Franchise in Focus: Examining Five Core Factors of The NOW Franchise Opportunity.
Move Beyond the Basics: Five Core Factors to Examine for Clearly Understanding any Franchise Opportunity You’re Considering.
With so much information available at your fingertips on franchise concepts, it’s easy to get lost. Unfortunately much of this information does not go nearly far enough to allow you to truly make an informed decision one way or the other.
In order to make an informed decision, non-essential information must be stripped away and essential information added in to see the concept clearly for what it is.
If you’ve read any of our other blogs or reviewed some of our brand evaluations, you know the Franchise Evaluator is central to how we examine concepts.
Of the Evaluator’s fourteen factors, five factors, when considered together, do just that… strip away non-essential information and allow you to focus on those first macro decisions – “Is this a category, and a brand, I want to be involved with?”. All the other Factors cover areas that support these core five factors. But unless you are comfortable with the ‘Big 5’, the rest really do not matter.
Full descriptions of the Franchise Evaluator’s 14 Factors can be found in our e-book Franchising: Decoded and Demystified. If you haven’t done so already, we encourage you to download and review it.
Five Core Franchise Evaluation Factors.
Of the fourteen factors of the evaluator, five core factors shape the macro picture of any opportunity. They are:
- Market Factor 1 – Market Size
- Market Factor 2 – Industry Trend
- Market Factor 4 – Competitive Climate
- Model Factor 1 – Revenue Model
- Model Factor 4 – Franchisee Role
The story these Factors tell when put together are the 1). size, strength and potential longevity of the market for 2). the products and/or services you are considering. 3). How the business accesses the revenue potential in this market through the Revenue Model. And 4). what your role is in setting up and operating this business. Unless you understand and can answer these favorably, not much other information will be helpful.
It almost doesn’t even matter the concept you’re looking at. Your first major decision comes down to these five elements.
As we’ve discussed in other blogs, a business, especially franchises, are entities set up to 1). access revenue potential, 2). among a defined market through a 3). system to reliably and repeatedly deliver specified goods and services. Essentially a ‘Market + Model’ way to evaluate an opportunity plus added franchise specific features such as Internal Factors 3 and 4 – Franchising Experience and Leadership – which are about the Franchisor themselves. These Factors help determine how well a particular concept can do that.
Why The NOW Franchise Opportunity Hit Our Radar
Our assessment always starts with properly understanding the market. Even if the products and/or services are not something you personally consume, there are people who do.
It’s also looking at what will make up your customer base. Will they come from another service provider, or are there new customers in a market to create.
If you haven’t reviewed The NOW evaluation, we highly encourage you do so. You’ll see there is an increased focus on health and wellness among a growing base of consumers, especially since the pandemic. You’ll see there’s an increasing awareness among medical referral sources for massage and similar services to be part of patient healing and treatment modalities and you’ll see there are many more people who could be educated on these types of services, but not using them currently throughout the US.
In The NOW’s drive to expand nationwide, you’ll also see they are different from other massage/spa concepts in a fundamental way and driven by a highly experienced executive team.
Coupled with a membership-based revenue model, we wanted to explore further.
Putting The NOW through the Franchise Evaluator.
The full The NOW Franchise analysis of all 14 internal and external factors and total score can be found here. In this blog, we’ll run through the 5 Core Franchise Evaluation Factors covering the Market + Model + Franchise Feature assessment of an opportunity.
Market Factor 1 – Market Size: Scale: Small to Large Market Size Score: 8
Factor Definition: What population does the brand serve? Is the market broad, niche, or somewhere in-between?
Our Assessment: AMTA’s 2022 Massage Profession Research Report, 21% of American adult females and 25% of adult males reported receiving a massage from a professional massage therapist in the past year. While the demand for massage services spans all income groups, consumers with household income greater than $100,000 per year are more likely to get a massage than lower income households. Additionally, over half of all massage consumers got their last massage for health and wellness reasons.
References:
AMTA Massage Industry Fact Sheet
Factor Summary: We categorize the market size as a large market with plenty of opportunity to create customers new to massage.
Market Factor 2 – Industry Trend: Scale: Low to High Growth Trend Score: 9
Factor Definition: Is the overall industry growing, that is creating new customers who have never used these services before, or mature where most population segments are already using these types of products and services?
Our Assessment: The industry seems to be solidly a growth industry. In fact from the same AMTA research study, In 2021, 63% of consumers who got a massage for health and wellness reasons stated it was part of a treatment plan from a doctor or medical provider. Consumers are also active in seeking out massage therapists through various mechanisms.
As well, the medical community is active in referring patients to massage therapists.
Factor Summary: We categorize the Industry Trend as active and a high growth trend.
Market Factor – 4. Competitive Climate: Scale: Low to High Competition Score: 7
Factor Definition: Are competitors a major factor in operating your business? If so, is competition sparse or saturated? Will it matter to your business?
Our Assessment: It’s a little challenging to pin this number down as a sole practitioner massage therapist can be considered a competitor and at the same time, a potential partner/employee/resource. What the AMTA survey says is that the number of practitioners grew by 14% over the last decade. Other things to note:
- 77% of massage therapists describe themselves as sole practitioners
- On average, massage therapists work in about 2 different settings
Overall, in our opinion, the overall market feels more like a community.
Factor Summary: We categorize the competitive climate as low–mid competitive pressure.
Model Factor – 1. Revenue Model: Scale: Simple to Complex Model Score: 9
Factor Definition: This is one of the most important factors of all. To understand it you have to look beyond what the business physically does, the services performed or products sold and ask how does the franchise make money? Where does the revenue come from? How is it generated? Are financial performance representations made? Coupled with External Factors 1, 2 and 5 – Market Size, Industry Trend and Competitive Climate and the next Internal Factor 2, Franchisee Role – the true nature of the franchise starts to take shape.
Our Assessment: The NOW services are predominantly subscription/membership based. This creates a recurring revenue stream and predictable cash flow to help manage and grow a The NOW business. As these are services most clients tend to use consistently over time, this revenue model is in line with client expectations.
There also are earning claims in the FDD based on a significant operating history. You should review this with the franchisor and competent legal and financial resources.
Factor Summary: We categorize the Revenue Model as Simple.
Model Factor 4 – Franchisee Role: Scale: Service Executor to Business Manager Role Score: 8
Factor Definition: What role is the franchisee expected to play in starting, ramping and the ongoing operation of the business?
Our Assessment: A Franchisee of The NOW system is recommended to establish and operate a business, not perform the actual services. In other words, the Franchisee is not expected to be a massage therapist. There is a recommendation that the Franchisee run the actual business as in managing the core business systems like sales and marketing, operational procedures, finance, recruitment and retention, etc. But you are not obligated to do so. But somebody has to. The Franchisee can opt to hire a Designated Manager who will be responsible for some or all of these things. Either way, the Franchisee has wide latitude here to set up and operate the business as they see fit to maximize the opportunity within your territory. However you set up the business, a franchisee must look toward meeting their obligations to the business and to the Franchisor set about in the agreements. Along with adequate financial resources for this type of business and according to The NOW requirements, potential franchisees do not need specialized industry knowledge or skills. As expected, you must have an aptitude and willingness to learn the system and follow the procedures, as with most franchise systems. General management, sales, hiring, retention, marketing, motivation, problem-solving, issue resolution and a financial management acumen, should a franchisee have these skills, will all be helpful in starting and growing your business, but none are required outside of learning The NOW way of executing and managing these aspects.
Note: You may score this differently depending on what role you want to play in the business.
Factor Summary: We categorize the Franchisee Role as Business Manager.
The NOW Summary
This is a simple business model with a service that is growing in understanding among the customer base. With a clearly differentiated service, macro industry drivers expanding the customer base of the industry, being a leading brand in the category and a healthy growth rate and highly experienced and engaged executive team, this is a system we would invite closer scrutiny.
Review The NOW’s full evaluation of all 14 External and Internal Factors here.
As always, the information presented in this article and others is for guidance only and should not replace competent guidance from legal and financial professionals and your own due diligence.
And certainly contact us if you have any questions about The NOW or any other concept you may be considering.
