Small Business: Is it a good time to buy a franchise?

Joseph Skolom, 61, laid off as a medical

Joseph Skolom, 61, laid off as a medical lab manager, started a Hoodz franchise last fall to perform commercial kitchen exhaust cleaning. The demand is there, he said, and growth is “at a good pace.” (Feb. 12, 2012) (Credit: Heather Walsh)

Columnists

If you're looking to buy a franchise, now may not be a bad time.

Franchise businesses are showing signs of recovery, with a recent report forecasting the number of franchise establishments nationally to grow 1.9 percent after three years of decline, according to the International Franchise Association in Washington, D.C.

That bodes well for Long Island, say experts, who are predicting some bright spots locally for the business and personal services and health-care sectors.

"I don't see why Long Island couldn't grow 3 or 4 percent in terms of new franchises," says Ed Teixeira, author of "The Franchise Buyer's Manual" (Ed Teixeira; $39.99) and president of FranchiseKnow How.com, a franchise consultant in Stony Brook.

There are an estimated 3,500 franchise establishments in Nassau and Suffolk, employing more than 31,000 people, according to the IFA.

The Island has traditionally been attractive to franchisors due to such factors as its affluent demographics and close proximity to the city, Teixeira says.

"Consumers on Long Island are very quick to accept new products and concepts," he adds, citing examples like the Red Mango self-serve frozen yogurt chain, which has nine locations here and plans more to come.

Home-based concepts

Home-based franchise opportunities are becoming increasingly popular, says Teixeira. They offer lower entry costs than if you had to set up a store or office location.

Among the more prevalent are anything in business services (for example, coaching, tax preparation) or home maintenance/home improvement, says Teixeria, pointing to such examples as ActionCOACH, Mr. Appliance and CertaPro Painters.

Personal services will also be strong, with the IFA forecasting it will lead all franchise segment growth rates in terms of output (sales) at 6.2 percent. This category includes educational services and health care, says Matt Haller, IFA's director of communications.

Senior care, in particular, is strong, given the aging baby boomers, says Tom Scarda, president of FranChoice, a franchise consultant in Wantagh.

Fitness should also be a growth area, he notes.

The membership concept tied to fitness is very appealing, says Scarda, adding "every morning you start with money in the bank" via automatic membership fees, whether a customer shows up or not. A segment he foresees taking off locally over the next six months is the boxing/kickboxing fitness concept. He has several deals pending on Long Island for Title Boxing Club, in particular, where investment ranges between $125,000 and $150,000.

Overall, Scarda's seen an increase in the number of people purchasing franchises.

"It's the highest I've seen in five years," he notes, adding many purchasers are those who were downsized during the recession.

Joseph Skolom, who started Hoodz of Eastern Long Island in Holbrook in November, was laid off last August from his job as a manager at a medical laboratory in Syosset. He had worked there for 16 years until his department was relocated to New Jersey as part of a downsizing.

Starting his own franchise made sense economically, says Skolom, whose company performs commercial kitchen exhaust cleaning.

"I could have gotten another job, but I would have had to take a drastic cut in salary," says Skolom, 61, who worked with Scarda to find a franchise.

Stronger demand

He liked the Hoodz franchise in part because restaurants are required to clean their kitchen exhaust systems periodically to meet fire department regulations, so the demand is there.

Need-based services like these weather a weak economy well, say experts.

"I think we're growing at a good pace," says Skolom, who was trained and certified by Hoodz in exhaust cleaning. "I know the economy isn't what it was, but restaurants still seem to be strong."

The IFA is forecasting that quick-service restaurants and table/full-service restaurants will experience job growth of 2 percent and 1.8 percent respectively.

On Long Island, food franchises should grow, although not particularly in the saturated arenas of McDonald's and Baskin-Robbins.

"I think you'll see more ethnic and healthier food-based concepts," notes Teixeira.

TOP FRANCISES ON LI
Top franchises in Nassau and Suffolk based on number of units:


Nassau
1.
Subway: 79

2. Dunkin Donuts: 54

3. Dunkin Donuts/Baskin-Robbins combo: 45

4. Carvel: 42

5. Century 21: 40

Suffolk
1. Subway: 73

2. McDonald's: 47

3. Dunkin Donuts/Baskin-Robbins combo: 43

4. Carvel: 42

5. Dunkin Donuts: 37

Source: FRANdata