Developing a high margin specialty niche in a stagnant industry is usually a formula for success (see Panera Bread’s twist on fast food, Sports Clips and Snip Its on hair cutting, Starbucks on coffee, Applebee’s on chain restaurants). Foot Solutions is a new shoe retailer looking to capitalize customers who require more comfortable foot wear, namely sufferers of diabetes, obesity and arthritis.
Foot Solution’s web site details the anticipated $200,000 investment to open a store. The company expects the franchisee to sink $65,000 in shoe inventory before opening, yikes!
Foot Solutions requires you use only their vendors and approved products. And you must use their supply division to order opening orders, construction materials, fixtures and equipment. Of course, you should now be asking yourself, “How much more will I be paying if I was permitted to source the products myself?” Be sure to benchmark the average vendor and supply mark-up by asking the franchisor or franchisees for the actual price sheets.
Part of the reason to buy a franchise is the ability to buy into an already strong brand name. It is unlikely that customers are already familiar with the Foot Solutions brand (though it is a descriptive trademark, so intuitively people will generally understand the business’s purpose). There is also the dynamic of how many Foot Solutions can a local market support. Is it one, three, five? Niche franchises are much more susceptible to competition so the protected territory is an important issue.
There is a heightened liability risk. Franchisees receive training in foot pathology and physiology along with understanding the feet and related problems and symptoms. What if your sales person recommends a shoe that worsens a customers foot problem, or a customer relies on what they believe is your superior medical advice? Make sure you have high liability insurance coverage.
On the brights side…
From their FAQ:
Is this business profitable?
We cannot tell you how much you will make. Each storeâ€™s profit will depend on a number of factors such as total sales, monthly rent, labor cost, etc. We can tell you that most of the products you will be offering have an approximate cost of 40%, based upon our suggested selling prices.
The population trends favor this sort of business – obesity, diabetes and number of seniors are increasing. Local doctors can help generate a steady flow of referral customers. The customers are usually require special shoes and are willing to pay the hefty premium, with an average sale is expected to be about $200.
This is the sort of play that can work and be sustainable through referrals from customers and doctors. The margins are high and one or two trained staff can mind the store. I’d tentatively buy it!
Update 7-9-2005: Here is another article that includes pictures of their digital foot scanning machine.