As the world continues to navigate an unpredictable economy, new trends are opening doors of opportunity for the franchise industry over the coming year. Successful businesses know the difference between fads and trends. While fads are fleeting, trends point toward the future and reveal opportunities. By exploring emerging franchising trends in what has been one of the most challenging economic periods in recent history, entrepreneurs and franchisors can find unique growth opportunities.
1. Cohesive Partnerships
Franchising thrives when franchisors succeed by helping their franchisees succeed. The key is creating a cohesive business model where success is shared. When done effectively, franchisors actively support franchisees’ growth, while franchisees want their franchisors to succeed. This alignment keeps everyone focused on the same goal and prevents an “us versus them” mentality.
2. The Ideal Franchisor
The modern ideal franchisor has 500+ franchise units with fewer than 50 franchisees. Successful franchisees often expand into larger territories and reinvest free cash flow to grow more units. Multi-unit franchisees with large territories allow franchisors to operate efficiently, requiring less day-to-day monitoring and yielding higher returns if the business is sold.
3. Long-Term Value
Historically, franchisors viewed the franchise fee as their main source of revenue. Today, the focus is on the long-term value of franchisees. Franchisees pay royalties over the life of their business, potentially amounting to millions of dollars. Franchisors are increasingly dedicated to nurturing franchisees and providing the tools they need to succeed.
4. Private Equity and Professional Investors
More private equity and professional investors are recognizing franchising as a reliable way to earn steady, predictable revenue. Franchises can generate compounded returns, providing investors with long-term wealth-building opportunities. Franchising is increasingly seen as a self-sustaining investment that delivers consistent profits.
5. COVID-Driven Needs and Opportunities
The pandemic brought unprecedented challenges but also opened new avenues for growth. Concepts like ghost kitchens and off-premise sales allow businesses to reach customers in innovative ways. Brands like Chipotle have introduced “chipotlanes” for curbside pickup, demonstrating how business owners can adapt quickly to changing consumer demands.
Starting a business during COVID-19 can be 50-80% cheaper than pre-pandemic costs, thanks to lower real estate prices and available labor. Smart franchisees are leveraging these opportunities to expand their businesses with minimal investment.
Key Takeaway
Franchising only works when you succeed by helping others succeed. With the right strategies, partnerships, and foresight, the current economy presents unique opportunities for growth and innovation in the franchise sector.
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