- October 26, 2018
- Posted by: Strategic Franchise Brokers
- Category: News
Children’s businesses have been in an exponential growth curve over the past decade and don’t look to be slowing down any time soon. With more and more families being dual income and having even busier lives, people are dependent on services and products which help them manage the overload of responsibilities that come with parenthood.
First, what constitutes a children’s product? Children’s products would be any product or offering that is aimed towards the children’s market segment. Children would typically be defined by kids age 15 or younger in most cases which means that the product or offering must be sold to the parents in order for a successful transaction to take place. Categories in the children’s product market would include Safety, Entertainment, Sports and Education while others might find their own unique micro-niche within these categories. All of these markets have experienced growth in franchising in general, but there are certain benefits to one category of children’s product franchises over others which will lend themselves to different skill set requirements from franchisees.
Second, how do children’s product franchises typically work? Usually, the franchisor has created, designed or produces a proprietary product which they sell to consumers. Franchisees will invest in a franchise in order to have the right to sell the product or services which tie into that product offering. The brand is many times built around the product offering and revenue streams consist of both selling the product outright to consumers or selling complimentary services which support the value proposition of the product offering. For example, our Firm, Franchise Marketing Systems, worked with a child safety franchise system years ago which had designed proprietary safety equipment and supplies which families could use to “Baby-Proof” their home or apartment for young children. In addition to the sale of the products, franchisees of this brand could sell consulting, design and other services which were offered to families to help them manage their home or workplace better and more efficiently for their children’s safety.
Third, what can you do in order to choose the best children’s product franchise from an investment standpoint? First, look hard at the numbers. Great products don’t always translate to great numbers. Review the financial model and understand how the business works. Verify that there is consumer demand for the product and the franchisor has defined a franchise marketing system to sell the product offering consistently at a profit. Look hard at the margins. Product sales can many times have higher operating expenses with cost of goods sold, verify that after royalties, the franchisee can still make money with the children’s franchise business. Verify that all channels of distribution have been wrapped into the franchise offering. What you want to avoid is a franchisor who is selling franchises and will also sell their product to no benefit of the franchisee through other channels like the Internet or catalogue sales. The territory description and protection defined in Item 12 of the FDD will clear up how this works.
Finally, when evaluating children’s product franchises, understand what will be asked of you in order for the business to succeed and whether your personality fits. Education product franchises for example will typically require that the franchisee to some extent execute the education, classes or teaching that comes with the business model. If you don’t have the patience or willingness to work with children, probably not a good market to go into. In other market segments, such as entertainment, you will need to be energetic, love working with families and able to deal with the emotional swings that come with a children’s birthday party. On the other hand if you are selling a children’s safety product, you will need to embrace the value proposition, be willing an able to sell and understand how to convince concerned parents that your product offering will help their children be safer. All of these are examples of scenarios in children’s product franchises where if you don’t fully evaluate your ability to work in the business before you invest, you could be stepping into a business that just makes for a bad match.
Originally Published on Franchising USA: https://franchisingusamagazine.com