Emerging Franchises Hotbed of Growth If You Know What to Look For

May 9th, 2018 by Edith Wiseman

It is easy to discredit “new” brands in franchising, but there are advantages to understanding this group of franchise go-getters.  Over the last 5 years, these emerging brands have added new units by 75% compounded annually, from 800 locations in 2012 to over 8,000 in 2016.  No, not all new concepts make it, but when they do, especially in this age of strategic equity injections, they rise fast.

At FRANdata, we define emerging brands as those who have started franchising in the last 5 years. Based on that definition, there are around 1740 emerging brands that have started franchising since 2012, representing 42% of the franchise brands in the United States. While these franchise systems start small, the number of individual business locations for these brands constitutes a significant number: in 2016 alone, emerging franchise brands contributed an aggregate total of over 15,000 franchised and company owned businesses to local economies across the country.

There are 3 differences within the typical franchisor — start-up costs, experience, and number of corporate locations.

Start-up costs plays a role in speed of growth and the propensity to keep franchised units open.  Franchisors with less than $100,000 initial investment average 4 locations open per year, and their continuity rate (the rate at which unit are continuously in operation) is 96% annually. Franchised brands with higher investment levels open half as many have a 97.5 percent continuity rate.

Emerging franchisors that were either founded by someone with previous franchising experience, or is part of a franchise conglomerate, achieved twice the growth than the typical emerging brand. Having more corporate units allows for up to twice the growth, the average is 3 corporate units, while the median has one.

Each year, an average of 300 companies begin to franchise.  This translates to more than one franchise each business day. Since 2012, these brands combined have helped individuals start 15,000 franchised businesses.  Its quite an amazing economic engine which can be harnessed if you know what to look for.

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