Franchising’s Growing Popularity
Industry research firm IBISWorld (www.ibisworld.com) has identified the following six franchise industries with promising outlooks, based on revenue growth, growth in the number of franchise establishments and the dispersion of those establishments on a national scale:
New car dealers. Coming off a nearly 5.0 percent annual decrease over the past five years, new car dealers that operated under the franchise model have turned the corner and are expected to grow steadily going forward. IBISWorld estimates that the new car dealer franchise industry’s revenue will grow at an average annual rate of 3.4 percent in the five years to 2017.
Sandwich and sub stores. Sandwich and sub store franchises, such as Subway, have experienced moderate growth over the past five years and are expected to continue to grow at a steady pace, despite considerable competition from independent businesses. In the past five years, buying local and food truck trends have taken off, putting even more pressure on franchises to adapt. But, over the next five years, IBISWorld expects sandwich and sub store franchises to expand 3.0 percent and continue to push independent restaurants out of business.
Pharmacies and drugstores. Pharmacy and drugstore franchises fared well during the recession and will return to prerecession growth rates in 2012. A key driver for the industry has been the widespread adoption of generic drugs. IBISWorld expects pharmacy and drugstore franchises to grow at a rate of more than 3.0 percent per year in the next five years.
Gas stations with convenience stores. Although many gasoline companies are starting to buy establishments back from franchisees, breaking into this industry is still possible. Despite lower-than-average growth during the recession, the $331.7 billion gas stations with convenience stores industry is expected to do well over the next five years, with projected growth of just more than 2.0 percent per year. Growth prospects will depend on the total vehicle miles driven and consumer spending, which are both expected to increase as the economy improves.
Supermarkets and grocery stores. Despite high external competition from convenience stores, big-box retailers and warehouses, supermarket and grocery store franchises are expected to experience steady growth as the economy improves. Over the next five years, the $494.6 billion industry is expected to increase 0.1 percent as people once again begin to indulge themselves.
In-home senior care. The baby boomer generation is getting older and, as a result, in-home, senior-care franchises have been flourishing over the past five years. Going forward, the trend toward “aging in place” is expected to strengthen and, as a result, the $6.0 billion in-home senior-care franchises industry will continue to rapidly expand in the five years to 2017, with revenue growing 6.3 percent.
“Overall, franchises are expected to continue stealing market share away from independent businesses and increasing their total economic output, which currently stands at 4.4 percent of the total private sector,” says IBISWorld industry analyst Eben Jose.