Want to Buy A Franchise? Consider the Market and Think Beyond McD’s
It is estimated that there are over 825,000 franchise businesses across 300 business categories in the U.S. that provide nearly 18 million jobs and generate over $2.1 trillion to the economy, according to AZFranchise.com. Why open a franchise instead of starting you own business? It’s a business brand that is already successful. You pay for your own franchise and there is a startup fee. But, then you receive a percentage (royalties) of the profits. The HowStuffWorks website has additional details on how to operate a franchise.
And McDonald’s isn’t the only successful franchise in town.
Kiplinger’s Personal Finance magazine recently listed seven franchises that are on the rise — prime for new franchise owners. Their picks “have demonstrated solid growth despite the harsh business climate — and none of them require exorbitant startup fees,” writes Kiplinger’s. “We focused our search on franchises with growth of 70 percent or more since 2006 (or 10 percent or more since 2010 for new franchises). Then we narrowed that list to those with franchise fees of $50,000 or less. Finally, we sorted by franchises in industries that are doing well and are expecting continued growth, according to experts.”
Among their picks was JumpBunch, a franchise of fitness programs for children. This is an interesting pick as Americans have begun to focus on children’s fitness and health, with schools cutting out high-fat foods and sugar-based drinks and parents enrolling their kids in more after-school sports programs. JumpBunch targets local school districts that have cut their recreational budgets. “Franchises such as JumpBunch allow schools to outsource gym classes, a cost-effective alternative to maintaining their own physical education departments. The service is also in demand with day care programs and camps. JumpBunch franchises have grown 181 percent since 2006,” reports the article. There are only 45 franchises in the U.S. currently, so new owners shouldn’t be worked up about the brand being over-staturated. And the startup requirement is $75,000. The franchise fee is $33,000 and royalty earnings are eight percent of gross revenue.
Another interesting choice is Expedia CruiseShipCenters, cruise/vacation marketing and sales businesses. There are 32 franchises in the U.S, requiring a franchise fee of $29,000 (retail center) or just $8,500 for a sales center. To buy you need $250,000 (for retail location only). The royalty earned is nine percent of the profit. “Franchisees can run sales centers from their homes or start their business in a storefront retail location. The number of franchises has grown 85 percent since 2006,” says the article.
With 143 franchises in the U.S., MaidPro, a residential cleaning service, is on the rise. To start, you need $50,000. The franchise fee is between $7,900 and $21,5000. Royalty earnings are 3.5 percent to 6.5 percent of gross revenue. With so many families too busy to keep their homes clean, many are turning to outside services, such as MaidPro. According to the article, the “number of franchises has grown 126 percent since 2006.”
Before deciding on a franchise, The Wall Street Journal offers tips.
“Start by asking yourself what kind of franchise you want to operate. You will need to consider the hours you are willing to work, the kinds of work you enjoy and whether you prefer working directly with customers or remaining behind the scenes,” advises the article. Also think about how much money you’re borrowing and investing versus how much you need to generate.
And, “as a general rule, you will want to avoid industries and fields that are either too crowded or too thinly populated. Crowding creates competition, while the absence of franchisees in a particular niche suggests that it either doesn’t lend itself to franchising or that the market hasn’t yet developed adequately,” the article says.
Check out the International Franchise Association, a Washington trade group that provides a free online directory of more than 1,200 opportunities. There’s also FRANData, which maintains a database of franchise circulars, contact lists and other information about franchises. There is a research fee to use FRANData, but it’s worth it. Also, World Franchising Network is an online directory of franchises.