Gary Prenevost - Official Blog

Trends for 2018: Franchises led by millennials and women poised to grow despite minimum wage hike and SME tax reforms



As the cost of living rises more Canadians are looking for alternative sources of income.

Statistics Canada’s consumer price index (CPI) shows price of goods has increased by 16 per cent over the last decade, leaving Canadians with less money to build their wealth. As a result of these factors, more Canadians are considering franchise ownership as an income option. As we enter 2018, here are the top trends and considerations I have observed that we can expect to see in the new year.

1- Millennials are looking beyond side hustles; converting to main hustles

More adults 18-35 years of age are looking for ways to build wealth, while maintaining their preferred lifestyle. Over the last few years, there are two approaches that I have seen trending among this demographic.

The first is that lower cost, service-based franchises are on the rise. Young entrepreneurs are opening franchises in areas such as home improvement, construction and niche fitness training as they often require less money up front. Typically, they can range from $50,000-$125,000 to start, and fit into the Millennial business-owner’s desired lifestyle.

Secondly, just like some parents who help their children secure loans for their first homes, I also have clients whose parents helped them secure loans for their businesses. This strategy unlocks access to traditional franchises, which often cost between $150,000-$400,000 as an upfront investment. While helping children purchase their first home is a passive investment that often yields great returns in the long run, investing in a business is an active investment that can generate tremendous returns in a quicker time frame. Many of these types of franchises qualify for the Canada Small Business Finance Program, thus providing access to substantial capital without significantly increasing risk to the family wealth pool.

2- More women are opening franchises

More women are looking for greater control over work-life balance and alternative income options to avoid workplace politics and the “glass ceiling” often experienced in corporate environments. In 2017, we saw a 10 per cent year-over-year increase among women opening franchises.

Today, women make up 30 per cent of my client base, while franchise ownership among men also continues to grow. Service-based franchises, often geared towards women, such as hair salons and day spas are just some of types of franchise purchases on the rise among this demographic.

3- Brick and mortar retail and food industry franchises will be impacted by government reforms

While the new year represents a fresh start, 2018 is also the year when new provincial and federal government legislation will come into play. The minimum wage hike in Ontario is a 20.6 per cent increase in one of the biggest expense line items for many small business owners (it also increases another 8 percent next year). With rising wage costs in Ontario, and the federal government’s impending small business tax reform,several of my clients who employ minimum wage staff are rethinking how they will remain profitable, and how they can balance raising prices and/or decreasing staff, with the possibility of declining customer flow. Many would-be franchise owners who were originally thinking about food and other labour-intensive franchises will need to remain cautious and extra diligent in their research as these changes play out in the real market place this year. We anticipate a greater interest in niche franchise business models offering premium value services, and where the workers have higher levels of skills. Because these employees already get paid significantly more than the new minimum wage, these types of franchise business models should face minimal impact from the 28 per cent minimum wage hike.

While a new year signals an opportunity to reflect on your career, there are also new factors that could significantly impact your choices. In order to review these options, as well as learn more about how government legislation will impact the small business and franchise ownership space, contact me for a free consultation. There is no cost to you in having a franchise expert help you make one of the biggest financial and lifestyle decisions in your life.

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