Franchising has matured since Ray Kroc opened his first McDonald's in 1955 in Des Plaines, Illinois. First-day sales at that restaurant were $316.12. In 2016, McDonald's annual sales topped $24.6 billion at nearly 37,000 restaurants in more than 120 countries -- with about 84 percent of those stores owned by franchisees. Daily sales per franchised store today? You do the math!
Many other things have changed in franchising as well. In its earlier years, franchising was a place for single-unit owners, content to "buy a job," be their own boss, and provide a modest income for themselves and their families. Today, more than half of all franchise units in the United States are run by multi-unit operators, some with hundreds of units and revenues in the tens of millions. These operators don't work in their store making sandwiches or traveling from home to home to provide services. Rather, they manage their company, employing a professional staff of field and unit managers, while they focus on strategy and growth.
Multi-brand franchisees (those with two or more brands) are also a rising trend. These franchisees often have maxed out their territory for their first brand and must take on a second or third brand to continue to grow their organization. Others are seeking additional brands to provide cash flow for different day parts, or to diversify their risk by creating a hedge against market cycles, changing consumer tastes, and shifts in the economy. Others still seek out new geographical markets to expand.
So what are the trends in franchising today? Where are the growth areas? And more important, where will they be in 3, 5, and 10 years?
Major changes in the U.S. population are affecting not only who consumers are today, but also the available labor market. Franchisors and franchisees alike must adapt to this changing customer and employee base to find opportunities for growth.
Millennials -- This generation, whose numbers outstrip even those of the Baby Boomers, are coming into their own as a potent economic force as they begin their careers and raise families. This group of more than 70 million - whether as entry-level employees or as media-savvy consumers raised on the Internet -- present a huge opportunity for franchisors and franchisees who can provide goods and services related to their growing needs.
Baby Boomers -- As this "forever young" generation ages, it will demand many new services: health and fitness programs; financial and retirement planning and advice; assistance with their aging parents; child care for their younger children and educational services for their college-bound children; legal and tax services; nutritional, cosmetic, and "anti-aging" products and services; and more.
Seniors -- People are living longer, more active lives today, a trend that will only accelerate as Boomers age. This will create a "booming" market for services demanded by this affluent, expanding demographic. Healthcare-related services, delivered at home or in assisted living facilities, will continue to grow. Home renovations for seniors, health and fitness programs tailored to their aging bodies, and increased acceptance and use of "cosmeceuticals" will expand in the years ahead.
Minorities -- The U.S. is well on the road to having a "New Majority" as the ranks of Hispanics, African Americans, and Asians continue to grow. From food to fashion, real estate to business services, as members of these groups continue their rise in numbers and economic clout, their needs will continue to expand as well -- presenting new opportunities and challenges for franchise brands focused on serving them.
What if you could start a franchised business with the guarantee that you couldn't fail? While there are no sure bets in life or in business, some areas are more likely to succeed than others.
No business is free from risks, but having a firm grasp of current trends -- and where they are likely to go in the coming years -- is a big step in the direction of long-term franchise success.
6.6: Choosing a Home-Based Franchise
7.1: Calculate Your Personal Net Worth