By Gary Prenevost and Grant Bullington
2023 brought shifting economic conditions like a slowing Canadian economy, rising interest rates, and a challenging labour pool. Despite these economic challenges, the Canadian franchise industry remains vibrant for Canadians seeking alternative career options, or for investing in semi-absentee opportunities that create long-term wealth. As we navigate our way into 2024, multiple factors will influence the franchise sector. This article delves into these influences and speculates on the types of franchises that are likely to gain traction in 2024.
Q: With changing consumer preferences and lifestyle trends, which types of franchises do you think will be more popular in 2024, and how do they fit with the evolving needs of the market?
Gary Prenevost (GP): Evolving consumer preferences are expected to make certain types of franchises more popular in 2024; here are a few areas that we see as the most viable.
Health and wellness
Canadians are becoming increasingly health-conscious; as our population ages, our bodies “need more help” to continue to enjoy our lifestyle choices. Service-based franchises that cater to these trends are poised to continue growing in 2024. Fitness examples include boutique fitness studios (cardio and strength training, yoga, etc.); wellness examples include physiotherapy, massage businesses, and healthy food outlets. This trend aligns with the growing societal interest in well-being and the desire for healthier living options. It’s important, though, to understand the competitive landscape as some of these sectors are crowded, so the search for a strong location will require some patience.
READ MORE >>> 🍎 Fresh franchises offering healthy opportunities
Education
Education will continue to be another strong category. While demand for tutoring will continue, the supplemental education sector (STEM/STEAM: science, technology, engineering, arts, math) will see larger growth as these franchises help our kids be better prepared to use the evolving technology of the future.
READ MORE >>> 🎓 Look at the education franchises across Canada
B2B franchises
For people with B2B sales backgrounds, business services that solve ongoing business needs will continue to flourish (i.e. digital marketing, IT support services, business coaching, property maintenance); these are often lower cost because they don’t require a prime retail location.
READ MORE >>> 🤝 B2B Brands Helping to Build Better Businesses
Grant Bullington (GB): I think we’re going to continue to see franchise opportunities grow when their net commodity is additional time and convenience for the end customer. Services that allow a homeowner to spend more time with their family or on leisure are appealing. We’re also seeing that with a reduction in residential sales, owners are electing to invest in home improvements that deliver added enjoyment in the home for the medium to longer term. And as always, business-to-business franchise opportunities, where they provide their clients with any advantage in a competitive landscape (including cost savings), are consistently popular.
Q: With higher interest rates and inflation, why is franchising a strong option for entrepreneurs who want to start their own business in the current economic climate?
GP: The average Canadian recession is measured in months (only three to nine months on average), while economic growth cycles are measured in years. While we’re currently not in a formal recession, we won’t see another slow cycle for many years to come, so building a foundation during slow economic times provides significant advantages over waiting. Yes, launching a business during sluggish economic times will be more difficult. But it also encourages the franchisee to be more strategic in implementing their business model, like having a heightened focus on customers and staff. As the economy regains momentum, these early experiences would have imparted crucial skills and helped establish a robust foundation for the business, enabling the franchisee and their team to be fully equipped to leverage the economic upswing right from its onset, unlike those who chose to wait until the end of the slowdown before starting. Think about the benefits of gaining a head start of one to two years over the competition. This early entry could position your business favourably to benefit from the growth cycle for many subsequent years.
Choosing trend-driven franchisees in business categories that show historic sustainability, despite economic conditions, will provide the strongest opportunities. Fad-driven options might be “hot” today and seem exciting to get into, but one has to assess their ability to stand the test of time.
GB: There’s no getting around the fact that interest rates are at the highest that we’ve seen in recent decades. Initially, we saw a slowdown in the number of inquiries from prospective franchisees. Fortunately, the interest rate hikes have stopped and are expected to fall in the next couple of years. And we’re accepting the opinion of the economists who are telling us that they won’t return to 2020 rates.
Franchising provides a backstop or safety net when it comes to investing in a business. It’s not necessarily more or less expensive to go with a franchised business, but by partnering with a proven model, you’re taking some of the risk out of the investment. One of the core benefits of the franchise model is that franchisors can provide clarity (and data) on what a franchisee can expect to deploy. Having this level of insight, coupled with guidance from the franchisor, means that there isn’t the same potential for costs to run out of control. Independent start-up businesses can’t offer the same level of safety.
Q: How are demographic shifts, such as the preferences of younger generations or the aging population, influencing the types of franchises you predict will be successful in 2024?
GP: Younger generations are showing a preference for experiences over material possessions. This is likely to boost franchises in the entertainment and hospitality sectors that provide unique experiences. A great example is Trapped, an escape room franchise that sold out its territories across Canada in just a few short years. Younger generations tend to eat out more frequently and have a broad palate, so specialty food franchises (i.e. street food, international cuisine) will continue to attract attention.
Younger generations are also incredibly tech savvy; they seek fast access to information and solutions. This will drive growing demand for services that offer convenience, while not compromising on quality of experience. Franchises providing time-saving solutions for the consumer (residential cleaning, home improvement/maintenance, dry cleaning/laundry) will continue to appeal to this demographic in 2024. These types of services are also appealing to the aging demographic who can no longer do the services themselves.
GB: Younger generations place great value in solutions that provide freedom, so businesses that cater to this, and in a rapidly evolving fashion, stand to win. When it comes to aging populations, they control a significant amount of wealth, are living longer, and strive to maximize their enjoyment. At the same time, these older consumers look for options that allow them to safely remain in the home longer.
Q: How do you predict emerging technologies, such as virtual reality (VR) or artificial intelligence (AI), will influence the landscape of upcoming franchise trends in 2024?
GP: At its heart, the franchise business model is about optimizing businesses that have proven demand by bringing systems, processes, and support to enable franchisees to outcompete their non-franchised competitors. As exciting and fast growing as emerging technologies like AI and VR are, the rapid evolution inherent with this sector doesn’t allow for the development of proven systems and processes, simply because things change too fast.
I do see, however, that these emerging technologies will have a profound impact on the franchising landscape in 2024. Would-be franchise buyers should pay close attention to how well franchisors are embracing technology to attract new customers, bring better experiences to existing customers, and help their franchisees run their businesses more effectively. When used effectively, AI can streamline operations and enhance decision-making through data analysis. Franchisors and franchisees that successfully integrate AI can improve their strategic planning, operational efficiency, and customer service.
GB: In the short term, franchise systems will appear as though they are lagging behind non-franchised businesses that, by nature, are nimbler and quicker to react. However, with AI being so new in many areas, it may take some time to understand the true business cases for many applications. As things settle and key trends prevail, I predict that franchisors—because of their size and scale—will be in a great position to quickly implement the best AI solutions that offer the biggest (proven) impact. Franchisees will benefit when franchisors test out the applications, options, vendors, and solutions. The less technologically savvy owners can take advantage of not having to suddenly develop proficiency in areas that aren’t their strengths. So, while it might take a while to see the true benefits of AI in franchise systems, when it does happen, it will be just like past technology deployments where franchisors significantly outshine their competition.
Q: With the rise of remote work and changing consumer behaviours, how are franchises adapting their business models to meet the evolving demands of a digitally connected and convenience-driven market in 2024?
GP: The rise of remote work and the continued growth of digital connectivity are causing franchises to rethink and adapt their business models; the best franchisors work closely with their franchisees to capitalize on emerging opportunities that come with this shifting landscape. With an increasing number of individuals working remotely, service-based franchises such as digital marketing agencies and remote IT support services mentioned above stand to benefit.
In addition, changing consumer behaviours, including the shift towards online shopping and delivery services, call for franchisors (especially in the retail and food sectors) to enhance their online presence and delivery capabilities, while closely managing the cost-benefit dynamic that comes with these enhanced service levels. By doing so, they can better meet the demands of a digitally connected and convenience-driven market while also protecting the profitability of their franchisees.
GB: Some people have really enjoyed the switch from having to go into an office every day. Fortunately, there are many franchise opportunities that will allow people to get into business without forcing them to abandon their now-beloved work-from-home lifestyle.
This could include B2B or a variety of service franchises opportunities. As an owner, when you’re not spending time in your home office, you’re out in the field meeting with clients or overseeing projects. In cases where the business requires more space than your living environment can sustain, there is always outside storage, warehousing, or offices.
We saw a lot of franchisors were already quite well prepared, digitally speaking, before COVID-19. This allowed a quick pivot towards effective connection and convenience in 2020 and they have continued to improve in these areas since then. While a lot of these franchise opportunities already existed, there is now a heightened level of search interest for business opportunities that satisfy prospective owner’s evolving business-selection criteria.
Q: Do you have any parting comments about trends affecting the franchising industry overall?
GP: The franchise landscape in Canada in 2024 will be shaped by a multitude of factors—this is no different than any other year. Franchisors and franchisees that can adapt to these changes by harnessing innovation to meet the evolving market demands will be well positioned to thrive in this dynamic environment.
Ultimately though, success in franchise ownership rests with how well the franchisee can execute the business model of the franchisor they’ve aligned with. If the franchisee can’t run the business and lead their staff to deliver the product or service that meets or exceeds the customer’s expectations, neither the brand or the industry will matter because the customer won’t return after two or three visits, and they’ll likely leave negative reviews on the way out. Success in any franchise comes down to how well the franchisee can learn how to leverage their transferrable skills (the things they’re good at and like to do regularly) in a new business model.
Finding the right franchise fit can be an exciting process. Researching franchise ownership is about considering making big changes in your life, which can be both scary and uncomfortable. Typically, you need to do about 40 physical hours of research over a few months before you can fully understand the franchisor’s business model and what it takes to run the franchise well enough to achieve your financial and lifestyle goals. Be prepared for lots of emotional ups and downs as you gather and analyze information from different sources. Your confidence in your skills and abilities will raise the excitement while your fears will mute the excitement. You have to go from “comfortable” (your current state) to “uncomfortable” (during the research mentioned above), then to “comfortable enough” where you can make an informed, educated, and defensible decision about buying your franchise. We hope that you can use these trends as a guide and a source of inspiration as you find the right opportunity for your skills, goals, and lifestyle in 2024!