Franchise Industry Details, Trend Data Gaining Accuracy

FRANData research helps bring order to industry data chaos. Latest report shows 377 new concepts launched in just past three quarters.

By Edith Wiseman, CFE, and Anya Nowakowski

Before 2013 you might have (erroneously) concluded that franchising as a whole was performing much worse than it was actually. For years, the U.S. Small Business Administration struggled to capture accurate data on franchise brands. This was widely known, but because the information was convenient, it was also widely used. The problem stemmed in part from the inadequacy of the classification system.

But in 2013, the SBA moved towards correcting that system by adopting FRANdata’s FRUNS identifier, which applies a unique code to franchise brands.

FRUNS ensures one number per franchise system tracks brand name changes and other evolutions of a brand referencing the same system, i.e. UPS Store, Mailboxes Etc., MBE, The Mailboxes Etc., and The UPS Store all previously had separate identifiers. A small change at a glance, but it brought order to chaos and over time will allow more accurate representation of franchise industry performance.

New Entrants Tracked

Tracking franchise brands provides visibility into new industry entrants. FRANdata produces the quarterly New Concept Report, which identifies new brands, their business models and 25 key data points for each. FRANdata distributes the report to subscribers, but the report’s compilers would also like to share some recent trends with the readers of Franchising World, and will do so on a regular basis in the future.

On average there are one to two new brands each day, with the number varying based on many factors. In the past three quarters, 377 new concepts began franchising. Three industries saw the most activity: lodging, health and fitness, and sit-down restaurants, all of which are closely tied to rises in disposable income and broader improvements in the national economy.

Health & Fitness

The health and fitness industry added 52 new brands, consisting of 20 new fitness centers. There are an increasing number of specialized fitness centers in the sector. Some of these are focused on specific group exercise: CycleBar and StarCycle offer cycling; Omni Fight Club and TapouT Fitness host martial arts and kickboxing classes.

Other new brands feature proprietary methods or technology to differentiate themselves. ChaiseFitness uses an overhead system of bungees suspended on steel trusses in their “Reinvention Method.” Specialty locations tend to have 30 percent to 50 percent higher price points than “big box” gyms such as Blink Fitness.

Travel Boosts Lodging

The lodging industry has benefited from a rise in business and leisure travel, and added 16 new concepts. Lifestyle hotels are increasingly prevalent and cater to millennials who are both cost-conscious and drawn to different features: unique design, local flavor, communal spaces and high-tech amenities.

Some brands such as Red Lion, with the Hotel RL by Red Lion, are adding an upscale lifestyle concepts to their portfolios. Departing from industry norms of brand conformity, Hilton’s new Curio brand strives for authenticity, allowing hotels to reflect the local culture and retain their independent character.

Sit-Down Restaurants Outpace QSRs

Surprisingly, among food brands, sit-down restaurants saw more new brands (58) than QSR/Fast Casual restaurants such as Bruges Waffles and Grabbagreen (41). The former requires an initial investment nearly double that of its fast-food alternatives.

Americans continue to devour Italian food; it is the most popular growth area with 22 new brands, 12 sit-down Italian concepts and 10 new QSR pizza brands.

Better Data, More Accurate Industry View

As the past three quarters have shown, franchising continues to attract new and innovative concepts. Many new brands benefit from the effects of a growing economy and appeal to consumers increasingly drawn to higher-end, customized products and services.

Always number nerds, FRANdata will continue to monitor the details and report on trends in the industry. Now, more than ever, we’re able to make those observations accurately.

Edith Wiseman, CFE, is president of FRANdata, and Anya Nowakowski is senior research analyst for the firm. Find them at fransocial.franchise.org