Interest in franchise opportunities continues to rise and franchising is more diverse than ever before
By Thomas Scott, CEO of Brand Journalists
The International Franchise Expo is the largest franchise trade show event for potential franchise buyers in the world. This year’s attendance was one of the largest on record, and the event has seen attendance climb in recent years.
More than 400 franchise companies attended, and although the show isn’t fully representative of the franchise industry, it can be a great place to gauge the health of the industry, see what franchising trends are evolving and get a feel for the size and scale of the franchise buying population. At this year’s IFE, participating brands included those from all investment levels, a wide variety of industry segments and full- and part-time owner participation requirements
In the era of self-directed online research, franchise buyers are still interested in seeing what’s out there and meeting a person face-to-face.
Here’s what we took away from the 2015 IFE that you might have missed:
The franchise industry is growing
Almost 800,000 franchise locations and more than 4,000 franchise brands now operate in the U.S. According to FranData, there were more than 365 new franchise companies in 2015 alone, a trend that isn’t going to slow down any time soon. Franchising produces more than 3% of the GNP and outperforms all other sectors on job creation.
Record numbers of potential buyers are in the market today, and franchising is healthier than it has been since the economic downturn and only getting better. Franchising continues to be one of the best options to help people participate in the economy at their full market value.
Brands that focus on niches and authenticity on the increase
While there were more burger concepts showing at the IFE than any other segment, as well as a big presence from many home service brands and iconic franchise systems, what really jumped out this year, more than previous shows, were the number and diversity of niche brands offering authentic goods and services.
I stopped by a French Macaron franchise, a ramen noodle shop franchise, a Halal franchise, several Korean food franchises and some really intriguing non-food businesses. The diversity is refreshing; franchising is, after all, more than burgers, chicken and pizza. For millennials, buying a niche brand that serves something unique in a market is attractive. Millennials are very entrepreneurial as a group and for them, unique is better than mainstream.
The future of franchising might not be with the mega brands with thousands of locations; it might be that a much larger number of smaller brands prosper and dominate a small niche. Not every franchisor needs to have 500 or 1000 locations — a small, regional chain might work well with just 50 or 100 locations. Considering that the franchise industry is joined by hundreds of companies every year, the membership of the IFA is sure to increase in the decade ahead.
The volume of potential franchise buyers is increasing
More people are researching franchises than ever before. Although the franchise industry only recruits 14,000 to 15,000 new franchisees a year, we estimate that more than 12 million people search for franchise ownership information at any time. Clearly, there is room for ample expansion of just about any brand that has good unit economics, a stable segment and positive franchisee validation.
Trade shows have largely fallen out of favor as a lead generation source. They are expensive and in the era of self-directed online research, buyers can now easily gather helpful information on just about any brand they get curious about. Digital lead generation is both less expensive and more productive. That said, the IFE has seen a rebound over the past few years and traffic at the center was high when we visited. There were many serious franchise candidates mixed in with the curious in the aisles of the Javits center.
This makes sense as record numbers of immigrant buyers are seriously evaluating US brands and the Affordable Care Act has given entrepreneurs access to health insurance, which allows them to leave a traditional job with a benefits package. Millennials are researching ownership in large numbers and financing has finally risen to reasonable levels, making ownership possible for a larger number of candidates.
Holding a trade show gives serious candidates something self-directed research doesn’t — access to the source of information. Trade shows are great to see what is out there, and a lot of prospects we talked to were already well into the sales process with a specific brand. They were coming to the show to meet the franchise staff in person and were using it as a way to check out other concepts. Trade shows may not be the most cost effective way to recruit buyers, but they still have a place in your lead generation plan.
Baby boomers are leaving the room
Now that millennials make up the largest percentage of potential franchise buyers, baby boomers are diminishing in number. There are really 3 distinct groups of franchise buyers in the market today: baby boomers (those born before 1965), generation X buyers (those born from 1966 to 1980) and millennial buyers (those born after 1980).
For the first time at an IFE, it appeared that baby boomers were in the minority. Most were generation X buyers, and we saw many more older millennial buyers than expected. Baby boomers are no longer the future of franchising; we’ll see more drop out of than enter into business ownership in the next decade. Generation X buyers, who started the self-directed research push, make up the majority of inquiries, and millennials are just starting to gather enough financial resources to purchase franchises.
Although baby boomers were raised on traditional, promotional advertising (like trade shows), the other two groups of buyers have different attitudes towards this form of advertising. Generation X buyers witnessed the birth of computers and the Internet and pride themselves on gathering a much wider scope of information than baby boomers. Millennials expect to be in control of the sales process and recoil from most traditional advertising, making trade shows a challenge for most franchisors. Expect to see the approach to trade shows evolve as fewer baby boomers attend these shows in the future.
Although the overall economy may not be as strong as we’d like, the state of franchising is healthy and robust. As seen at this year’s IFE, with record-breaking attendance, the industry keeps growing and evolving as the demographics of the potential franchisee shifts and those interested entrepreneurs research and evaluate franchise opportunities.
If you haven’t attended the IFE as either to walk the aisles or have a booth, we recommend giving it a try. It does produce sales — although not every franchisor will generate a sale — and it can introduce your brand to a much larger audience.