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Entrepreneur, Jan, 1999 by Laura Tiffany

Franchise trends: What's hot. What's not. What's next.

Like any great awards show, this year's Franchise 500[R] was full of well-earned victories, as well as a few surprises. Kudos to the brothers at Yogen Fruz, this year's breakthrough winners at No. 1, proving that truly entrepreneurial franchisors can not only compete with the McDonald's Corp.s of the world, but can even surpass the grandfathers of franchising.

And while not all the news was so dramatic, we did come away with a good impression of what's going on in franchising - what's hot, what's not, and what trends are making a surprise comeback.

BRINGING UP BABY

There's a common gag that pops up occasionally in TV shows and movies: The moment a couple finds out they're expecting a baby, they put their names on a three-year waiting list for the most prestigious preschool in their city. While this scenario is probably a bit extreme for most families, many parents and grandparents are showing great concern for early childhood learning even before the wee ones start kindergarten - and are willing to shell out big bucks for supplemental education.

So what types of educational services did we determine are sweeping the nation? "Anything having to do with the child's exposure to other children," says Jerry Wilkerson, president of Franchise Recruiters Ltd., a Chicago-based franchise executive management search firm. "[Also,] anything having to do with pre-learning or trying to help someone who's having a learning problem. Those are the things that are going to continue to grow in America."

For toddlers, this means trips to fitness/play centers like Gymboree, where little ones are tricked into learning things like social skills while participating in fun activities. As they get a little older, children can learn computer skills at franchises like Computertots and Futurekids. And if they're having trouble with the three R's, there are always after-school tutoring centers that provide programs to help them catch up.

WHAT'S ON THE MENU?

Our research tells us that to be successful, franchise restaurateurs must strike a delicate balance between too much and too little on menus this year. You'll see more smoothie stores adding complementary foods like bagels and sandwiches to increase sales in the off-season (Jamba Juice has added soup) and, conversely, food concepts like Smash International adding smoothies to their menus. Smaller dessert franchises are also adding more to their menus, as we've also seen in the past with ice cream stores adding frozen yogurt and frozen coffee drinks to their offerings.

What's the not-so-new contender in the frozen dessert market? Custard. Big in Wisconsin and Minnesota, frozen custard has loyal fans: One Web site, www.custard.execpc.com/cgi/index, lists the custard du jour for Milwaukee custard shops.

The custard revolution is being led by Culver's Frozen Custard, with 59 franchised locations in five States. Each day, the franchises offer a "Flavor of the Day" from their selection of more than 130 flavors, including caramel pecan and raspberry cordial. Rita's Water Ice is also jumping on this trend as fast as it did with Italian ices by adding custard to its summer menu.

We've found the secret to rounding out a specialized menu is not to go overboard. "The market will be more discriminating [about providing] better quality and better service. It's [not] just a matter of having a wider variety of products," says Don Boroian, chairman of Francorp, an Olympia Fields, Illinois-based franchise consulting firm. Case in point? Boroian contends that one of the reasons Boston Market recently filed for bankruptcy is that the company diversified its menu to the point where it confused both employees and customers. "trying to add more things can sometimes screw up your menu, screw up your labor costs, render you unprofitable, and confuse the public as to what your image is," adds Boroian.

COFFEE TALK

And with what do customers want to wash all this chow down? Need you ask? We found that once again, coffee is the prime beverage choice everywhere from doughnut stores and smoothie chains to specialty coffee bars. But lest you despair, we've found there's still room in the industry alongside the ubiquitous Starbucks chain. Franchises like Gloria Jean's, The Second Cup and The Coffee Beanery are still pouring strong brews for anti-Starbucks denizens (think: big, corporate monolith, bad; small, neighborhood coffee bar, good) and those rare few who don't have a Starbucks nearby. "Since Starbucks isn't franchising, it's not into the saturation that a franchise company might be engaged in because Starbucks is limited by the capital it has available," says Boroian. "So what's happening is, these smaller chains are starting to open competing units to fill the gaps between the Starbucks locations, and they're undercutting their prices."

Two other trends we predict you'll want to watch for: caffeine-lovers who proudly flaunt their Dunkin' Donuts coffee cups while thumbing their noses at $3 lattes, and juice bars, whose number of franchised units exploded by almost 60 percent this year.