The boom of American franchising

Leading economists may be giving indications that the United States economy is slowing, due to various indicators, such as higher interest rates, outsourcing and layoffs, but the franchising sector is launching into an era of substantial growth.

In fact, the buzz has it that the local franchising mantra in the United States is ‘here we grow again’. Before we can appreciate the positive projections, however, we should consider some of the recent evidence supporting growth.

Franchising in the United States took on a powerful new meaning in 2005 with an astounding growth rate of 11 per cent, compared to a total growth rate of 4 per cent in 2004. In the years prior to and including 2003, the United States franchise market actually declined in growth.

What’s behind the boom?

One of the reasons behind this substantial increase in growth is the emergence of a new sector of investors that is adding to the ‘new franchisee’ core. This emerging market of people is composed of a wide variety of individuals, ranging from recent college graduates to seasoned corporate executives. However, when it comes to corporate America, the media continues to report on job instability, layoffs and ‘offshoring’ – all of which has created a significant depth of anxiety for the American workforce.

Kids and obesity

A topic of considerable concern that is garnering much attention from the media is obesity. It’s unsurprising to learn that two of the top trend franchise companies are kids gyms and food chains that have a healthy twist to them.

Childhood obesity has increased 10 per cent since 1980 and that doesn’t include those that are overweight, but not categorised as obese. This is serious business in the United States.

This scenario has produced a need that has become a trend. Children’s gyms are now popping up across the United States. With the resurgence of ‘the family’ as an ideal in the United States, the smart money would be to bet on the theory that a mother won’t be losing interest in her children’s health and welfare anytime soon.

Business services

Another greatly expanding sector of the franchise industry in the United States is the business services sector. In this year’s Franchise 500 review, technology franchise systems, in particular, more than doubled in size over the past two years. Meanwhile, Entrepreneur magazine predicted that eBay’s consignment stores would flourish – and they were right.

There are a few brands out there, such as QuikDrop and the iSold It franchise , that started franchising in 2003 and have both managed to rank in this year’s Franchise 500. Again, they did their homework and found out that there are over 168 million people worldwide who are registered with eBay.

According to Hani Durzy of eBay, during the third quarter of 2005, a total of US$10.8 billion in goods were traded on eBay, and eBay International’s net revenue hit US$408.9 million. The business model is simple, requires no inventory, and offers huge profit potential.

Pets

In the United States, the popularity of the pet industry has also continued to astound most people. Given the fact that 69.1 million homes, in the United States, have a pet it is no wonder that this industry is sizeable, and growing by the minute! Franchise 500, this year, includes all pet-oriented categories from supplies to training, sitting and walking.

It seems pet owners aren’t afraid to spend lavishly on products and services, ranging from gourmet treats to mobile pet grooming. The APPMA (American Pet Product Manufacturers Association) estimates US$35.9 billion was spent on pets in 2005 – up from US$34.4 billion in 2004. Now that’s something to bark about!

So if you’re a prospective franchise owner, take note. The United States franchise market has blazed a trail for you to follow. Hitch up the wagons and follow the exploding world of franchising!

For those considering domestic or international franchise expansion, it may be wise to read up on buying a franchise and running a franchise.