20 May 2019
Quality and Local Ties Seen as Key to Success in US Franchise Market
Whether operating escape rooms, home delivering pet food or making gardens easier to manage, maintaining quality control and winning over the local community are essential, according to exhibitors at the New Jersey Franchise Show.
While the US franchise sector is currently said to be booming, this can be seen as both good and bad news for would-be franchisees. While, on one hand, there are plenty of willing franchise owners looking for a business investment – as illustrated by the bustling aisles at the recent New Jersey Franchise Show – on the other, franchisees may well find it tough going in this increasingly competitive market.
Naturally, every franchisor at the event was bullish as to why their particular offering was the best around, both in terms of the edge it had over direct competitors and its innate supremacy compared with franchise opportunities in any other sector. Although each individual business category saw different key requirements forefronted, a couple of common themes were highlighted by many exhibitors at the event – the importance of quality control and the need to vigorously engage with the local community.
One exhibitor focusing on the importance of quality control was The Work Lodge, a Houston-based provider of furnished office accommodation. Outlining the company's philosophy in this regard, Founder Mike Thakur said: "We are definitely all about providing a premium office space, although we don't charge a premium price. The quality of what we put in makes a real difference, especially the way we focus on the details.
"While everybody talks about 'community' – and that's now pretty much a given throughout the sector – it's the little details that we sweat over. We are, for example, on the third generation of our bespoke chairs, an evolving design process that has seen us work very closely with the manufacturers. As a result, there is not a co-working space chair out there that's as good as ours."
This attention to detail seems to be paying off for The Work Lodge, with Thakur maintaining it is increasingly attracting ever more prestigious clients. Highlighting this shift, he said: "We're starting to be more successful with established businesses, with companies such as HP now using us on a regular basis. When Hurricane Harvey hit Houston in the summer of 2017, for instance, we housed about 100 of their employees for an extended period of time.
"That was the first test for us with a Fortune 500 company. There was nothing they wanted that we couldn't do and, ultimately, there was no negative feedback from them at all."
Despite being a very different type of business, Exit 4, a New Jersey-based escape room operator, also maintained that delivering a high-quality experience was the key way it stood out from competitors. Explaining how this pans out in practice, Co-founder Derek Lindeman said: "A lot of escape-room operators tend to open up in low-rent locations, often making them hard to find. Our preference is to set up in more of a high-traffic area, somewhere there's a lot of food and drink options and where it's easy to park. You can then get all your friends together, complete the escape room, then go and grab some food and talk about how much fun you had. That's huge for us.
"We also only offer private sessions, so you're not going to get grouped with strangers, which is the way it's now gone in Europe."
Explaining the company's innovative approach to securing repeat business, he said: "Where a lot of escape-room operators get into trouble is by initially spending a lot of money on their room, then two years later that same room isn't booking half as much as it used to be and they have no capital to reinvest in upgrading their facilities.
"For our part, we have a leasing programme for franchisees, something that brings the costs down substantially. You're not then putting down US$40,000-50,000 for an escape room that you're going to have to replace in two or three years. Our leasing programme keeps the room fresh, which makes sure that you remain the best attraction in the area."
Again, looking to quality to differentiate itself was Husse, a Stockholm-headquartered pet food home delivery brand. Maintaining that the company offered something very different from the more mass-market pet food delivery businesses, Franchise Sales Manager Mark Foisey said: "Our core concept is healthy GMO-free pet food home delivered to owners.
"A business such as Chewies [a leading US pet food delivery company] is very similar to Amazon – you are dealing with an operation that may well be outsourcing its services to people who are not necessarily qualified in pet nutrition. By contrast, every single one of our franchisees is a certified pet nutritionist. So, when you sit down with your local franchisee, they're going to be able to tell you just what's best for your pet."
As well as premium quality food and expert advice, Foisey also saw well-developed local connections as an important part of the company's offer, saying: "In many suburban areas, you are able to go to the farmers market, network with local people and really try to penetrate a certain territory. That's where I personally think success is to be found.
"That's the other aspect of our model that gives franchisees an edge over Chewies or Amazon – they function as the sole contact. So, if you're calling or texting your local franchisee to say you need another bag, it's a very different vibe to clicking your mouse then just waiting for something to show up."
While not strictly a franchise operation in the classic sense, GetAround, a San Francisco-headquartered car-sharing business, was also majoring on the importance of developing local connections, despite its high-tech proposition. Explaining why this was far from a contradiction, General Manager Tom McNeil said: "We're all about peer-to-peer car sharing. To that end, we have a platform that allows car owners to list their vehicles on our app. We then install the necessary technology and the cars can then be rented out to people in the local community.
"While this doesn't necessarily represent a franchise as it's normally understood, people have seen that renting out their car has been profitable, so some have then bought more vehicles and listed them on the platform too. This has seen some people go from one car to five and then, maybe, to 15 or more."
Essentially, the company's proposition to car owners is that letting such an expensive asset sit idle for the majority of the time is clearly a waste of money. Outlining how this message is communicated, McNeil said: "We are always out in the local community talking to people, meeting them in shops and so on. Ultimately, they come to recognise that, if a car is just sitting there, they are losing money. Why not, then, put it to good use?
"They list a car, see the benefits and realise how hassle-free it is. The kind of technology we install in the car means they don't even have to interact directly with the renter if they don't want to."
A more classic style of franchisor, but one with a similar regard for the importance of nurturing local ties, was 7-Eleven, the Dallas-headquartered operator of the world's largest convenience store network. Despite its near-saturation penetration of the US, the company sees working with growing communities as the key to opening up new markets.
Explaining how this philosophy is currently being put into practice, Charlie Cannella, a Franchising Specialist with the company, said: "We are constantly looking to develop new areas, such as Summit New Jersey or Hackensack, areas where we believe there are real growth opportunities. To date, we've opened several stores in Newark, for instance. We're trying to get established there and give the local communities something of a boost."
Another business prioritising local thinking was Curb Ease, a British Columbia franchisor with a focus on garden edging. Explaining the value of developing a neighbourhood feel, Chief Executive Garry Tyna said: "We specialise in machine-extruded stamped concrete garden edging. We're very much a niche operator in the landscaping sector. Our machines extrude concrete in one continuous piece and can produce it in a variety of different colours and stamp profiles.
"From the functional standpoint, the concrete acts as an excellent root barrier, preventing grass from constantly growing into flowerbeds. This substantially reduces the amount of time a homeowner has to spend cleaning the garden up.
"Most of the time we do one job at a house and then end up doing the whole neighbourhood. People see it and they see the lawn sign, then it kind of sells itself."
The 2019 New Jersey Franchise Show took place from 16-17 February at the Meadowlands Exposition Center.
James O'Donnell, Special Correspondent, Secaucus