Retail Products & Services Industry – Franchises & Businesses
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Retail Products and Services Franchise & Business Opportunities
Retail Industry
General Retail Industry
The U.S. Retail Products and Services industry is well-establishedA business that has been running for at least ten years and depends on a strong distribution channel for all types of retail companies. The market provides several different goods such as food, apparel, furniture, jewelry, as well as many others. The retailer’s subsector within the industry employs 1 out of 5 Americans. In addition, independent and privately held retail businesses account for 95% of the whole retail industry. For retail companies, the holiday seasons are the most important time of the year.
The Retail industry directly employs 29 million people and supports over 42 million jobs. It accounts for 5.5% of gross domestic product (GDP) and generates around $5.3 trillion in salesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue..
Retail Industry Trends
Online retailing continues to be the fastest-growing segment within the industry, with e-commerce emerging as the major shopping platform. The sector is expected to grow 9% annually, reaching $1.3 trillion by 2030. In addition, retail companies must continue to embrace technologies and automation in order to better leverage growth. Even expecting a growth of 2.2%, slower than previous anticipated at 2.5%, the industry still has space to transform itself and encourage consumer spending.
Key Industry Numbers
The Paid-in-Full RateReferring to the SBA 7(a) Loan Program, how many businesses in a particular industry paid their SBA loans in full including interest relative to all the businesses in that industry. Note that many businesses are exempt from sharing their loan statuses as part of the… is when the SBA loan is fully paid off by the small business owner including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, indicating financial strength.
The Charged Off RateAlso can be referred to as the SBA Loan Default Rate, the charged off rate is percentage of businesses in set field (e.g. industry) that defaulted their loan, are unable to pay their loan in full, and/or there is no confidence that they will be… is the SBA loan default rate where loans have no confidence in being paid off by the small business owner.
For every 9 SBA loans fully paid including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, 1 SBA loan was unable to be paid back, or defaulted.Â
*SBA Loan Data from 2010-2019
*Non-Franchise Businesses taken into account: 71,503
Retail Franchises
The retail industry has had many changes as technological advances have developed over time. No longer are mom-and-pop shops strong enough against large competitors. The biggest shift happened when Amazon emerged as the largest retailer online. Rather than going to a brick-and-mortar store, consumers do not have to leave their home to find and easily compare products to purchase.
Retail Franchising Trends
Despite these constant changes in the retail space, there is still opportunity for growth in specialized stores with more depth and less breadth. One example is in the pet space. Many pet owners want to visit a store to physically see and feel the products available as they may not be able to trust it online, or get the product they are looking for on time.Â
Retail stores have also become more attractive by also offering additional services related to that specialized field. Like the example above in the pet industry, some pet stores can sell supplies along with services like grooming so it is a one-stop-shop for the pet owner. Most retail stores focus beyond products but also the services.
Within the retail category, it is important to understand the inventoryThe value of the total finished and unfinished goods and materials the business holds for future sale. and salesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. processes. Retail franchises are much stronger options compared to mom-and-pop shops as they usually have a recognizable brand or style that consumers would be more comfortable with. You will also have the support and systems in place from franchisors to support you if you have minimal business experience in the retail space.
How much can a Retail franchise cost?
Through our online business platform Vetted Biz, we have reviewed and analyzed over 2,900 businesses and franchises. For the businesses we have studied in the retail space, we have seen a range of investment amounts that can start at $8,800Â and can go all the way up to $14,261,150. Based on the retail business you decide to choose, it can be a very large retail space in a high foot-traffic location, or a small shop in a local neighborhood. Additionally, in our research, the average royalty fee was around 5.7%, and the average marketing fee is 2.5%. When studying the SBA analysis for the 7(a) loans disbursed from 1991-2019, franchises in the retail industry had a paid in full rate of 58.9% and a charged off rateAlso can be referred to as the SBA Loan Default Rate, the charged off rate is percentage of businesses in set field (e.g. industry) that defaulted their loan, are unable to pay their loan in full, and/or there is no confidence that they will be… of 17.5%. Although it had the highest charged off rates compared to the other industries, its paid in full rate was relatively better compared to the other industries. What is more important to understand is the specific business within the industry and how it can do in the future.
Average Retail Franchise Industry Percentage Fees
Standard Retail Franchise Industry Investment
This metric is the standard industry investment amount for a single unit franchise investment in this industry. Our research and analytics team analyzed over 217 franchise concept investment breakdowns in order to calculate this figure.
The Paid-in-Full RateReferring to the SBA 7(a) Loan Program, how many businesses in a particular industry paid their SBA loans in full including interest relative to all the businesses in that industry. Note that many businesses are exempt from sharing their loan statuses as part of the… is when the SBA loan is fully paid off by the franchisee including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, indicating financial strength.
The Charged Off RateAlso can be referred to as the SBA Loan Default Rate, the charged off rate is percentage of businesses in set field (e.g. industry) that defaulted their loan, are unable to pay their loan in full, and/or there is no confidence that they will be… is the SBA loan default rate where loans have no confidence in being paid off by the franchisee.
For every 9 SBA franchise loans fully paid including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, 1 SBA loan was unable to be paid back, or defaulted.
*SBA Loan Data from 2010-2019
*Franchise Businesses taken into account: 6,829
Sample Retail Franchise Income Statement
| Year 1 | ||||
|---|---|---|---|---|
| Base | % of Revenue | High | % of Revenue | |
| SalesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | $ 240,000 | 100% | $ 360,000 | 100% |
| Cost of Goods SoldAlso known as Cost of Sales, Cost of Goods Sold includes the direct costs associated with generating revenue. Depending on the business, it can be physical products, supplies, and/or payroll. More | $ 69,600 | 29% | $ 104,400 | 29% |
| Gross ProfitThe profit a business makes after deducting the costs involved in making, providing, and selling the goods and services. In an income statement, it is the sales minus the cost of goods sold.Gross profit = Revenue – Cost of Goods Sold | $ 170,400 | 71% | $ 255,600 | 71% |
| Expenses | Â | Â | Â | Â |
| Rent | $ 60,000 | 25% | $ 60,000 | 17% |
| Utilities | $ 2,100 | 1% | $ 2,100 | 1% |
| Marketing / Advertising | $ 18,000 | 8% | $ 24,000 | 7% |
| Insurance | $ 1,800 | 1% | $ 1,800 | 1% |
| RoyaltiesFees paid by a franchisee to their franchisor in order to operate a franchise location. They are usually on a weekly or monthly basis. More | $ 21,600 | 9% | $ 32,400 | 9% |
| Salaries / Wages | $ 13,900 | 6% | $ 16,700 | 5% |
| Repairs and Maintenance | $ 0 | 0% | $ 0 | 0% |
| All other expenses | $ 8,900 | 4% | $ 8,900 | 2% |
| Total Expenses | $ 126,300 | 53% | $ 145,900 | 41% |
| Â | Â | Â | Â | Â |
| Owner BenefitThe amount of money a business owner receives before taxes from a business’s operations over the course of a year. More | $ 44,100 | 18% | $ 109,700 | 30% |
| Net Profit MarginThe net profit margin shows how much a business is generating profit for every dollar of cost, expenses, interest, and taxes involved. It is displayed as the percentage of how much of each dollar collected by a company as revenue translates to net profit. The… | 18% | Â | 30% | Â |
| Â | Â | Â | Â | Â |
| Year 3 | ||||
| Base | % of Revenue | High | % of Revenue | |
| Sales | $ 384,000 | 100% | $ 558,000 | 100% |
| Cost of Goods Sold | $ 111,400 | 29% | $ 161,800 | 29% |
| Gross Profit | $ 272,600 | 71% | $ 396,200 | 71% |
| Expenses | Â | Â | Â | Â |
| Rent | $ 60,000 | 16% | $ 60,000 | 11% |
| Utilities | $ 2,100 | 1% | $ 2,100 | 1% |
| Marketing / Advertising | $ 18,000 | 5% | $ 24,000 | 4% |
| Insurance | $ 1,800 | 0% | $ 1,800 | 0% |
| Royalties | $ 34,600 | 9% | $ 50,200 | 9% |
| Salaries / Wages | $ 62,400 | 16% | $ 88,800 | 16% |
| Repairs and Maintenance | $ 0 | 0% | $ 0 | 0% |
| All other expenses | $ 8,900 | 2% | $ 8,900 | 2% |
| Total Expenses | $ 187,800 | 49% | $ 235,800 | 42% |
| Â | Â | Â | Â | Â |
| Owner Benefit | $ 84,800 | 22% | $ 160,400 | 29% |
| Net ProfitAlso known as net income or net margin, the net profit is the net income on an income statement. It is the revenue minus the cost of goods sold, expenses, interest, and taxes.Net Profit = Revenue – Cost of Goods Sold – Expenses – Interest – Taxes Margin | 22% |  | 29% |  |
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