The New Face of Franchising: A Competitive Platform for Small Business Success
Though they remain a vital part of the domestic economy-the franchising narrative is no longer about national fast food giants and convenience store chains alone. With an increasingly diversified business focus and a growing league of new entrants to the space, the role and utility of franchises are morphing today. Unbeknownst to many, they're fast becoming a powerful tool in the small business owner's arsenal to compete in an environment of rapid community development.
Local Development Accelerates Competition
The competitive urgency for small business owners today is undeniable. As current local and national development rates accelerate, growing real estate lease costs are putting additional pressure on small business owners to achieve scale and keep pace with rising costs. With 42 high rises currently under construction city-wide, nowhere more than in Chicago is that development pressure apparent. According to consulting firm Integra Realty Resources, more than 15,000 new construction residential apartments have been added to the downtown Chicago area in recent years, with more than 8,000 more to be added through 2020. In the same timeframe, more than five million-square-feet of new office space, and nearly 3,000 hotel rooms will be added, reveal CBRE data and forecasts by research firm STR.
The impact of all that development translates to neighborhood affordability. Prime examples of high-impact, rapid development are the West Loop and adjacent Fulton Market neighborhoods centered around the new Google and McDonald's corporate offices. Long gone are the lower cost rents, and meat market and warehouse businesses of yesterday with the area's unprecedented 56 development projects currently underway or approved to break ground.
According to the institute for housing studies at DePaul University, development is having a measurable impact on price stability across the city. A key driver of displacement pressure for vulnerable populations and resident businesses, a number of Chicago neighborhoods are feeling the pinch right now, including portions of Uptown, Edgewater, Irving Park, Albany Park, Belmont Cragin, Portage Park, Bridgeport, Chatham, and Woodlawn near the future site of the Obama Presidential Center.
Correcting Long Held Misconceptions to Compete
The urgency of this mounting competition in recent years is prompting many within the business community to leverage franchises as a competitive tool. However, arriving at this business model as a competitive solution requires some basic education. The leading misconception people have about franchises is that they're corporate entities run by chief executives from remote headquarters. This stems from people commonly mistaking chain businesses with franchises. A chain store is a corporate owned and operated business, run and managed by hired employees. By contrast, franchises are independently owned businesses that happen to have a brand name that provides support and training to its business owners. Take for example a sandwich maker, who is in business for himself with a single sandwich shop that happens to be a franchise. No corporation ownership.
The other side of franchise misconceptions has to do with their scope. Very few people recognize that franchising is not simply confined to buying an existing business. Successful entrepreneurs across the country are also in the prime position to expand their reach by franchising their own independent, small businesses. A recent example of this inroad to the franchising realm is Cuban Eddie's on the east coast. An independent restaurant business launched in 2007-featuring family empanada and Cuban sandwich recipes passed down through generations-it recently franchised its model to the outside world with great success. Because Cuban Eddie's wildly popular empanada in New Jersey could be successfully duplicated by Joe Schwartz in San Diego by leveraging a clearly defined set of systems and some hard work - the winning formula for a franchise was born. A myriad of opportunities exists for small businesses that are replicable through training others in their operations and providing ongoing evaluation and support.
Key Considerations to Enter the Space
There are two key criteria to consider before successfully entering the franchise space: investment level and industry. Entrepreneurs can purchase an existing franchise business for as little as ten-thousand dollars, and up to several million dollars with every price point available in between. It's worth noting that in many-if not all of those cases, financing is available at generally favorable terms for good reason: Lenders recognize that the chances of franchise businesses' success are much greater than start-ups, and are therefore more apt to lend. While the Small Business Administration (SBA) reports the average failure rate of startups hovers around 50%, it's widely held that franchises fare much better, based on their pre-established success. Where mistakes made in the early stages of a new business model are often fatal, franchising substantially reduces risk and operational landmines by providing a proven roadmap with comprehensive training, clearly defined systems, and ongoing support.
When it comes to franchise industry selection, the universe of opportunities for both new and existing franchises is vast. Successful standalone businesses with replicable operations from every industry represent a potential franchise opportunity. For those interested in the universe of existing businesses, selection is even more turn-key. Would-be franchise owners needn't have a deep or inherent knowledge of any particular industry to pursue buy-in, given the comprehensive operational blueprint provided for every business. From farm-to-table focused retail businesses to clean eating clinics and 30-minute kick boxing fitness studios - promising opportunities are limited only by personal interest.
The Best Possible Business Environment
A very compelling financial argument can be made for franchising, as the business segment leading our domestic economy. The International Franchise Association (IFA) Report reveals that in recent years the industry produces goods and services in the neighborhood of $870 billion each year, employing nearly 16 million people, with an annual payroll of more than $723 billion and job growth at a rate two-percent greater than all businesses. The Bureau of Labor Statistics also reports that small business - including franchises, are credited with adding more than 60 percent of all new jobs each year.
Most exciting about this powerful segment is the fact it promises to only get better in the coming years. When you have an entire system analyzing opportunities for incremental improvements that yield meaningful returns, and a bar that is consistently being raised for experience and knowledge-it can't do anything but thrive. It's the smartest way to be in business under the best possible environment.
Access to Key Resources
Expert resources are readily available to support those interested in exploring and entering the space. Franchise Expo Chicago-taking place at the Stephens Convention Center in Rosemont September 13th-14th-will feature professional industry resources from finance and legal consultants to leading franchise brands and opportunities at every investment level imaginable. A comprehensive lineup of more than 25 seminars and workshops designed to help attendees evaluate all their options will also be offered.
Among these education sessions are hands-on workshops detailing all the steps required to purchase a franchise, franchise an existing business, and master operational efficiency, together with dozens of seminars outlining best practices in everything from franchise marketing to real estate concerns. Those interested in leveraging these resources can register for free online at https://www.franchiseexpochicago.com using the code 2019.