FBR Emerging Franchises 2015

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SPECIAL REPORT: Emerging Franchises Men in Kilts Window Cleaning franchisees keep communities sparkling. things become harder to do and perhaps not as urgent,” says Ciara Stockeland, COO of MODE, a designer outlet store franchise. When considering whether you should invest in an emerging franchise versus a more established brand, it might be helpful to realize that just because a franchise has existed longer, does not always mean it is better. “There are many other fitness franchises that have been around longer than ours, but clearly have a less organized system, a less competitive model and less engaged leadership,” says Ben Midgley, CEO and Co-Founder of Crunch Fitness Franchise. The Top Emerging Franchises list on page 6 may well have only been franchising for five years or less, but our research indicates they are checking off all the right boxes to establish themselves as long term players. 87% of the emerging franchisees we surveyed replied “Good”, “Very Good”, or “Excellent” in response to: “Overall, how would you rate your franchisor and the opportunity provided by this franchise system?” HOW DO YOU CHOOSE? The sheer number of franchises available for you to consider can be overwhelming. There are 40 brands in this report alone. The easiest way to narrow down the field is to seek out franchises that have staying power due to a strong leadership team and proven systems. Finding out which ones they are requires due diligence. “First and foremost, I think potential franchisees should look for engaged leadership. They should meet the CEO and all other executives before joining the brand in order to get a good feel of the team they would be relying on for their personal success as well as that of the overall brand. If the franchise, regardless of its size, does not facilitate meeting the executive team, a potential franchisee can be pretty sure where he will stand once he becomes a franchisee,” says Midgley. He also suggests that potential franchisees find out what the track record for the opened stores is and how the earnings claims look, which is sometimes available in the Franchise Disclosure Document (FDD). In addition, Midgley stresses the importance of speaking with multiple franchisees to get their perspectives and a feel for if they seem genuinely happy and successful. Mosquito Joe franchisee, Steve Clark, echoes this sound advice. “Meeting the corporate staff at Mosquito Joe sold it for me. They seemed trustworthy and friendly,” says Clark. “I also spoke with franchisees and asked them three questions: Does it really work? What were your first year sales? When do you expect to make a profit?” Another way to obtain insight into franchisee satisfaction is to see if the brand does an annual survey of their franchisees to measure feedback. If it is a brand we have researched, you can see if they make their franchisee satisfaction results available at www.Franchise BusinessReview.com or ask if they have a report they can share with you directly. Each of the franchises on the Top Emerging Franchises list in this report have very high franchisee satisfaction as a result of investing in their success. “We believe our franchisee satisfaction is so high because we support our franchisees with their businesses,” says Wasney of Men In Kilts Window Cleaning. “We do our best to make ourselves as accessible as possible to our franchisees and their overall needs. Our leadership team lives our core values, which are People, Passion, Integrity, Gumption and Growth, and all share the same vision and end goal.” To further narrow down your options, look for franchises that will best meet your personal and financial objectives. “I was not looking to invest in a franchise, but when YESCO franchised the lighting and maintenance side of its business, it was a perfect fit for our existing custom sign manufacturing and installation business,” says YESCO franchisee Paul Deters, who has five territories in Michigan and has signed an agreement to purchase more over the next three years. You can also work with a franchise broker, who connects people looking to become franchise owners with opportunities that seem like a good fit for free since they receive a commission from the franchisor. Unlike real estate brokers, who can access information on all of the houses in a market, franchise brokers typically have a limited portfolio of franchise brands that they work with and know have a good track record. To work with our experienced franchise consultant partner who will guide you through the franchise search process, help answer your questions, and understand your needs and business 4 | For more information on this report, visit: www.FranchiseBusinessReview.com
SPECIAL REPORT: Emerging Franchises goals, visit www.fbr50.com/free-franchiseconsultation/. “I recommend that anyone considering buying a franchise work with a franchise broker”, says John Suazo, who co-owns a The Exercise Coach franchise in Colorado Springs, CO with his wife. “Ours spent a tremendous amount of time working with my wife and me in order to learn what we were interested in, how much we could afford, where we wanted to live and much more. Eventually she presented us with five options and helped us evaluate the pros and cons of each. We narrowed our choices down to three with the intent of going to two discovery days. Our broker worked with us through our interactions with franchisors and franchisees during the entire process. If it wasn’t for her, we would not be in the system we are in today.” Suazo and his wife signed a multi-unit The Exercise Coach franchise agreement to open three units within 14-month intervals. They opened the first one in March of 2015. Their goal is to have 100 clients by April 2016 and they are above pace to achieve this metric. Franchise expos are another way some potential franchise investors find their perfect franchise match. “We went to a franchise expo in New York City and happened upon two companies in the paint and sip industry,” says Pinot’s Palette franchisee, Reed Alewel. “We did discovery day at each and chose Pinot’s Palette due to the simplicity of the business plan and its robust proprietary technology that helps us interact with our customers and manage our business.” HOW PROFITABLE WILL YOUR FRANCHISE BE? Financial Performance Representations, which are outlined in Item 19 in the FDD, may give you an idea of how much you will make as a franchisee. It is, however, important to keep in mind that many variables come into play, such as your business experience, how much time and energy you commit to being successful, market area, location, franchisor support and more. Our Franchise Buyer’s Toolkit includes the 3-hour How Much Money Can You Make? online course, available at www. FranchiseBusinessReview.com/Toolkit, is a great tool when it comes to determining how profitable you might be. “Our previous sign and lighting maintenance business was a small segment of our business. It is seven times larger since we became a YESCO franchisee,” says Deters. “Through its unique lead generation program and relationships with national chains, YESCO generates business for us.” Deters believes that the price advantages YESCO’s purchasing program has provided have contributed greatly to his profits and cover the 6% royalty fees he pays. He states that becoming a YESCO franchisee has also made his revenue, which previously was impacted by economic and seasonal changes, more predictable since each signage and lighting component has a predictable life. In addition, unlike custom sign fabrication clientele, Deters says he receives income from his YESCO clientele every few months. “Whenever they need interior or perimeter lights fixed, we get a call.” Mosquito Joe franchisee Clark also says that becoming a franchisee has helped him successfully contend with the seasonal aspect of his pre-existing lawn care business. “My first year goal was to make forty thousand in sales, instead we did one hundred thousand,” says Clark. “We anticipate the business will make a 15% profit next year and be making a 25% profit by the fourth or fifth year.” How involved your franchisor is in your success will have a significant impact on your financial performance and profitability. “Performance monitoring is a staple of what we do. We have daily performance monitoring and quarterly financial reviews for all clubs. Surprisingly, some of the largest franchisors in our space don’t even pull their franchisees’ P&Ls (Profit and Loss income statements) which means they have NO clear visibility on the profitability and true performance of their clubs and no means to have a meaningful review with their franchisees,” says Midgley. “We have in-person visits from a member of our team to all locations annually as well as a fully integrated secret shopper program. We are constantly monitoring the membership blends of all of our clubs to be sure that their average dues are trending properly. We also monitor all social media monthly to help the franchisees manage their overall customer satisfaction.” Continued on page 8. How Satisfied are Emerging Sector Franchisees? “I enjoy operating this business” 91 % Agree or Strongly Agree 90% Agree or Strongly Agree with “I enjoy being part of this organization” “I respect my franchisor” 89 % Agree or Strongly Agree “I believe my franchisor acts with a high level of honesty and integrity” 86 % Agree or Strongly Agree Overall Satisfaction with Franchise: replied Good, Very Good, or Excellent 84% 84 % would “do it again” knowing what they know today. Overall Satisfaction with Franchisor and the opportunity provided by this franchise system: replied Good, Very Good, or Excellent 87% 88 % would recommend their franchise brand to others. For more information on this report, visit: www.FranchiseBusinessReview.com | 5
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FBR Emerging Franchises 2015

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