Food Franchisees Are Shifting to Non-Food Investments — And You Should, Too Food franchise leaders are diversifying their investments into non-food sectors such as skincare and electronics, driven by rising costs and challenges in the restaurant industry.
By Dan Rowe Edited by Carl Stoffers
Key Takeaways
- The rising costs and challenges in the food industry have led franchisees to explore non-food franchises as a means of diversifying their portfolios.
- Veteran franchisees are successfully transitioning into non-food sectors like skincare and electronics.
- The strategy of blitzscaling — reinvesting profits from one store into opening additional locations — is being effectively used in non-food franchises.
Opinions expressed by Entrepreneur contributors are their own.
When it comes to portfolio diversification, like most food franchisees, I have traditionally turned to the holy trinity of restaurant franchise investments: burgers, chicken, and pizza. Further diversification meant leaning into sandwich, dessert chains or other emerging segments within foodservice, like when we grew the largest halal Middle Eastern chain, The Halal Guys.
But with the major headwinds facing the restaurant industry today, food franchisees looking for generational wealth face a conundrum. The costs associated with opening and running a restaurant these days are astronomical — getting harder. Everything is more expensive: equipment, wages, ingredients, rent. Yet, even with wages at an all-time high, restaurants are struggling to hire and retain employees.
That's why entrepreneurs like me are starting to also invest in non-food categories that cost less to launch, require far fewer staff and, most importantly, offer a greater return on investment.
Venturing into non-food franchises
To be clear, I'm not giving up on food. I've spent 30 years turning brands like Five Guys, QDOBA, and The Halal Guys into national players. As an early franchise partner in Five Guys, we made millions by growing and selling our franchises. This is a great business. It finally dawned on me though, that diversifying outside of food might be a good idea.
At Fransmart, we are in business to help people get wealthy through franchising. My passion — and fiduciary responsibility — is to grow the balance sheet as big as I can. Traditional brands are not cutting it these days, with once-thriving concepts like Rubio's and Red Lobster recently filing for bankruptcy.
Greg Flynn, the world's largest restaurant franchisee, recently rebranded his company after becoming a Planet Fitness franchisee — Flynn Restaurant Group is now the Flynn Group LP. Flynn believes Planet Fitness will be a great growth channel for his company since it requires fewer employees than restaurants.
"It's less intense," he told me when I interviewed him in April on my "Smart Franchising with Fransmart" podcast.
Discovering GLO30
As I advise clients to venture outside of food, I'm also putting skin in the game. For the first time since I became a Five Guys franchisee partner 15 years ago, I am now a GLO30 franchisee partner.
The Washington, D.C.-based GLO30, founded by Dr. Arleen K. Lamba, is a skincare studio that bridges the gap between facial spas and medical spas. It offers medically backed facials that blend medical science with customized, seasonally adapted, AI-assisted treatments, along with pharmacy strength at-home skincare.
A proprietary AI-based system named GLOria scans each guest's face on arrival and creates a personalized treatment for the aesthetician to perform. Proprietary maintenance products are sold on-site as well. Its core revenue stream is tied to the company's subscription mode. Members return every 30 days for a treatment that likely will vary every time, thus creating a reliable revenue stream. The clients build relationships with their service providers — more than 65% of GLO30's original membership groups are still part of the program.
Today, Fransmart is working with Dr. Lamba and her team to help them achieve a goal of growing GLO30 to 1,000 locations in 10 years.
Concerned about running a non-food business?
I didn't know much about skin care, but I do know about research and market trends. Health and self-care is one of the fastest-growing retail segments in the U.S. Already a $1.5 trillion global market, it remains highly fragmented. Despite this, it has become a sought-after tenant for Main Streets and shopping centers, as landlords cater to shoppers' health and wellness needs. Services like facials cannot be provided online, which is why businesses such as Massage Envy and Club Pilates have grown rapidly.
And I know about ROI. GLO30's incredible ROI can't be found in the restaurant industry.
As for learning the business, I'm in the same position as every other franchisee. I don't need to know the chemicals or how to operate the equipment. I'll hire the right managers, find the right locations, follow the playbook, and reinvest my profits into new stores. So, if your goal is financial independence, and to accumulate wealth by investing in a franchise, it's time to consider your options outside of food.
Blitzscaling for success
My GLO30 partners and I are using a different investing strategy called blitzscaling. Instead of opening multiple stores at once, we open one store at a time and use the profits to buy more GLO30s. It involves reinvesting profits into more stores, compounding returns. They keep investing until the stores can self-fund, allowing us to take profits or sell.
In contrast, restaurants typically take longer to reach that point with continuous reinvestment. Non-food franchises like GLO30 offer higher returns. So, while I'll always be passionate about food franchises, Fransmart is paving the way for entrepreneurs to earn generational wealth by investing in emerging retail brands that are on the brink of exponential growth.
We are proving it can be done, while having a little bit of fun along the way.
