Buying into an existing franchise can be a good entree for many entrepreneurs into owning a business rather then starting a concept from scratch.
Last year was a growth year for franchising, and 2020 is expected to be no different. The number of U.S. franchised businesses is forecast to grow by 1.5% this year to a total of 785,316 establishments, slightly down from the 1.7% growth seen in 2019, according to the Washington-based International Franchise Association.
“Slower growth is not a decline,” says Stephen Worley, IFA’s senior director of communications. “It’s still a positive story for investors, franchise owners and for employees at franchise businesses.”
The franchise industry is forecast to add 232,000 jobs in 2020, growing total employees to 8.67 million.
Part of the slight decline in anticipated growth year-over-year in establishments may be attributed to the U.S. manufacturing slowdown, global trade uncertainty and an upcoming election, which can all lead to slower economic growth, says Worley.
That said, local experts and franchisees are optimistic pointing to success last year even though New York State is expected to see a slight .04% decline in number of establishments in 2020.
“2019 was the best year we had,” says Tom Scarda, a Wantagh-based franchise consultant and president of The Franchise Academy, an educational platform for those looking to buy a franchise.
He anticipates he could outpace that growth in 2020, referring to the amount of people he will place in franchises.
“Q1 2020 is the busiest I’ve had in 15 years,” says Scarda, who hosts a weekly podcast called The Franchise Academy.
Anthony Citrolo, managing partner at The NYBB Group in Melville, a mergers and acquisition firm, which sells franchised and other family-owned businesses, also anticipates growth in franchising.
“I think franchise businesses in general are replacing mom-and-pop private businesses,” he says, adding 2020 should see growth with “new franchises coming out every day.”
Citrolo’s seeing demand for home health care agencies, and insurance and financial services franchises.
Scarda’s seeing high demand for personal services concepts like gyms and eyelash extension establishments.
Personal services was also listed as a high growth industry by IFA.
Part of the reason is consumers are placing higher importance on health, fitness and lifestyle brands, which explains the surge in fitness concepts, and these are services that can’t be bought online.
“If you want a massage, someone has to give that to you,” says Worley.
Same goes for a workout.
Tracy Seaver sees great growth potential in the fitness arena, which prompted him to buy into the Spenga franchise — a workout studio combining spin, strength and yoga in 60-minute sessions.
Seaver, who worked with Scarda, has the rights to develop three locations on Long Island and is scouting various locations including North Babylon.
He will invest between $300,000 and $500,000 per store using retirement funds to help fund the investment.
“The payoff is fairly substantial,” says Seaver, adding he anticipates good return on investment based on projections.
That helps justify the investment.
The average Scarda sees people investing, in general, is $100,000 to $300,000, which includes total turnkey investment.
For Rachael Garafola and partner Marc Arnberg it’s an investment of more than $350,000 for each F45 location. F45 is a fitness franchise that offers 45-minute high-intensity training classes.
Arnberg opened an F45 in Dix Hills in May 2017 and Garafola, a member, bought in as a partner in 2018. They are in the process of opening another location in East Setauket in the Three Village Shopping Center at the end of March and another in Lake Grove in May. They hope to open three more additional locations by end of 2021.
They are harnessing the growth the brand is seeing, particularly since actor Mark Wahlberg invested in the parent company last year, says Garafola.
David Wolk, who opened his first Club Pilates in Commack in December 2017 and has since added a Woodbury studio, also cited growth as the reason he is expanding with a third location. The new location will open mid-May in Melville on Walt Whitman Road, he says, noting he has seen 3% to 7% month-over-month growth at his two existing locations.
He is optimistic about future growth, noting “fitness is strong even in times of recession or a shrinking market.”
That rationale is one of the reasons John McQuaid, owner of Hicksville-based 1-800 Water Damage of Nassau County, bought into the property restoration franchise last spring.
He was impressed that the firm was under the umbrella of restoration giant Belfor and the support that brings, but also that it’s an industry that can withstand a downturn.
“Nobody plans to have an emergency,” he says. “But you still need to get it dealt with.”
There are 773,600 small franchise establishments, or businesses that use the franchise model, across the country, according to the International Franchise Association. In 2019 alone, these establishments supported nearly 8.4 million direct jobs.