In 2020, countless industries and business models went into slowdown or lockdown mode, trying to find a new normal in a world that was, well, not normal. Like everyone else, franchisors, franchisees, and their employees strove to find their way through a tough time. So it was a bit of a surprise, even for those of us with experience and deep knowledge in this space, when 2021 brought what the International Franchise Association’s annual economic outlook called an “exceptional year” of rapid recovery. Faster than anyone could have predicted, franchising was back in business!
Now that we’re in the final quarter of 2022, I can report that what we’ve seen this year can only be characterized as a boom. A big, energetic, forward-moving, money-making business boom that is breaking records left and right.
Just what factors are fueling this growth? Let’s take a look at a few of the most important:
1. People are Stepping off the Sidelines
After a couple of years of learning what it feels like to have to sit things out, people came into 2022 ready to take action. We came ready to resume travel, ready to eat out again, and ready to see concerts. But I am seeing a deeper trend in this mentality in people who are eager to take more ownership of their career plans. People who considered becoming entrepreneurs in the past came into 2022 sick of daydreaming and ready for action. Time and again over the course of this year I’ve met with candidates who’ve undergone a psychological shift from waiting for something to happen to be determined to make something happen. They’re bringing terrific new energy to franchises.
2. Big Investors are Paying Attention
Franchising has long been a business model that promises stability and profitability, but this year I’m seeing a massive inflow of money into the business model in many forms. This goes far beyond individual investors and into the realm of private equity, where groups are buying entire systems and investing in their growth.
What happens when private equity gets involved? First of all, things start growing exponentially. The business model for many of these groups boils down to throwing money at the investment to spur rapid growth. That deep-pocket mentality funds programs like digital marketing, back-end management resources, tech support, and even call centers. And those investments directly benefit unit owners.
Another factor of private equity investment is the intellectual and energy capital it brings to franchises. At their best, these are sophisticated, high-octane groups that bring big improvements to the systems they buy.
Lastly, private equity groups often invest with the long-term goal of selling, and their laser focus on creating value can mean money in the pockets of unit investors both in the short term and in the long term.
3. Tried-and-True Keys to Profitability are in Play
One trend I’ve been seeing a lot in the franchising world is companies whose business models truly shone during the hard times of 2020 and 2021 stepping up to tout their records and show they aren’t just survivors—they’re thrivers. These are companies that relied on great leadership, outstanding use of technology, the ability to pivot and refocus, and the strength of their network of franchisees to maintain profitability. Some of the most resilient pandemic- and recession-resistant businesses were business-to-business services that remained indispensable; necessary home services; recurring revenue business models; and companies using technology to cut down on face-to-face interaction with customers.
With franchises reaching over $780 billion in output in 2021, it’s clear this is not a small pocket of franchised businesses. It’s a wide swath of well-run concepts that are reliably benefiting their franchisors, their franchisees, and their customers.
An All-In-This-Together Mentality
You know you’ve made the right call when the team around you steps up to support you in troubled times. This is a trend I’ve seen play out so many times since early 2020, with franchisors looking at potential problems for franchisees and addressing them with their full strength of their corporate power rather than leaving individual units to find their own way. Some examples include franchisors that created in-house recruiting systems to help their franchisees find and hire quality job applicants, franchisors who took extraordinary steps to minimize the impact of supply chain and distribution snags on their franchisees, and even franchisors who bought up supporting companies to ensure smooth operations for their units.
New Concepts and Hot Topics Abound
Every time I think I’ve seen the upper limit of the creativity and ingenuity of franchisors, I discover that I stand corrected. We are seeing a wealth of new concepts across industries, but let’s just talk about a few.
Medispas. At first glance, some of these services sound like science fiction. Cryotherapy? Light therapy developed by NASA? Infrared treatments? Microneedling? IV therapy? Many segments of this industry are beginning to offer treatments to customers that were once only available to the very wealthy, the very famous, or just the very well-connected in the medical world.
Mental health services. There’s a huge level of unmet need for mental health services in the US, and over the past two years, a number of excellent franchised concepts have come online to help meet that demand.
Fitness. Here is a market that never seems to get saturated (and that likely never will). Technology-heavy concepts, concepts that cut workout time, old-school-made-new concepts (like boxing workouts)—there is continued great growth across this sector.
Home services: Do you know anyone who isn’t in the market for or on a waiting list for home services? Demand is sky-high for everything from roofing to plumbing to renovations to decorating, and consumers in this segment prize reliability and trustworthiness—two factors franchised businesses can consistently deliver.
Caring companies: Businesses that help families take better care of and show their love for aging parents, for kids, and even for pets continue to thrive and expand. These things are perennial, but I am constantly amazed at the number of new concepts designed to make things to make life easier, more rewarding, or more fun for entire families by serving these segments. As a dad, a dog owner, and a member of a big family, when I go to franchising events, this is the area where I find it hard to resist investing in, well, everything.
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Pete Gilfillan is a leading franchise consultant, entrepreneur, and author of the best-selling book HIRE YOURSELF: Control Your Own Destiny through Franchise Ownership.
