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Franchising Industry Trends and Outlook
May 20, 2021
With affinity for starting a business at an all-time high, anyone considering owning a franchise must examine the prospects in the sector. The latest franchise industry trends point to sustainable growth, and the current market conditions are unlocking some particularly lucrative opportunities. Prospective business owners should also consider how franchise ownership compares to starting an independent establishment. While many entrepreneurs find success in both paths, the current outlook is tipping the scales toward franchising.
We’re analyzing some of the latest trends and the best franchise industries to help hopeful business owners like you find the right opportunities.
Franchise Industry Overview and Outlook
Franchising is a business model that can apply to almost any industry. It involves a relationship between the franchisor, who owns the rights to the company, and the franchisee, who opens and operates one or more branches. In some cases, the franchisor owns the right to a brand name or trademark and licenses it to the franchisee. In other cases, the franchisor owns an entire business model and provides marketing, exclusive territories and other support. The franchisor receives royalties and the promise to adhere to the approved operational model in exchange.
The United States ended 2020 with approximately 753,770 franchise establishments, which are poised for growth in 2021. Roughly 3,400 franchise brands span 29 industries, meaning prospective investors can choose from excellent opportunities in almost any field. The business model offers a lower barrier to entry, brand equity and access to proven marketing techniques. Under the right franchisor, it can help business owners achieve success and stability.
Amid economic uncertainty, the franchising industry outlook is bright. Recent economic conditions have forced many small enterprises to change the way they do business. For the 1 in 7 U.S. businesses that operate as franchises, that process was smoother and more manageable. They had leadership and support from their franchisors guiding them through the changes. Overall, franchises have proven themselves resilient and reliable, which has fostered strong predictions for the coming years.
In 2021, more than 26,000 new franchise locations will open their doors, contributing $477 billion to the U.S. economy. The expected 780,188 total locations in 2021 add up to 6,585 units more than 2019 totals. The number of establishments will grow by 3.5%, outpacing the annual growth rates from previous years. Many indications point to franchises as one of the first industries to recover from 2020’s economic hardships.
These numbers are good news for many people interested in starting a franchise. While building any business takes hard work and dedication, the fact that franchises will see such strong performance in 2021 is an encouraging sign for success.
How Franchising Compares to Starting an Independent Business
Franchising opportunities are growing in part because independent operations have much more uncertainty. With a franchise, you get the advantage of proven business models and marketing tactics. If you work with a supportive franchisor like HomeWell Care Services, you’ll get extensive training and other resources to make starting a business even more accessible.
In many cases, the choice to open a franchise or an independent business is driven by your personality and the type of business you want to have. People who are a little more risk-averse prefer franchises because they have a lower barrier to entry, built-in brand recognition and a reliable turnkey strategy. Big risk-takers may like to take their chances with an independent establishment so they can experiment with different business models and create a brand from scratch.
The people who do the best with franchising believe in the established system wholeheartedly and want to emulate it. They’re excited about the prospects for business ownership and know that working with a franchisor will give them the extra resources they need to achieve success. They’re also ready to stick it out with their business for years to come.
Advantages and Disadvantages of Franchising
When you consider opening a franchise, it’s crucial to weigh the pros and cons of choosing to franchise rather than opening an independent business. The benefits of franchising include:
- Brand power: When you invest in a franchise, you can access equity in a brand your target market already knows and trusts. It makes finding customers and developing industry contacts much easier.
- Turnkey business operations: Franchisors offer their franchisees play-by-play operational instructions. It takes the guesswork out of finding a method that works, and you get to use a winning business model from day one.
- Proven marketing tactics: Franchisors have extensive marketing resources their partners can use to hit the ground running with their grand opening and future marketing campaigns. You’ll access marketing strategies and tools for your business from a library of resources that have worked for fellow franchisees.
- Training and support: Some franchisors, like HomeWell, train their franchisees extensively and offer plenty of resources to help new partners reach success.
The drawbacks include:
- Finding the right partner: Not all franchisors set their partners up for success. Franchise brands offer varying degrees of support and strategies, making finding the right one for you a challenge. The franchisors worth partnering with will spend plenty of time getting to know you and ensuring a good fit. It’s best to do the same with them. While it will take some extra time and research, it’s well worth it. When the brand’s franchise team shares your values, you’ll find powerful allies to help you make strategic decisions and grow your business.
- Costs: Starting any business involves an upfront investment. In franchising, entrepreneurs also have to consider ongoing royalties for the right to use the brand name and business model. While all franchise opportunities will require some investment, the best industries to franchise in often feature lower upfront costs and predictable expenses.
Rising Franchising Industry Trends
The projected franchise industry growth is good news for current and prospective franchisees alike. These businesses will perform well this year, and their prosperity is already contributing to exciting innovations and trends. Prospective investors should take a hard look at the current industry landscape as they identify the best franchise industries to invest in. The top five trends to consider include:
1. The Home Care Franchise Industry Continues to Offer an Excellent Opportunity
Home took on new meaning in 2020, and with people spending more time at home than ever before, home-based service franchises saw incredible growth. This new demand has benefited home renovation franchises, cleaning services and everything in between.
One industry benefiting in particular is the home care business. Home-based care allows older adults to stay where they’re most comfortable and receive care from a smaller group of caretakers. When they can live at home and get the care they need, they limit their exposure to others. Therefore, home care services saw increased demand, which will continue for the next several years.
However, the demand for home care is more than a recent development. The in-home care franchise market saw an average of 8% annual growth from 2014 to 2019. The approximate 11,383 home care franchises represent an $11 billion market. Meanwhile, the International Franchise Association cites a projected 29% increase in demand for home assistance aids through 2024.
Interest in senior care as a business opportunity and investment has never been greater, and the need for home care is just as high. Why? In short, baby boomers, our largest generation, are aging. In 2019, 16.5% of the population was people aged 65 or older. By 2030, that demographic will reach 20.6% and steadily grow to 22% by 2050. As the country’s population of older adults grows and life expectancies climb alongside them, services for older adults like home care will see increased demand. These market trends make home care services one of the best industries for franchises right now.
As the need for home care rises, prospective business owners are increasingly turning to franchises. Home care and franchise industry analysis predicts the market will lean more heavily toward franchises and away from independent operations in the coming years. The added benefit of franchising in this segment is that home care services come with ever-evolving legal requirements, a difficult labor market and an industry landscape that demands connections in the local health care ecosystem to drive referrals. All these challenges become much easier to manage with a national brand backing business owners.
2. Recession-Proof Businesses Are a Growing Segment of the Franchise Market
One reason why home care franchising is such a great opportunity is that it is recession-resilient. Aging adults will always need some form of care, and home care is an attractive option. Depending on the level of care required, home care is often more affordable than assisted living or long-term care facilities. These factors allow home care franchises to fair well even during economic downturns.
It’s easy to see why recession-resilient industries are so popular. They offer reliable income even in an uncertain economy, which reduces the level of risk associated with opening a business. Those who want to own a business yearn for economic independence and the ability to determine their own worth. All that is much more possible when the business model is recession proof, which is why the demand for recession-resilient industries is growing. The effects of a stagnant economy are fresh on everyone’s mind, which has brought increased interest in franchise brands like home care services.
3. Franchisees Are Becoming More Diverse
According to the latest franchise industry statistics from the International Franchise Association Foundation, minorities own 30.8% of all franchises, compared to just 18.8% of non-franchised establishments. When analyzing business ownership data between 2007 and 2012, they found a 50% increase in minority franchise ownership. During that same time frame, female franchise ownership also grew by almost 50%. These numbers show franchising as an increasingly popular option for groups who are traditionally underrepresented as entrepreneurs.
Ethnic minorities and women have historically had a more challenging time accessing employment and economic opportunity, which makes business ownership an attractive option. Why are these prospective entrepreneurs increasingly turning to franchises? The organizational model lowers the barrier to entry and helps more people achieve the dream of business ownership. With the right franchise, people inexperienced in running a company can get extensive training before opening their doors and often on an ongoing basis. Their parent brand may also provide support as they seek financing and assess territory or real estate locations.
For example, HomeWell offers comprehensive industry training and other support in the eight weeks leading up to launch. You’ll get a dedicated opening team and all the help you need to open your business and establish yourself in the first 90 days of operation. After that, we’ll provide:
- Ongoing sales training.
- Extensive educational modules for you and your staff.
- The Clear Care all-in-one agency management platform.
- Discounted vendor relationships.
- In-house design services.
- A resource library of proven marketing tactics.
It’s easy to see how the right brand acts as the perfect partner for a first-time business owner. What’s more,in-homecare companies offer low upfront investments and predictable overhead compared to other franchise opportunities. That makes this particular franchise opportunity even more accessible and attractive to groups that have historically faced more barriers to business ownership.
4. Franchising Is Contributing to Economic Recovery
Franchises often see more interest on the tail end of an economic downturn. They’re usually the first to bounce back from challenging economic times. When unemployment grows, experienced professionals may struggle to find attractive career opportunities. Those who are looking for more financial independence often consider franchising. After all, the right opportunity can help management-level professionals secure career stability and a reliable income.
When real estate prices go down, business owners can find office space or a prominent retail location at a much lower cost. And with the added guidance and support the model provides, a franchise investment is a safe bet. According to data following 2008 and other economic recessions, franchises typically expand faster than other small enterprises. Their unique business model allows new locations to hire and open rapidly and achieve more stable performance in a volatile economy.
As one of the first businesses to recover and achieve growth after a recession, franchises are pivotal in helping the rest of the economy recover. Predictions indicate that franchises will create 800,000 new jobs this year. Those jobs will benefit retail, food service and service industry professionals, who were all struck hard by the economic downturn. Since franchises often price their goods and services more affordably, they’re some of the first businesses consumers will frequent when their budgets allow. All these factors put franchises at the forefront of the path toward economic recovery.
5. High Unemployment Rates and Other Labor Trends Are Improving the Franchising Workforce
The high unemployment rates that draw many entrepreneurs to business ownership also open the floodgates to a favorable labor market. Unemployment reached an all-time high of 14.7% in April 2020 and has declined to around 6% as of March 2021. Most economic downturns affect jobs for low-skill and mid-skill workers, and this event in particular has also impacted management-level professionals. With unemployment rates still relatively high, franchises can hire top candidates more rapidly. While providing much-needed jobs at the management and entry levels, franchise operators can build a strong workforce of passionate, high-quality employees.
The current labor market presents an opportunity to build a dream team of managers, administrative staff and entry-level workers. The employment trends also lead many franchise owners to design long-term career paths for their best team members. While it’s easy to attract all-star talent now, that may not always be the case. Forward-thinking franchisees know this and are working now to retain their top talent years into the future. They align compensation with branch performance in their top management roles to incentivize their team to continue their best work. They’re also prioritizing internal promotions to reward their leaders for their top performance.
Franchise owners also commit to fair pay as talks of increasing the minimum wage intensify around the country. In a field like home care services, for example, happy, friendly and helpful care staff are the face of the brand. They’re the people customers interact with every day, and their skillful, high-quality care is what they’re paying for. Fairly compensated workers take the best care of their clients, which will be a crucial differentiator in any service-oriented business.
Find Out if a HomeWell Home Care Franchise Is Right for You
HomeWell Care Services is a franchise brand that’s proud to offer the highest level of support and care for our franchisee partners. We want to help promising business owners succeed in a field where they can help others and earn a steady income. Home care is a rapidly growing industry, and choosing the right franchise partner can set you up with a strong foundation in the field. We offer comprehensive training, launch support and ongoing assistance to all our partners.
If you think HomeWell might be the partner you’ve been searching for, download our franchise kit today. We’ll lay out our discovery process and our in-depth training method to help you decide if we’re the right fit for you.