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There aren't as many new franchise business opportunities as there were a few years ago, but the ones that have appeared are probably of better quality than previously. That's according to Michael Haith, founder and principal of Greenwood Village, Colo., franchising consulting firm Franchise Sherpas Inc. "The economy has certainly held back new franchise opportunities," Haith says. "It's not like it was two or three years ago when it was easier to get financing."
What new franchise opportunities have lacked in numbers, they make up for in quality. They have to, Haith says, because potential franchisees demand it. That's especially true when it comes to the size of the investment and the length of the projected time to profitability. "Franchisees are much choosier as to how much the franchise can generate and how quickly," Haith says.
With their savings depleted and employment uncertain, potential franchisees are right to be picky, Haith says. "New franchisees should be looking for concepts that have some experience," he says. "Even if they're new, the management team has to have their act together."
Haith also projects that different industry sectors will be more promising than others. "We like the food space," he says. "It Redwood Healthcare Staffing anticipates making the most of that promise. "We believe healthcare reform and the population of adults over 65 expected to reach 71 million can make our 8 billion dollar industry reach high levels of growth. Aspiring franchisees get the chance to take advantage of our industry's potential, use a business model time-tested for almost 30 years, receive training and guidance from committed industry veterans, and choose from the best territories available in the business", says Veerpal Brar, chief executive officer of the Los Angeles-based company.
Redwood's primary offering is medical staffing, providing healthcare professionals such as nurses and other allied healthcare staff to hospitals, nursing homes and other healthcare facilities. Franchisees can also add travel nursing and in-home care creating three possible income revenue streams. "This is appealing to franchise owners, as they would not have to have all their eggs in one basket: it gives franchisees options and allows them to take advantage of multiple areas of growth within the healthcare industry," Brar says.
Redwood was started by brothers Veerpal and Amarveer Brar, who grew up working in the healthcare staffing industry. Their parents, Kal and Imelda, started their first healthcare staffing company in Los Angeles in 1981, and continue to operate a successful international healthcare staffing company. Redwood began franchising in 2010 and anticipates opening its first franchise location in Southern California or the Las Vegas area this year. Over the next year, Brar says, they expect to open six to 10 new franchises.
Fiesta Insurance has been franchising since 2006, but the Huntington Beach, Calif.-based company is currently introducing enough changes to its offering to make it as fresh as one just starting out. And it's already strongly differentiated, notes President John Rost. "We're the only national franchise out there that combines insurance and tax preparation," Rost says. "That gives us an opportunity to be open year round."
By offering both auto insurance and income tax return filing to customers, Fiesta is able to build ongoing relationships with customers for those services. To give prospects still more reasons to visit Fiesta offices, its franchises are or will soon be selling wireless communications services, activating and refilling cellular phones, issuing VISA debit cards that will make it easier for tax filers to receive their refunds, and providing bill payment services for more than 10,000 merchants.
The company has approximately 110 offices open now and should add another 110 in a year within a year. Fiesta is located in 11 states including California, New York, Illinois, and Michigan. "We'll probably open up an additional four states in the next four months," Rost says.
Mr. Clean Car Wash is a veteran franchiser that was acquired in 2008 by Procter & Gamble. The move, part of P&G's expansion into franchising service businesses, provides the Duluth, Ga., chain of professional car washes with unparalleled brand-building resources, says CEO Bruce Arnett, Jr. "The fact that P&G owns our concept and is behind our brand gives investors a great deal of enticement," Arnett says.
The time is ripe for a national chain in the highly fragmented car wash industry, he adds. Only in the last several years has the majority of new cars been designed to go through professional car washes without problems, he says.
Mr. Clean has 16 locations, including 13 in metropolitan Atlanta, two in the P&G headquarters city of Cincinnati and one, its first new franchise under the Mr. Clean trademark, in Round Rock, Texas. Arnett expects significant expansion before its fiscal year ends next June. "We will be at 22 locations," he says. "That's what we have under construction right now."
When it comes to soup, the first brand that pops into many people's minds is a fictional one, the crusty soup vending character from the Seinfeld television series. That fictional character was inspired by a real one, restaurateur Al Yeganeh, whose original New York City restaurant is now the location for a unit of The Original SoupMan. This Staten Island-based franchiser attracts customer with quality products and the inestimable appeal of the popular TV show.
"That's the reason people are attracted," says Lloyd Sugarman, area developer for SoupMan franchises at casinos in the United Stats and Canada. "It's the soup from Seinfield. They shop and then they're hooked, because the soup and sandwiches are just phenomenal."
For franchisees, Sugarman says the appeal is the opportunity to generate sizable sales from small-footprint food operations. And, once again, the marketing push that comes with selling a product made famous on TV. "It's unbelievable the amount of press a franchisee will get by opening up," Sugarman says.
The company began franchising in 2005 and today has 20 locations. While many are in the New York area, they range from Ontario, Canada, to Dallas. Several more are under construction, generally in the northeast, with particular emphasis on casinos, airports, and other high traffic locations.
DVDNow Kiosks self-service movie-rental machines are in locations ranging from the United States to South Africa. The Vancouver, British Columbia-based company sells the kiosks as business opportunities, and has recently added to the offering, according CEO Scott McInnes. "One of the new initiatives that we are very excited about is our corporately run digital signage advertising program that is intended to drive generate additional revenue to our kiosk operators through the sale of national and regional multimedia advertisements," McInnes says. In addition to the U.S. and South Africa, DVD Now Kiosks are in 2,000 locations in Canada, Ireland, Norway and the Netherlands, McInnes says. For the next year, DVDNow will focus on the United States while also growing internationally, he says.
U.S.A. Mobile Drug Testing of Tampa is growing a brand-new business of going to local businesses to test employees for the presence of illegal drugs. John Cohen, executive vice president of franchise development for the company, says employers like the service because it's less expensive and less disruptive than sending employees elsewhere for testing, and because on-location testing makes it harder for employees to tamper with results.
For franchisees, Cohen says, several components of the opportunity make it attractive. One is that has a low cost of entry. Because it is mobile and can be operated from a franchisee's home and vehicle, it requires no real-estate investment, he notes. Further, a U.S.A Mobile Drug Testing franchisee requires few employees and those employees don't have to have advanced skills. Finally, the concept offers the potential for rapid return on investment, Cohen says.
U.S.A Mobile Drug Testing began offering franchises in 2010 and has seven locations on the East Coast. Within the next year, Cohen anticipates selling 30 to 50 additional units. "We're prepared, and this is a viable concept throughout the country," he says.
Rob Israel thinks Doc Popcorn is a viable concept anywhere people are interested in healthy snacks. The co-founder and co-owner of the Boulder, Colo.-based franchiser says, "The idea was to give moms, kids, and dads an indulgence and wonderful snack that's better for you in high-traffic venues."
Doc Popcorn franchisees work out of malls, shopping centers, stadiums, and similar locations selling popcorn flavored with high-quality cheese, gourmet peanut butter, jalapeno, cinnamon, and other natural flavors out of mobile units. "Our goal was to make the business model very simple," Israel says. "We wanted high margin, great turn--and a great smell to bring folks to the area."
The company began franchising in 2009 and today is up to 16 locations, including the likes of Denver's Investor Field and Pepsi Center, in addition to sites in Arizona, California, Georgia, Indiana, Illinois, Michigan, Minnesota, Texas, and Florida. Israel says the future looks good. "I'd like to be at 100 units in a year, and I think that will happen," he says.
The future is bright by definition at LED Source, a Wellington, Fla., company that is the first national franchiser of LED (light emitting diode) lighting products. Marcel Fairbairn, president and CEO says the company offers evaluations, retrofits, and consultation in addition to supplying energy-efficient, cost-saving, environmentally sustainable LED lighting.
The mushrooming appeal of LED lighting helped boost the company to an average growth rate of 40 percent a year since its 2005 founding. The company was started by Fairbairn, who is also CEO of Gearsource.com, a source for pre-owned lighting, audio, video, and other production and concert equipment.
LED Source began franchising in October 2009 and has signed agreements for franchises in Chicago and Canada. Current development efforts include franchises in New York, California, and Texas. "The company expects to have a network of 150 franchise offices throughout North America within three years," Fairbairn says.
When it comes to the future for new franchise opportunities, Haith's expectations are positive for businesses that have what potential franchisees are looking for. That is, something new and exciting that grabs their interest, along with sufficient veteran sat the helm to inspire confidence. "If I were a franchisee," he says, "it would be a concept that I would be passionate about and a management team I could respect."
Haith's own credentials include more than a decade with Maui Wowi Fresh Hawaiian Blends, which he introduced to franchising and guided to over 600 franchised units worldwide. In contrast to the easy-money environment during much of that period, today, sound business economics and, nearly as important, creative approaches to helping franchisees obtain financing are critical, he says.
New business franchisers are increasingly exploring all kinds of ways to enable potential franchisees to obtain the financial wherewithal to become entrepreneurs. Those tactics include introducing would-be franchisees to lenders, arranging equipment leasing deals, and, in some cases, self-financing startup fees.
Haith expects challenging times to bring out the best in the industry. "It's a bit Darwinian," he says. "The strong concepts will see growth, the weaker concepts won't. But it won't be pell-mell like it was. Everyone's being smarter about it."
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