Advice & TipsCover StoryJanuary/February 2022

New Year, New Trends

Franchise consultant Gary Prenevost examines what he expects to come for franchising trends and changes in 2022

By Gary Prenevost

At the beginning of every year, one of the most common questions I get asked is, “what are the hottest trends in franchising right now?” For nearly two years, the COVID-19 pandemic has been with us and has influenced how we see and experience many things—employment, work/life balance, our spending habits, where and how we shop, eat, play, and more.

While not a trend, one new result of the pandemic is how Canadians are approaching risk. Our inability to spend money on travel, food, and entertainment throughout most of the pandemic has resulted in a surplus of savings. As we return to the “new normal,” this surplus will either be spent over time, or invested.

  • Spending: I believe that we’ll see sustained increased spending over the next two to three years, creating a post-pandemic surge—which will be driven into additional revenues for franchisees and small business owners.
  • Investing: Savvy investors are watching for opportunities where companies are on the leading edge of shifting trends, and some of those people will look to franchise ownership, either as full-time owner/operators, or as a passive engagement (semi-absentee) multi-unit wealth creation strategy.

Some of these shifts in consumer behaviour will be with us for years to come, so if you’re considering franchise ownership, you’ll want to pay attention to these five trends.

1. Home is our sanctuary

Most Canadians have been experiencing a forced work-from-home life during the pandemic, creating a lot of adjustment and stress for many families as they’ve had to come to terms with learning how to share space and manage privacy issues while working. Despite these adjustments, many people have come to realize that they would rather work from home than spend endless hours commuting, and going into the office just to be “seen.”

The importance of functional home space has never been more important, and this has driven a huge increase in demand for home improvement franchises, from the traditional three per cent year-over-year industry growth rate to more than nine per cent throughout the pandemic. Also fueling this astounding growth is the intense real estate market, since investing in home improvements also increases home values. There are several sub-categories within the home improvement sector, and almost every one of those categories has benefited from this surge. We expect things to continue at the current pace for at least another two to three years.

Many home improvement franchise opportunities are also work-from-home models themselves, often coming in at under 50 per cent of the cost of brick and mortar location-based franchises. Because these businesses have much lower operating expenses and require fewer staff than location-based businesses, they also enjoy substantially higher profit-per-revenue-dollar ratios, and thus are popular with prospective franchisees who possess good project management and people skills.

2. The desire to age in place

Those who have aging parents have likely heard the sentiment that they would rather stay at home and adjust their living quarters than be moved to a seniors’ facility. This “Aging in Place” phenomenon is directly related to the devastating effect the pandemic had on senior care facilities. It’s further supported by the underfunding of our healthcare systems, which has been driving the homecare industry for many years.

Generally, we’re living longer, and the number of Baby Boomers turning 75-years-old and up will continue for many years to come, so this demographic supports sustainable business growth for the foreseeable future. If you’re only thinking seniors’ homecare as you read this, then you’re missing several category opportunities. Aging in place requires a variety of services that at some point, the senior will no longer want to, or be able to, do themselves, and thus will seek trusted franchise brands to provide, like:

  • Home improvement (ramps, door grips, elevators, bath/bedroom renovations, etc.);
  • Residential services (handymen, gardening, snow removal, cleaning, etc.);
  • Healthy meal deliveries; and
  • Driving/shuttling services.

3. Education concepts and business coaching

Education: Most parents want their kids to have a solid educational foundation, and this has driven the demand for tutoring and supplemental education for many years. Even though it’s anticipated that some type of in-person/virtual blending will continue for the foreseeable future, most parents feel that the virtual classroom is less effective than traditional schooling. This creates increased opportunity for the tutoring/supplemental education sectors. If this category excites you, then look to franchisors who have been able to successfully transition to virtual delivery through some of their course content.

Business Coaching: Small business owners have had to face many different challenges throughout the pandemic, and the bumpy ride won’t be over for a while. It can be lonely being an entrepreneur, and often business owners have no sounding boards or people to strategize with. Strong entrepreneurs recognize the importance of thought leadership, focus, and accountability, and they’re willing to invest in themselves and their business to find that slight edge over their competitors. For people with strong B2B sales and/or relationship building experience, several franchise options exist in this unique space, and require a lower investment to get started.

4. Healthy/specialty food

Representing roughly 33 per cent of the entire franchise industry landscape, the food industry will continue to dominate franchising in the coming years. This is an incredibly resilient industry—while food operators were amongst the hardest hit by lockdowns and capacity limits, many brands brought significant innovation amidst the pandemic that enabled them to find new ways to retain their customer base and also attract new customers. Increased demand for pick-up/delivery is likely here to stay, so intuitive on-line ordering apps with pick-up and delivery options have been contributory differentiators for franchisors who have invested in this strategy.

Brands that focus on healthier offerings continue to rise in popularity, as do those who bring some healthy menu innovations to attract this growing demand. Specialty foods have also always been popular, especially in major cities that attract a lot of new Canadians. Numerous examples exist of brands that serve specific ethnic tastes, so we can expect this sub-category to continue to flourish in the coming years.

5. Staffing and cost of goods increase

Labour shortages continue to make headlines, resulting in the number one challenge we hear from any business owner: finding and/or keeping staff. It’s no longer just about a fair wage, while that’s important, employees are paying far more attention to how they’re being treated as employees. For franchise owners, this often translates into:

  • Increased front-line labour costs to attract new talent;
  • Increased training costs;
  • Increased supervisory/management costs; and
  • Being more flexible in work/personal time needs of employees.

The global supply shortage has driven the cost of goods up in every sector (materials, food, shipping/delivery, etc.), and small business owners in every sector are experiencing this.

These two factors combined create an unpleasant trend for business owners that requires close attention: increased operating costs and some net profit erosion. It’s not a simple matter of passing these costs on to customers, because at some point, they’ll reduce their purchasing frequency, or stop buying altogether.

If you’re considering franchise ownership, seek out opportunities where the franchisors and their franchisees work closely together to share ideas, innovations, and best practices, asthese brands often have some of the fastest and most effective solutions to finding good talent, and to offset increasing operating costs.

Gary Prenevost is president of FranNet of Southern Ontario and Eastern Canada. He’s an author and one of Canada’s leading franchise search coaches. For nearly 20 years, he and his team have helped more than 2,000 people seriously consider franchise ownership.