October 20, 2014

The Hottest Franchises

The other day, a reporter for a Hispanic business magazine asked me what I thought the hottest franchises were this year. I hesitated, like I always do when I get asked that question, and shared a couple of “categories” that are currently popular.

burger king

When he pressed me for the names of specific franchises, I hesitated again, but this time, I spouted off 2-3 concepts that have been getting a lot of PR, or have been selling a lot of new franchises lately. But, I really don’t like naming names. I’m much more comfortable naming some of the trends in franchising.

A “hot” franchise opportunity can mean a number of different things. It depends on who you are and where you are in the franchise buying process. Take a look at the three things I listed below that could make a franchise concept “hot,” and maybe you’ll understand where I’m going with this important topic:

High New Unit Sales

In my industry, things are measured in units. Franchisors are always on the hunt for new franchisees. New franchisees open new units. New units create new franchise fees, and a new stream of monthly royalty income.

Check out this Introduction to Franchising to learn about these fees, which are the lifeblood of the franchise model. If a franchisor is selling a lot of new franchise units, it could be considered to be a “hot” franchise concept.

Locations Everywhere

Let’s say that you travel a lot for business. Let’s also say that you’ve been thinking of leaving your job and becoming the owner of your own business, maybe even a franchise. Since you’re in the “looking for an opportunity” mode, you’ve been keeping your eye on certain businesses that populate all the places you travel to. And, there’s this one restaurant franchise that you keeps popping up everywhere you go. Not only are these franchises everywhere, they all seem to be new. In your eyes, this franchise seems like a “hot” one.

Publicity

Some franchises get a lot of publicity; the reasons why, vary.  For example, Dunkin’ Donuts tends to get a lot of PR. Like this story featuring two very-well known sports figures that just purchased the rights to 50 Dunkin’ Donuts franchises.

Earnings announcements can be turned into PR, too. Here’s a story that discusses Burger King’s 2Q profit going up 60%. (The reasons include their new menu, and recent marketing initiatives.)  Then there’s the recent publicity surrounding a certain chicken-sandwich franchise, that may or may not be considered what’s termed, “good” publicity.

So, based on the publicity that those three franchises have been getting as of late, one could say that they are pretty “hot” franchises.  The reason I chose to attempt to define what a hot franchise is by using the examples above, was to get you to stop and think for a minute.

Now, I understand why you want to find out what the hottest franchises are these days. You’re equating popularity with higher income opportunities. That’s completely normal. But, it’s not necessarily the case, every time.

Look at the recent Facebook IPO, for a moment. Didn’t you want to secretly “get in on the ground floor,” so that you’d have a chance to make a lot of money on a brand new stock? And, wasn’t the fact that Facebook has been considered a “hot” social media site-a hot company the main reason for your interest in it?

Investigating a franchise because its “hot,” and using whatever criteria you’re using to make it so, can be really tricky. Will the franchise concept you’re interested in potentially be a short-lived fad? Are there too many locations nearby for you to really have a chance to make money? Can the franchisor keep up with all the new units being opened?

Those are all great questions that you need to ask yourself before you sign on the dotted line. Of course, one of the best things about franchising is that you get to ask actual franchisees, the ones that took a risk already and that are in business, all the questions you want.

But, in your excitement to become an owner, to finally be in control of your career, don’t forget to ask yourself this question:

“Is the franchise I’m thinking of purchasing right for me?”

If so, maybe it can become a “hot” franchise for you and your family.

Make sense?

Burger King Photo via Shutterstock

8 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

8 Reactions

  1. Many of these “hot” franchises have gotten publicity because of emotional appeal. Agreement or disagreement with social views. The popularity of the sports figures buying the franchises. However, a good decision is one made deliberately, with a minimum amount of emotional sway.

    • 100% true.

      Even though our emotions can really come into play during the course of a big decision like buying a franchise, Robert, focusing on the facts are what help produce winning decisions for today’s franchise buyer’s.

      The Franchise King

  2. “Is the franchise I’m thinking of purchasing right for me?”

    – This question really must be the first question that must come to mind of those people who want to franchise a certain business. The right decision will result in business success.

  3. A better question may be “will I ever get a payoff’? Does the franchise model still work post the “Great Recession”? It makes sense to understand how the franchise model must work before trying to answer this question:

    Everyone has to win or the franchise industry simply doesn’t work.
    This means basically the following:

    The Franchiser has to charge approximately 5% royalties from franchisee sales to build equity and to provide service that gets progressively better over time. Support systems must be flexible as not all franchisees are created with equal talents and various forms of support are , therefore, necessary The top ten percent revenue and earnings franchisee producers need a different support system than those performing in the lower ten percent bracket. On-going training and marketing development are both critical for both franchiser and franchisee success.

    The franchisee must make around 10% before tax earnings so that all employees can be treated right and a quality service/product is provided daily. This number also means that equity is building creating a valuable business over time. Franchisees should not be viewed as simply buying a job. Everyone involved in the company must recognize that all, (or nearly all) franchisees’ business net worth must continually grow or the system will eventually fail.

    Internet informed customers must feel that they are receiving a valuable service or product at price points that are fair so that they will return. They also must provide strong word-of-mouth advertising about the franchisee’s business as this remains the most valuable form of sustaining and building any business. The system cannot grow unless the franchisees and customers remain strongly committed to the brand. If that sense is not sustained, potential franchisees seeking validation will not find it and the system cannot grow and will eventually fail.

    Accomplishing all three objectives on a steady basis is challenging. This has become particularly true as the U.S. continues to claw out of the “Great Recession”. Franchise companies have no choice, however, if they intend to build a winning system. All three objectives must be met or failure will be hard to avoid. Franchisers must have terrific talent, be well capitalized, and have to sustain a winning culture to win in this complex industry.

  4. Thanks for your comment, David.

    You’re correct; everyone has to win.

    But, it has to start at the beginning. In franchise development.

    It’s difficult to launch a new franchise these days. Too many people think that they have a great thing, and can just launch a “franchise.”

    And, way too many franchise development firms take on projects that are marginal at best, and once launched, these firms don’t help them get those critical first franchise sales.

    All the things you wrote make sense.

    I just want to see better, tighter franchise systems at the beginning. So everybody wins.

    The Franchise King®

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