Top 5 Recession-Resistant Franchises

One of the most common statements I hear from clients is "I want a business that will be successful." Of course success means different things to different people and there are no guarantees in business. However, aspiring business owners can mitigate some risk of business ownership through owning a franchise, and owning one that time has proven to be recession-resistant.

The following 5 franchises, in alphabetical order, are my picks for the Top 5 Recession-Resistant Franchises:

1. Liberty Tax Service
As the saying goes, there are two certainties in life: death and taxes.  Every year, by April 15th, most Americans have to file a tax return.  Liberty Tax franchisees work on the business, not in the business, and do not need a background in accounting or tax law. Liberty Tax is on the list because:

• They were #21 on the 2011 Franchise 500 Rankings, the highest rated tax preparation franchise
• During the challenging economic times of the last 3 years, they have added over 1,000 retail locations
• For 8 years in a row, Liberty Tax Service has grown by more returns than H&R Block and Jackson Hewitt...COMBINED!

2. Meineke
Automotive aftermarket maintenance and repair is a $275 Billion a year industry and the "do it for me section" of the industry is $150 Billion. Meineke franchisees do not work on cars and do not need auto industry experience. They concentrate on running the business. The Meineke real estate team can help you find and convert and independent garage so you can started for a lower cost. Meineke is on the list because:

• Every year the number of cars on the road grows, and the average age of those cars is getting older
• Meineke is recognized by 95% of the US adult population, driven by National TV commercials, the Meineke Car Care Bowl, and millions of direct mail pieces
• Average sales for 6 bay centers in the system is $556,000

3. Sharkey's Cuts for Kids
Sharkey's Cuts for Kids provides an unique salon that caters to children of all ages. They provide prompt service for on-the-go parents, a fun environment for children, and reasonably priced services. There are a variety of services for customers to choose from including cuts, color, up-dos, mini manicures, make-up application, and private parties. Hair care is a $55 Billion dollar a year with built in demand and a recurring customer base.  Sharkey's is on this list because:

• They are the fastest growing chain of children's salon in the country. In their first 2 years of franchising they opened 20 franchised locations and had global commitments for 235+ salons
• Children have to get their hair cut multiple times a year and even in a down economy people will spend money on their children
• Sharkey's franchisees enjoy 3 amazing revenue streams: hair care for boys and girls, birthday parties in their famous Glamour room, and specialty merchandise/party favors

4. Stratus Building Solutions
Stratus Building Solutions Master and Unit franchisees are part of a $140 Billion commercial cleaning industry. Stratus franchisees provide their clients with a "one stop shop" for all maintenance services that include "touchless sanitization", specialty floor care, pressure washing and exterior cleaning, "green" recycling, lawn care and landscaping, pest control, energy conservation, and security/safety.  Stratus is on this list because:

• All commercial spaces must be maintained (built-in demand), and they must be maintained regularly (recurring revenue)
• They have doubled system-wide sales each year for the last 3 consecutive years ($30M, $60M, $120M)
• They were recognized as the Fastest Growing Franchise for 2011 by Entrepreneur Magazine

5. Tutoring Club

The Tutoring Club is a family-owned and operated franchise that guarantees one full grade level improvement with 32 hours of tutoring time. Using proprietary software called TutorAid, tutors create custom lesson plans and track students' progress. Franchisees work on the business, not in the business, and don't need a background in education. Tutoring Club is on this list because:

• People will always spend money on their children, and education becomes even more important in a down economy
• Tutoring Club locations are open Monday - Thursday from 12PM to 7PM so you don't have to take away time from your own children
• Since the late 90s, the supplemental educational services industry has grown at a compound annual rate of nearly 12% and the for-profit tutoring industry has grown by double digits nationally

What other franchises do you think should be on this list?

Franchising to See Stronger Growth in 2011

In my January newsletter, I highlighted the findings of the International Franchise Association Educational Foundation's 2011 edition of the annual Franchise Business Economic Outlook, prepared by PwC. If I had to highlight the report in one sentence it would be, "Franchising is poised for stronger growth in 2011."

At a high level, there are three key metrics in the report. Looking at the projected percent change from 2010 to 2011,

• The number of Franchised Establishments will increase 2.5% (compared to 0.3% last year)
• The number of jobs in Franchised Establishments will increase 2.5% (compared to 0.6% last year)
• The Economic Output of Franchised Establishments will increase 4.7% (compared to 3.4% last year)

The report looked at the three metrics across 10 franchise business lines.  Ranked by largest expected increase in Economic Output in descending order, the top 3 lines are:

• Automotive at 7.2%
• Commercial and Residential Services at 6.9%
• Personal Services (education, health, pet care at 6.5%)

So how do you use this information as an input to finding the best franchise for you? Of course we all want to be in a business that is poised for strong growth, but if the franchise doesn't fit your unique goals and requirements, then your chances of success diminish significantly. This is where Meta-Franchise Consulting can help.  Let us help you find that intersection between great franchise opportunities and your requirements.

Franchising Economic Outlook for 2011

Meta-Franchise Consulting's January newsletter is now available! Check out the information on the franchising economic outlook for 2011 and the spotlight franchise this month, Stratus Building Solutions.

SBA Loans and Franchising

It is a common misconception that the U.S. Small Business Administration (SBA) loans money to potential franchisees. Instead of loaning the money, the SBA provides a loan guarantee. If your loan application looks too risky to a bank for a traditional loan, you may apply for an SBA loan through an SBA approved lender. The SBA has approved these lenders and loans made by these lenders will be guaranteed (up to 80%) so your loan application looks less risky to the lending institution.

There are many benefits to an SBA guaranteed loan. Those benefits include:

• Lower capital requirements
• No points or balloon payments
• Longer amortization periods
• Increased loan-to-value financing

Just like banks are pre-approved to be SBA lenders, franchises can be registered with the SBA. The registry is not an endorsement of a franchise by the SBA. Additionally, a franchise not listed on the registry can still be eligible for an SBA guaranteed loan. To be listed on the registry, a franchise must provide the SBA with a copy of the franchise agreement which the SBA will review. Once approved and listed on the registry, the turnaround time and paperwork required are reduced for a potential franchisee.

Need more information on the SBA loan process? Contact Meta-Franchise Consulting.

Tax Franchises: Winners and Losers

Potential franchisees love tax franchises because the initial investment is reasonable, the income potential is great, and they are recession resistant business...death and taxes...right?

UnhappyFranchisee.com just wrote an article about the tax winners and losers of 2010. At Meta-Franchise Consulting I have always felt strongly that I work with the best franchises in the tax industry, and this article helps validate that belief.

The two largest tax franchises (as measured by number of franchisees) are Liberty Tax and H&R Block. I work with Liberty Tax which grew by over 700 units from 2008-2010 while H&R Block lost 261 units.

Tax Centers of America and Roni Deutch also realized great growth in their franchise systems.

Maui Wowi Hawaiian Franchisee Is Blending Up Success

Maui Wowi Hawaiian Franchisee Is Blending Up Success

Maui Wowi continues to be one of my favorite franchises for four reasons.

1. Maui Wowi offers multiple business models to give franchisees flexibility in both where they locate their business as well as varying investment levels.
2. Maui Wowi offers multiple revenue streams with coffee, smoothies, and other Hawaiian products.
3. Maui Wowi does NOT charge a franchise fee!
4. Maui Wowi offers a joint partnership with Doc Popcorn to give franchisees a second franchise and another revenue stream for a small additional fee (significantly less than the cost of two separate franchises).

What are your experiences as a Maui Wowi customer at any of their 550+ franchised locations? Do you want to own your own Maui Wowi Coffee & Smoothie franchise?

CNBC Cancels Reruns of Franchise Documentary

On December 19th I wrote a blog about CNBC's Untold Story of Franchising documentary. In that blog I talked about what I thought the story got right and what the story missed for the franchising industry and the franchises they highlighted. Apparently I neglected to highlight a major criticism of the show!

I did not spend a lot of time talking about negative spotlight that was shining brightly on Cold Stone Creamery, primarily because I have not worked with them and don't have enough information to have an informed opinion. However, those closest to the details found many flaws with the Cold Stone Creamery segment and hired the top franchise attorney in the country to represent the franchisees and a separate law firm to represent the franchisor. Robert Zarco, the new franchisee attorney, said in a letter that CNBC acted "irresponsibly, wrongfully and with malicious intent, negligently, and with reckless disregard for the interests of the franchisor, the franchisor’s employees, the franchisees’ employees, and consumers." Now CNBC has "temporarily" cancelled planned reruns of the documentary to investigate the facts as presented in the original airing.

This was not the first piece of controversy about CNBC's "The Untold Story of Franchising." After the original airing, CNBC posted a clarification that the CEO in charge of P&G's franchise subsidiary said that Mr. Clean and Tide franchise royalties were based on net sales instead of gross sales, which would be a good deal for franchisees. It turns out that what P&G calls net sales is what other companies call gross sales. As if current and potential franchisees need something else to be confused about.