Retail Products and Services Franchise & Business Opportunities
Retail Industry
General Retail Industry
The U.S. Retail Products and Services industry is well-established and depends on a strong distribution channel for all types of retail companies. The market provides several different goods like food, apparel, furniture, and others. The Retail industry employs around 1 in every 5 Americans. 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 sales.
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 previously anticipated at 2.5%, the industry still has space to transform itself and encourage consumer spending.
Key Industry Numbers
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Paid-in-Full Rate
The Paid-in-Full Rate is when the SBA loan is fully paid off by the small business owner including interest, indicating financial strength.
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Charged Off Rate
The Charged Off Rate is the SBA loan default rate where loans have no confidence in being paid off by the small business owner.
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SBA Loan Success Ratio
For every 9 SBA loans fully paid including interest, 1 SBA loan was unable to be paid back, or defaulted.
-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.
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. The focus of most retail stores extends beyond products to include services as well
Within the Retail category, it is important to understand the inventory and sales 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 $8,800 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 was 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 rate 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
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Royalty Fee
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Stability Rate
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Marketing Fee
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Growth Rate
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Failure Rate
Standard Retail Franchise Industry Investment
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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.
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Paid-in-Full Rate
The Paid-in-Full Rate is when the SBA loan is fully paid off by the franchisee including interest, indicating financial strength.
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%
Charged Off Rate
The Charged Off Rate is the SBA loan default rate where loans have no confidence in being paid off by the franchisee.
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:1
SBA Loan Success Ratio
For every 9 SBA franchise loans fully paid including interest, 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 | |
| Sales | $ 240,000 | 100% | $ 360,000 | 100% |
| Cost of Goods Sold | $ 69,600 | 29% | $ 104,400 | 29% |
| Gross Profit | $ 170,400 | 71% | $ 255,600 | 71% |
| Expenses | ||||
| 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% |
| Royalties | $ 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% |
| Owner Benefit | $ 44,100 | 18% | $ 109,700 | 30% |
| Net Profit Margin | 18% | 30% | ||
| 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 | ||||
| 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% |
| Owner Benefit | $ 84,800 | 22% | $ 160,400 | 29% |
| Net Profit Margin | 22% | 29% |
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