain extent they would be right.
Quick service restaurants are still the biggest fish in the franchising pond. They represent one-fifth of all franchise units and are responsible for nearly 40% of the entire franchise sector’s employment.
But the franchises that are currently showing the fastest growth can all be categorized under one main umbrella – personal services.
The competition in this sector is fierce.
Personal services, which include salons, spas, gyms, and child and senior care, are all on the upswing.
Fitness: big-box gyms were long held as the norm, but up-and-coming fitness studios with smaller footprints are gaining muscle by offering specialized options like kickboxing and Pilates while creating a more personal experience for clients.
Seniors: over the past several years senior care has become one of the pillars of the franchising industry. As with traditional big-box gyms, the highest-ranking senior care franchises have been around for more than 15 years, but the field continues to evolve as new concepts try to differentiate themselves from their more established counterparts by introducing new services.
Salons & Spas: despite being relatively new to the franchise space, massage franchises are proving to be not only a bright spot in the industry, but also one of the most competitive areas. And due to the transformative power of the franchise model, other spa and beauty services, like waxing, spray tanning and nail salons, are embracing the model to reach more customers.
Children: last, but certainly not least, child-centered franchises have been wildly successful over the past several years. And thanks to franchising, parents have lots of options, from early-learning childcare to traditional tutoring.
Despite the immense growth occurring in the franchise industry, it’s important to keep in mind that overly aggressive growth has killed many brands.
So one of the most frustrating realities franchisors have to face is determining whether a market is ready for their concept, and if so, how many locations it can support.
Establishing multiple locations in a market requires teamwork between the franchisee and franchisor, an understanding of customer growth and timing, as well as aggregated data projections – national data combined with individual store transaction data – to provide insights.
Data-driven solutions offer analyses without bias so that franchise leadership can make more strategic, objective decisions in order to start moving forward.
Customer analytic solutions and their applications have proven to be key elements when optimizing franchise growth.
Want to accelerate your franchise growth in 2015? Contact us to talk about our Franchise Growth Solutions. Or if you’re attending the upcoming 2015 International Franchise Association Annual Convention in Las Vegas, talk with one of our franchise experts about how using analytics can optimize your franchise growth.
