CONTENT BROUGHT TO YOU BY: WellBiz Brands
In my 25 years of experience on both the ownership and franchise development side of franchising, I have seen my fair share of industry transformation. It’s safe to say franchising has evolved significantly in the past decade.
So where is popular franchise ownership heading? Industry shift is imminent, and to predict the future of franchising trends, we must reflect on the past from both an economic and consumer-demand standpoint:
The Beginning of the Franchise Model
To get a holistic picture of franchising, let’s take a look at one of the first franchise models, which might best to seen through Ray Kroc and McDonald’s. Although McDonald’s and many of the earliest franchise models were in the restaurant vertical, Kroc and the founding fathers of franchising paved the way for establishing a streamlined and turnkey business plan for franchisees and franchisors to come. McDonald’s original franchise model came to conception as a distribution method, capable of eliminating many of the complexities of business ownership and enabling franchisors to expand more rapidly.
During this time, many thought becoming a franchise owner was an easy route to business ownership. What many people had a hard time wrapping their minds’ around then and still do to this day, is that the model is truly a business inside a business, and it’s not always as simple as it appears. Although franchise owners are provided the steps and guidebook to build the business, it still requires a level of investment including funding, faith, fundamental leadership and the activities that everyday business owners complete.
To put the early model into perspective, picture a staircase. Franchisors stood at the top of the staircase, defining the steps to the customer in the forms of branding, messaging and the customer-service experience. Franchise owners stood closer to the bottom and executed the steps in accordance with the franchisor’s vision but had little to no weigh-in when it came to the decisions made at the top of the staircase. This model created friction with franchise owners, as they came into ownership expecting to have some entrepreneurial independence and a seat at the table when it came time to determine the business vision.
Early Franchising
From 2004 to 2007, interest from franchise developers began to boom. This was a period where many new health-focused franchising restaurant concepts began to materialize and health club franchise offerings experienced a lot of growth.
During this time, entrepreneurs from all verticals saw the franchise model as an opportunity to expand their business concepts rapidly. As a result, franchises began to pop up in nearly every retail center across the country.
From a franchise owner standpoint, this was a period where money was available and home equity was at an all-time high. While franchise owners were still expected to adhere to the branding and business model set forward by franchisors, the expanded franchise offerings allowed more independence for franchise owners to select a franchise model and brand that aligned with their vision.
The issue with this rapid growth was that many of the franchise buyers had little business experience and insufficient capital to sustain the business. This resulted in many franchise locations going out of business.
Franchising During the Recession
Counter to what one might intuitively think, when the economy begins to struggle and corporate earnings aren’t meeting expectations, many c-suite executives choose to take control of their own destiny. As a result, franchising benefits as these executives pursue a new entrepreneurial path.
The New ‘Niche’ Era of the Franchising Industry
We don’t live in a one-size-fits-all world, and the current state of franchising has become very diverse and niche, especially as it relates to health and wellness. The current generation has a desire to work for themselves and live a health-forward and focused lifestyle. The franchise model is appealing to aspiring entrepreneurs, particularly big box-gym trainers who want to branch out, open their own facility and work for themselves with the added support of a proven model.
This shift is not limited to health and fitness offerings. Take a look at the evolving nature of fast casual restaurants offering healthy food options, mainstream fast-food restaurants evolving their menus to offer healthier selections, increased availability of organic food at grocers such as Walmart and soon, Amazon providing Whole Foods deliveries through its recent acquisition.
According to the Pew Research Center, in 2015 more millennials reported making personal improvement commitments than any generation in the past. They also spend more on self-care essentials, such as fitness regimens, diet plans, life coaching and therapy. They even utilize mobile apps to improve their personal well-being.
This health-forward mentality is not projected to slow any time soon.
According to Statista, in 2015, more than 186,000 fitness & health clubs were in operation worldwide, of which about 36,000 (19 percent) are located in the United States. U.S. clubs had about 55 million members. In addition, about 25 percent of people in the United States who work out at least once a month say that exercise, workouts or sports in general is part of their daily routine. Because of this, and the millennial fitness appetite, industry annual revenue for health and fitness clubs is forecasted to grow exponentially by 2020.
Some Advice
A core component of being successful in any franchise model is understanding your personal strengths and core competencies, and then utilizing those to select a franchise that matches your strengths. In addition, believing in the business and having a passion associated with the brand and its mission are keys. The fundamental necessity is to be a great ambassador who is proud to wear the brand logo and be a representative both verbally and through your day-to-day interactions.
The Takeaways
- Franchising evolved over the past decade and will continue to evolve in the coming years. If you are interested in opening a franchise location, it is critical to pay close attention to generational appetites as well as the economic and competitive landscape and to select a model that aligns with your personal passion.
- Franchising is a box with a kit of parts and a set of directions. An essential part of being a good franchise owner is taking the business model, putting the pieces together and not attempting to re-create the wheel.
- Franchise ownership takes investment. It requires an investment of time, work, funding and faith in the franchise model.
- To be a great business owner, you need to be a good brand ambassador. People can tell the difference when brand ambassadors are passionate, verbal and proud to wear their franchise logo.
BIO
Joseph Luongo serves as executive chairman of Colorado-based WellBiz Brands where he oversees three franchise concepts including Elements Massage, FIT36 and Fitness Together, which collectively operate more than 400 locations across the United States. Luongo has 25 years of experience in the franchise industry, most recently serving as a fitness and wellness industry consultant. Previously, he was chief operating officer for Massage Envy. Luongo has also held leadership roles with Pizza Hut, Peter Piper Pizza, FedEx Kinko’s and Starbucks. Luongo was a C-130 navigator and captain in the U.S. Air Force. He received a bachelor's of business administration in finance from Iona College in New York and a master’s degree in operations management from the University of Arkansas. He also has completed Harvard University’s Advanced Management Program.