The Latest Trends In Franchising
By Geoffrey Stebbins

Franchising, like any other sector of the economy, is driven by trends. Since it's been more than four years since our last review of franchising's key trends, it's time for an update.

Prepared foods is one trend worth noting. As more working couples find it increasingly difficult to prepare home-cooked meals and turn to dining out or bringing home prepared hot meals as an alternative, this trend is driving an increase in the number of prepared food outlets in the United States. This increase in the volume and number of outlets is evident both in traditional sit-down restaurants and in carry-out prepared food and fast food establishments.

A recent survey reported in Restaurant News found off-premise traffic increased 4%, and the average check for a carry-out meal rose 1%, reaching $5.25, last year. According to the National Restaurant Association, dinner accounts for 42.3% of the total restaurant business.

The trend in the prepared food industry is still leaning strongly towards health foods, and many companies are promoting healthful items on their menus. One pita bread sandwich franchise has two or three diet items on its menu and promotes a fat-free pita bread. Some of the traditional hamburger franchises have added fish to their menus and are promoting low-cholesterol sandwiches.

We're also seeing a trend toward capitalizing on the popularity of ethnic cuisine. This is evident in the pizza sector, where many franchises are expanding into pasta and other Italian specialties. Pasta can be promoted as a health food using tomato sauce and other low-fat, low-salt toppings and ingredients. There has been a proliferation of new franchises that specialize in freshly prepared and quickly served pasta. Some specialize in carry-out, some focus on dine-in, others have both dine-in and carry-out, and still other franchises offer a mixed menu that includes fresh pasta among its selections.

Some trends in franchising transcend individual segments of the overall market. Franchising is a way of conducting business and, often as not, it mirrors the general trends in business. Today we see a strong emphasis towards business services and away from product orientation. These service-oriented businesses can avoid heavy investment in inventory, problems with obsolescence and the expense of large storage areas.

Hence, we are seeing the development of franchises that put their emphasis on the service side of their business and not the products. Businesses such as computer software training companies use predesigned course software that can be taught in a group, on a one-to-one basis or in a self-directed environment. Once the account has been secured, the key to the success of the business does not lie in the product or inventory but rather in the service the franchisee provides. Some franchise companies promote the Internet, which allows other companies to develop Web sites and advertise on the Internet. Again, these companies are service- rather than product-oriented.

HUMAN RESOURCES

Human resource franchises include employee leasing and temporary help agencies. This industry is one of the fastest-growing in the business services area. Employee leasing allows an owner of a small business to literally lease his or her employees from a company that has similar arrangements with many other companies. This allows a company to substantially reduce the costs of its employees.

Temporary help franchises are a growing segment of the franchise marketplace. Because so many companies are downsizing, their needs for the temporary use of highly skilled employees have increased dramatically. The franchisee needs to be able to market to the business community, but again, because the "commodity" is human resources, this type of business is not subject to the typical problems associated with inventory.

Another trend in the business service sector is growth in the financial services arena. Franchises that focus on money brokering and the purchase of accounts receivable are growing, in line with the trend towards the increase flow of financial information.

Another general trend in business today is towards the privatization of services traditionally provided by government agencies. There has been much written about the privatization of our penal system and, yes, if you would like to own your own jail, there is a franchise available.

There is a strong trend of growing public awareness about many of the social problems we face today. The public consciousness is awakening to these needs. Issues such as ecology and protection of the environment are receiving more attention in the world of franchising. A franchise has been developed that provides for the marketing of natural gas as an alternative energy source to gasoline through a national chain of filling stations. Natural gas is less expensive than gasoline and burns more cleanly. As such, it is positioned as a highly desirable business opportunity-- especially in states that have legislated for cleaner and more environmentally friendly energy sources for transportation.

Care for the aging and the sick has become more prevalent as world statistics show that people are living to older ages. The profiled problem of our past president Ronald Reagan has increased public awareness of debilitating diseases that strike most frequently among older people, including Alzheimer's and similar age-related maladies.

In response to this, we are seeing the formation of residential home care franchises specifically designed to address these problems. Several such companies have already been launched, and others are in the works. Up to five long-term-treatment patients can be accommodated in a small home, where they can live comfortably and safely in a home environment and not be subject to the institutional setting of a nursing home. Because the house is specially designed, the patients and their families feel much more at ease with the living environment. The patients are all private paying patients, so as a business opportunity, this type of franchise offers some exciting potential

RETAILING

There are two strong trends prevalent in retailing, each pulling in opposite directions. One trend is toward very large, elegant, luxurious-style stores in bigger and bigger major shopping malls. The other is toward more compact retail outlets. These smaller units often take the shape of carts and booths in malls or smaller specialty departments of less than 1,000 square feet in strip malls or even as leased departments in larger stores.

Parallel to the two different directions in the sizes of retail establishments, we also see diametrically opposed trends in the area of product assortment and specialization. There is a strong trend toward specialty stores providing trendy products and services, some of which may be related to other trends mentioned earlier in this article. For example, our social concerns with health needs have given rise to the development of stores specializing in health-related areas such as allergies. Stores that market products to those with allergy needs are targeting a a multi-billion dollar industry with little or no existing retail competition. Other stores that fit into this same of niche are those providing products and equipment for people with back problems. With proprietary products and a creative marketing plan, this type of franchise is a truly interesting opportunity.

The trends mentioned earlier include the continuing desire to find alternative locations to traditional sites, and as I have already mentioned we are seeing small specialized stores or leased departments appearing in larger stores. In the search for more opportunities for distribution, we see innovative retailers opening up locations in airports and even on cruise ships. A very popular trend in retailing today is toward factory outlets. Many of these outlets, which are usually located outside of major metropolitan regions, host bus loads of visiting shoppers, who typically spend half a day browsing the stores. It becomes a day out as an alternative to going the shopping malls.