24 June 2016
Upmarket Vaping and Rapid Gadget Repairs Top US Franchising League
While the food sector remains ever-popular in the US franchising market, a number of newer, higher-tech opportunities are now also starting to gain ground, most notably upmarket e-cigarettes and fast turnaround electronics repairs.
As well as the usual profusion of food franchises, electronic cigarette suppliers and electronic device repair outlets were both well represented at this year's Dallas Franchise Expo. Overall, many exhibitors were bullish about these and other franchise opportunities, with the feeling that an increasing number of US workers are tiring of corporate employment and looking to strike out on their own to pursue their personal American dream.
A relatively recent addition to the US retail landscape is the growing number of electronic vapour cigarette supply shops. Several such 'vape' supply franchises were in evidence in Dallas, all keen to present e-cigarettes as a more healthy (or perhaps, less unhealthy) alternative to smoking cigarettes.
Commenting on the growth of the sector, James Franks, a Franchise Sales representative for Vapour Galleria, a Texas-based e-cigarette supply franchise, said: "Wells Fargo did some research that showed it's already a US$7 billion a year business, and it's expanding every day. More and more people are trying to quit smoking and live healthier lives with a reduced nicotine intake. While a cigarette contains several chemicals in addition to tobacco, e-cigarettes only have nicotine and flavourings."
In the US, the vape sector has a distinctly down-market image. As a result of this, Franks believes that many consumers are put off, leaving something of an opportunity for better-presented retail outlets.
As well as a poor shopping environment, the sector also suffers from the perception of poor product consistency. Franks said: "A lot of shops in the States are 'mom and pop' independents. They mix it up in the back room and it never has a consistent taste. Now the FDA is finally coming out with regulations, but we're compliant with a lot of those already. We actually make all the flavours and all the liquid in a lab."
Another noticeable trend this year was the growing prevalence of electronics repair franchises. At present, one Florida-based company – Ubreakfix – claims to be the market leader. Joshua Etchison, the company's Franchise Sales Specialist, said: "We are currently the largest and the fastest growing. We fix anything with a power button, but phones and tablets are our biggest markets."
Etchison was clear about the appeal of his type of business compared to the warranty and repair approach taken by more traditional electronics retailers. He said: "We're a big convenience player. Customers don't want to wait four days for their phone to go out to a depot and come back. They don't want to exchange like for like for a refurbished phone. They want their device and they want it immediately."
While the repair business model may be hard to protect and easy to replicate, Etchison believes that Ubreakfix offers a particular advantage to franchisees. He said: "Parts are the lifeblood of this business. We provide our franchisees – and only our franchisees – with the highest quality parts at the lowest price possible, to the extent that it's not a profit centre for us."
Maintaining that the electronics repair franchise sector has an appeal to people from a variety of backgrounds, Etchison said: "A lot of our franchisees are businessmen who have owned other franchising concepts or have come from Wall Street. Some 90% of the people who come through our training have never picked up a screwdriver. We teach everyone the technology, so they're then hiring customer-service focussed people and teaching them the tech. Overall, it costs about $125,000 – including fees – to start up. This includes build-out and everything else."
Another company seeing the attraction of the franchise model for former corporate employees was Garage Living, an Ontario-based home garage refurbishment business. Steve Wilkins, the company's Franchise Development Representative, said: "We've had some really great prospects, people who are looking for opportunities to do something on their own. They've worked in corporate America and have been kicked around so much over the last five years that they now want to do something on their own."
Garage Living targets affluent households looking to renovate or customise their garage space. The relatively high cost of their services and limited number of potential clients obliges them to restrict the number of franchisees in any given area, a fact that led to the Canadian company's presence in Dallas. Explaining the company's thinking, Wilkins said: "We want to have a demographic that allows each franchisee to draw from a 2-3 million population. We're currently looking for two franchisees in Dallas, two in Houston and one in Austin. That'll be it for the whole state."
As well as being attracted by the size and relative prosperity of Texas, a number of franchisors were also drawn to the state by its virtually year-round warm weather. One such company was Ohio-based Color World Housepainting. Tom Hodgson, the Founder of the business, said: "We are looking at franchises that operate all year-round. We are mainly in the Midwest, which is why we offer Christmas holiday lighting as a way of supplementing income when things start to slow down outside.
"We want to move south as we can the generate royalties all year-round. It is where we believe our franchises can be more successful."
While acknowledging the house-painting proposition is far from unique, Hodgson believes that his company's approach has a distinct advantage. He said: "Generally, there is a good reason why you need the outside of your house painted. A lot of the time it is down to a problem with leaky gutters. Our franchisees can come in, install new wood, tear out the existing gutters, paint the house and then install new gutters."
A less seasonally variable franchise was on offer from Kansas-based CIC PowerBox, with the company debuting its pickup truck-mounted power and compressed supply unit at the event. Explaining its proposition, Morgan Windsor, the company's Representative in Dallas, said: "It's a rechargeable generator, air compressor and jump-start system all built into the back of a truck. It doesn't have a motor – so no fuel, no oil, no noise and no emissions. It's a completely silent AC power outlet."
Permanently wired into the vehicle's alternator, the PowerBox enables campers and contractors to run domestic voltage appliances and tools without the need for a generator – the use of which is prohibited in US national parks. Bullish about the product's prospects, particularly in the truck-loving southern US, Windsor said: "This is the first time we've been to a franchise show to offer this kind of opportunity. What we're trying to do is provide people with something where it's not a case of one- to two-year ROI. Within three months, you should be making money with this product. The demographic is endless."
As ever, food businesses were well represented at this year's event. Looking to take a lead here was Cinnabon, a Georgia-based baked goods chain. Explaining its particular offering, Mark Hong, the company's Franchise Development Director, said: "We specialise in fresh-baked cinnamon rolls. These are all made at our own bakeries."
For Hong, it was very clear as to just what makes a good franchisee. He said: "The key to success is engagement, a willingness to learn. We are not looking for people who want to reinvent the wheel, but rather those who will try to make the system their own and train their employees to do the same. Absent owners tend to struggle and we believe being hands-on is vital."
One exhibitor at the show taking a slightly different approach was SAP America, a German multinational software company with offices in Texas. Nathan Novelli, the company's Global Business Development Manager, was in Dallas to target both franchisors and franchisees, offering software specifically designed for this particular business model.
He said: "We are delivering a tablet-based Enterprise Resource Planning solution for franchises and small businesses. Franchisors love it because it adds some credibility at the back end. It's actually easier to sell to franchisors as they want a little bit more control over their brand."
According to Novelli, you have to take a different approach when you're looking at doing business in the more southerly parts of the US. He said: "To be successful here, you've got to have referrals. You've got to know somebody. You've got to shake someone's hand.
"A lot of these companies don't have a big online presence. They don't need it because they have so much referral business. In California and New York, if you don't have an identity online – and you're not doing some kind of social media marketing – you're out. You cannot compete without it in those markets."
The Dallas Franchise Expo 2016 was held at the Dallas Market Hall from 14-15 May.
James O'Donnell, Special Correspondent, Dallas