Don’t get burned by hot franchises

Be careful of the hype over hot trends. Whether you’re talking stocks, fashions or franchises; the moment you can say a trend is “hot,” it means a lot of people are already weighing down the bandwagon.

The Globe and Mail
November 27, 1995


Don’t get burned by hot franchises
John Southerst

Be careful of the hype over hot trends. Whether you’re talking stocks, fashions or franchises; the moment you can say a trend is “hot,” it means a lot of people are already weighing down the bandwagon.

With franchise concepts, the danger is saturation, although that doesn’t mean that trend watching can’t be valuable. Some believe they can catch the next trend before anyone else. Others covet a niche within the trend: an unexploited white cap. Still others are contrarians who seek to tread where no one else dares.

In the spirit of cautious enlightenment, then here’s an unscientific list of hot franchising trends, culled from the speeches, seminars and scuttlebutt at the Canadian Franchising Association’s annual convention in Toronto last month.

Bagels up: The food industry is always looking for a trend. Over the years, many have been anointed: croissants, soft yogurt and coffee. Now it’s bagels.

A frontrunner is Great Canadian Bagel Ltd. of Toronto, with 35 franchises and six corporate stores nation-wide. The plan is for orderly expansion to about 45 franchises by sometime in 1996. Demand is dwarfing supply. Spokesperson Stacey Scribner says she sends out 200 information packages a week and gets 25 applications back. “It’s overwhelming,” she says.

But the bagel segment could soon be crowded. U.S. bagellers are rumoured to be on the way. “You need unique identification to set yourself apart,” retail consultant Karen Castelane says. For instance, after nine years in business, St. Urbain Bagel Bakery is franchising its Montreal-style bagel concept, whereby bagels are baked in a wood-burning oven on a long, wood paddle.

Over three billion taught: Perhaps we’ll see that sign someday thanks to the proliferation of franchised education centers. Computer schools, tutoring services, private educators and specialty training centres in various disciplines have all started standardizing tie offerings for franchisees.

“It seems to be driven in part by dissatisfaction with the public education system, ” says George Kostopoulos of First Choice Franchising Services Inc, a consulting group. “It can’t be all things to all people and parents are now drawing the line.”

The Academy of Learning in Richmond Hill, Ont., specializing in computer and business skills training, is one of the established concepts with 117 franchises in Canada. It’s a serious investment: The franchise fee alone is $50.000

Down-home services: The service economy is here, and often it’s working from a home-based franchise. Without need for much space for inventory, a home-based franchise keeps overheads low.

Innovative concepts run from Calgary based TAAG International Inc., a tax assessment appeal service, to Decorating Den, an interior decorating service based in Cambridge, Ont.

There’s more to come. “A good trend to watch will be temporary services,” says Calgary franchise consultant Ken Purvis. He talks about “secretaries for-a-day for businesses, nurses-for-a-day for homecare, teachers for-a-day for sick children, not to mention spot jobs in the legal and accounting professions. They’re already happening.”

Recycle, reuse, resell: Here’s a retail concept whose time has come: reselling used goods such as clothing, sports equipment and electronics.

This idea couldn’t be more appropriate to the nervous ‘90s. “It’s tapping into people’s quest for value,” Ms. Castelane says. And the beauty is that your customers become your suppliers, trading the children’s outgrown clothes or a pre-Christmas gown for something more appropriate.

The idea isn’t new. Microplay Franchising Inc. of Toronto, for instance, has opened 126 buy-and-sell video game stores in Canada and the United States since 1987.

“But it’s legitimized now,” Ms. Castelane says, “because larger chains are now making a living and flourishing with it in many commodities.” One of them is Play it Again Sports, a Minneapolis-based chain with 422 U.S. franchises and 46 in Canada that buy and sell sporting goods.

A rising star is Cash Converters, an Australian retailer specializing in second-hand jewelry, cameras, electronics, power tools and sports equipment. With 210 stores in Australia and Britain, Cash Converters has set up six Canadian franchises from Ottawa to Vancouver, and plans to open 35 by June, 1996,

“We’re already double what we expected at the shop level,” says Russell Percival, who owns the Canadian master franchise. “All of our stores gross over a million dollars.”

But catching even the tidal wave of all franchise trends wouldn’t release your duty to do your homework on a specific investment. I mention specific franchises only to provide a snapshot, not to endorse a prospect.

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