IFA’s 2014 Board Members Share Views on Industry’s Outlook
International Franchise Association directors share insights on issues affecting the franchise industry in 2014. The 2014 board members will assume their positions at the conclusion of the the IFA Convention in New Orleans.
Senior Vice President,
Design and Quality
InterContinental Hotels Group
Our business is a franchise in the Americas primarily. Lodging industry analysts predict demand growth to outpace supply growth in 2014, setting the stage for year-over-year revenue growth and increasing capital investment in new and existing hotels.
Applebee’s outlook remains positive. The key to our success is our ability to innovate and to satisfy the needs of both our traditional guest base and those of the New Millennial guests who have different expectations around menu, price and brand interaction.
Franchising will remain a very attractive business model in this economy. Applebee’s relies almost 100 percent on franchising for our success as our franchisees take ownership in serving up more than great meals at a great price, but great experiences and lasting memories for our guests.
Jania Bailey, CFE
President and Chief Operating Officer
FranNet Franchising, LLC
I remain very optimistic about the franchise industry and FranNet’s prospects for 2014. We have experienced tremendous growth over the past five years and I do not see that trend changing in the near future. The franchise industry continues to be strong due to the lack of opportunity in the corporate world. Many professionals are looking for alternative career paths and franchising is a great fit for many of them. As long as the U.S. economy remains at least level, we should see franchising continue to grow. Our government could help with the growth by providing a more stable environment in Washington. The fear of uncertainty stifles some people from buying franchises and hampers expansion plans for many in the industry. Despite the chaos in Washington, I have a great deal of faith in our industry and its outlook for 2014.
Melanie Bergeron, CFE
Chairwoman of the Board
TWO MEN AND A TRUCK
IFA Vice Chairwoman
Thankfully, in one word: Outstanding! At TWO MEN AND A TRUCK, we are positioned for growth in terms of same-store sales and franchise development. We have set lofty goals and by exceeding our customers’ expectations, we have every intention of hitting them. For the franchise industry as a whole, I’m hopeful. There are several serious threats in the business climate, such as the Affordable Care Act and negative franchise legislation that need to be carefully navigated. That said, enthusiastic business people don’t stick their heads in the sand, they find ways to make things work and move forward to serve their customer
Susan Black, CFE
Chief Operating Officer
Super Wash, Inc.
I am more excited than I have been in years about the possibilities I believe 2014 holds. The window of opportunity is finally cracking open to win over customers who are feeling a bit more stabilized within their family’s new “norm.” Hopefully other franchisors feel this same sense of excitement and seize the day, too!
President, United States & Canada, Select Services &
Extended Stay Lodging & Owner & Franchise Services
Our management and franchise strategy, along with the strength of our brands, allows us to expand quickly in a low-supply growth environment with minimal capital investment. With the broadest brand portfolio in the industry, we offer owners, developers and franchisees brands that attract guests and deliver results. With significant RevPAR or revenue per available room premiums worldwide, our owners and franchisees expect Marriott’s brands to perform − and they do.
Charles E. Chase
President and Chief Executive Officer
For our businesses, 2014 doesn’t suggest a big growth year. Franchising relies on optimized unit metrics to be bullish on the next 12 months. The haphazard management of the federal government has not allowed our franchisees to appropriately plan for 2014, making efficiency gains impractical. This means that 2014 will be, at best, marginal like 2013.
Baskin-Robbins/Dunkin’ Donuts of Bayshore, N.Y.
I am optimistic about small business and franchising in general for the upcoming year. I have seen consumer transactions continue to grow as we reach year-end. I have also seen more interest in people looking into make investments into franchising. I have had several calls over the past few months with potential people looking to buy different franchise concepts looking for some advice about getting into the small-business world. I am excited about 2014 and beyond.
IFA Supplier Forum First Vice Chairman
Javelin Solutions focuses on finding real estate for growing franchise systems. Last year was marked by a dwindling supply of space and increased demand for quality locations, dominated by such organizations as Walgreens, CVS, banks and cell phone providers. With a limited supply of new space coming onto the market in 2014, rental rates will start to climb as landlords become more selective of their tenants.
Growing systems must look to economically stressed retailers and proactively commit to proposed new projects to meet space demands. In the franchise industry, multi-unit operators, with the patience and financial resources to wait out space opportunities, will out-position single-unit owners with tight opening parameters. Franchisors must set realistic expectations with new franchisees about finding and opening qualified sites, balancing ideal site parameters against the limited opportunities available in the market. Fortunately, significant new developments will be completed in 2015-2016, relieving the bottleneck many franchisees face in meeting development schedules.
Rocco Fiorentino, CFE
Swiss Farm Stores
Although the 2013 year had a slow start, overall, it was a positive year for the franchise business. In 2014, we are anticipating modest growth in sales and new units. Access to credit is certainly better than in recent years and we have noticed a steady increase in lead flow. I am confident we will see positive sales increases across the board and demand for new development will remain strong throughout the upcoming year.
President and Chief Executive Officer
Interim HealthCare Inc.
Our outlook for business in 2014 is more positive on several fronts: the demand for the health care services our franchises deliver (home care, staffing and hospice) is expected to increase, the expanded eligibility of insurance coverage means more people will have access to homecare services and technology assistance (telemonitoring, for example) in delivering care at home will be more widely accepted. Our franchisees’ ability to provide services across the full continuum will continue to garner long-term customer loyalty as well.
Our view of franchising in 2014 is also optimistic as more industries attract experienced talent to build new markets. As the business environment stabilizes (rollout of the ACA and tax reform), brands will adapt to new business systems/processes to deliver services profitably.
Chief Executive Officer
NRD Holdings, LLC
Our company is projecting 2014 to be one of strong growth, principally through new-unit development. Credit access and an improving economy have helped create an environment to foster growth. We remain cautiously optimistic due to the resilience of franchising, but are weary of potential headwinds, most notably the regulatory outlook. The continuous barrage of new government requirements is a barrier to job creation. Adding to the economic burden is the cost of having to manage regulations. Quite simply, it takes the focus away from job creation in favor of compliance management.
President and Chief Executive Officer
Planet Smoothie/Tasti D-Lite
I am optimistic about the outlook for the Tasti D-Lite and Planet Smoothie brands in the coming year, and for the franchise industry as a whole. The interest level in owning your own business and the willingness for entrepreneurs to take the risk to do so continues to be strong components of the American spirit.
A key factor in franchise sales has been readily available financing for the business. While franchise financing is still not as robust as it was before the Great Recession, we are seeing an increased availability of funding options which is improving our franchise sales.
A cautionary note to my optimism might be the health of the U.S. economy. It is critical that members of Congress perform their roles, finalizing a budget and implementing programs that will improve the economy. Based upon the performance of Congress in 2013, there is reason for concern.
UPS Store of Washington, DC
IFA Franchisee Forum First Vice Chairwoman
Early indications are pointing to growth of The UPS Store business in 2014. I’ve seen positive trends in the second half of 2013 that make me confident that 2014 will be a strong one.
In terms of franchising in general, we must address the regulatory challenges that the industry is facing. Franchisees and franchisors need to demonstrate to state legislators that we are working cohesively and harmoniously to eliminate the need for government intervention. Working together to prove we are a united front with a common purpose will be a key aspect to our success in 2014 and beyond.
Darrell Johnson, CFE
President and Chief Executive Officer
The fundamental economic base has recovered and built a modest head of steam that will be sustained in 2014. The biggest challenge now is uncertainty and much of that lies with Congress. Taxes and health care top the list of issues that can only be clarified by leaders in Washington and until they are, businesses will hesitate to make the long-term commitments that lead to better economic growth and jobs. Despite these issues, franchising is expanding and has actually benefited from the weak economy by focusing on improving franchisor and franchisee performance, in addition to unit growth.
President and Chief Executive Officer
Choice Hotels International
IFA 2014 Chairman of the Board
At Choice Hotels, our business keeps growing, people are booking and development has been up significantly. We are pleased with our performance and we feel optimistic about our long-term growth and ability to drive excellent results. Sweeping changes are under way across our brands. We are adding great new hotels and expanding into exceptional new markets with our growth in the upscale segment. Our iconic Comfort Inn brand is growing rapidly and more customers are staying with us. There continues to be a slow, steady improvement in the economy and that is reflected in the consistent growth of our business; however, some accelerated economic growth would help us and the franchise industry alike.
Mark Kirsch, CFE
Gray Plant Mooty
IFA Supplier Forum Chairman
I am cautiously optimistic regarding franchising and my business in 2014. As a law firm, we share many of the same concerns as our clients. We have continued to deliver value amidst increased costs and heightened expectations. Despite dealing with economic uncertainty in several key areas such as health care/labor costs and new laws or regulations, franchisors and franchisees are experiencing improvements, albeit uneven increases in sales, profitability or growth. We look forward to working with franchise executives to implement lessons learned from several years of belt tightening. The latter half of 2013 saw a significant uptick in mergers and acquisitions and private-equity investments in franchising. We expect that to continue in 2014, along with renewed focus on international development and the expansion of smaller and mid-size franchise systems.
Gordon B. Logan
Chief Executive Officer and Founder
Sport Clips, Inc.
We see 2014 as being much the same as 2013. Our forecasts for same-store sales growth (8 percent) and additional locations (200) are slightly higher than our results for 2013 due to improved support systems, and real estate avails from new construction coming on line. Financing has not been an issue for our franchisees in 2013, and we do not see that changing in 2014, with interest rates holding steady. We believe that economic expansion will continue at a relatively slow pace, which should make 2014 a relatively good year for us and for franchising. If there is any change, we see some contraction in job growth and economic growth overall coming late in the year due to the ACA employer mandate coming into effect in January 2015.
Robert McDevitt, CFE
Senior Vice President, Franchising
Golden Corral Buffett & Grill
My 2014 outlook for our business, Golden Corral, and the restaurant industry, is bullish. The factors that suggest a strong year are: lower food costs driven by falling corn and other commodities; the prospect for lower gas prices which equates to rising discretionary income; growing consumer confidence; and, I believe, reduced uncertainty with gradual resolution of the impact of the Affordable Care Act, in spite of continued political gridlock. Most of these same factors bode well for franchising in general. None of this exempts a company from the need for exciting new ideas that captivate customers, but the environment promises to be better than it has been in years.
Sylvan Learning Center of Girard, OH
I believe our businesses will continue to grow and improve in 2014. However, growth will be restricted by a variety of economic factors impacting the entire economy. While I will target 10 percent growth through refined business efforts, we are well aware the national economy has a projected 4 percent (versus 3 percent in 2012) growth rate. Since franchise businesses usually outperform the national economy, the industry will likely continue the pattern of slow improvement. One concern is that uneven growth will occur because middle class buying power has lagged behind.
Catherine Monson, CFE
Chief Executive Officer
FASTSIGNS International, Inc.
In 2013, FASTSIGNS International, Inc. closed a record year in every metric, from same-center sales growth to franchise sales and new center openings to international expansion and franchise partner profitability. We expect 2014 to be even better as we continue to focus on profitable sales growth in our network. Our “More Than” brand positioning provides expanded products and services for customers; our extensive training and supply chain support prepared our franchise partners to successfully deliver on the brand promise. We are positioned for long-term growth as our franchise partners fulfill our “More Than” promise and employ more outside salespeople and we further develop their skills to sell more. We expect 2014 to be another strong year for FASTSIGNS.
President and Owner
Apex Restaurant Management, Inc.
At Apex Brands Management, Inc. we believe that quick-service restaurant sales are on track for moderate growth (2 percent to 3 percent) in 2014 according to internal market research. Incremental increases in various economic factors, improved consumer sentiment, store re-imaging programs, aggressive menu innovation and limited time offer testing will play leading roles in the QSR industry growth estimates for 2014.
Continued price sensitivity reinforces the fact that not all social-economic consumer groups are being affected by the improving economic environment. We will continue to have limited pricing power, as well as guest traffic challenges during 2014. Stealing market share will be a key marketing objective in achieving our growth projections for next year.
The major impact on the business remains the uncertainty of Obamacare. How do we keep that balance by not raising prices and still be profitable will be a challenge.
President and CEO
Sun Holdings, LLC
After looking at the past few years, I can tell that my business will continue expanding and growing rapidly. The environment is perfect to continue expanding in 2014. In fact, by the end of 2014, we plan to open 35 new restaurants in three different states and to re-image another 30 with the newest brand designs. The world of restaurant franchising is continuing to expand and I expect to grow faster than ever.
Karen Powell, CFE
Chief Relationship Officer/Decor & You CEO
FranchisEsource Brands International
I am optimistic. The world is changing and I see people, systems and businesses adapting to that change. We are up for the challenge and I think that everyone will benefit from the evolution if they choose to embrace it.
Steve Romaniello, CFE
Roark Capital Group and Chairman of the Board
FOCUS Brands Inc.
IFA Immediate Past Chairman
Roark owns a number of franchise businesses operating in a variety of industries, including restaurant, early education, pet, health and wellness, and specialty retail. While the outlook from company to company varies, all of our companies are expecting to grow in 2014, continuing a multi-year trend. My expectation for franchising in 2014 is for modest growth, as the continuing uncertainty, especially related to health care costs and tax policies, will keep us from achieving our full growth potential.
Todd Recknagel, CFE
Chief Executive Officer
AM Conservation Group, Inc.
We are seeing very good economic signs for 2014. New contracts are being signed as businesses are starting to open up and take risks again. It has never been a better time to hire top talent reasonably, find lower interest rates on borrowed capital and expand. We also see great opportunities for franchises that serve both the consumer and business to business markets. We are bullish on 2014.
Michael Seid, CFE
Chief Concept Officer
MSA Worldwide’s practice is diverse and includes emerging franchisors, as well as established franchise and non-franchise brands in the United States and internationally. I expect that our leadership position will remain strong and our consulting practice will continue to grow in 2014.
CFW has been expanding outside of our home base in Kenya and added more than 50 franchises in Rwanda in the past 24 months. The continuing and growing need for a social franchisor makes the outlook for CFW and our amazing cadre of franchisees extremely positive.
Resilience in the franchisor-franchisee relationship will be strengthened in 2014 by IFA’s introduction of its Principles of Franchising and the Profile of Franchisors. Despite the proposed relationship laws at the state level, the impact of the ACA and other problems stemming from the vacuum of leadership in the White House, I expect continued relatively strong performance of franchise brands and for franchising overall to outperform other segments of the economy in 2014.
Shelly Sun, CFE
Chief Executive Officer and Co-Founder
BrigthtStar Franchising, LLC
BrightStar Franchising, LLC anticipates double-digit growth in locations and same-store sales in 2014 because our underlying demographics for the senior care industry are favorable. The business climate and increased legislation impact profitability and growth for the franchise industry – both franchisors and franchisees. We need government to make it easier for businesses to grow and create jobs by working in 2014 to do the following: align the ACA to 40 hours, lower tax rates for businesses (job creators) and realize that increased legislation increases costs and harms economic growth and creates disincentives to add jobs.
BrightStar Healthcare of Madison, WI
S and J Home Care LLC
IFA Franchisee Forum Chairman
The coming year promises to be exciting in the BrightStar Care business. Madison is serving as the pilot city for BrightStar Senior Living Assisted Living Facility’s first building. The facility will begin serving clients in the first quarter beginning the vision Shelly Sun had years ago to extend the quality of care we provide seniors in their homes to a quality facility environment when they can longer stay safely at home.