There are thousands of franchises out there. You can categorize them in an endless number of ways. In this article, we focus on two ways: locations and industries. We will finish with some considerations of identifying what kind of franchise is right for you.
Overview of Different Franchise Models
- Mobile Franchises: These franchises typically require minimal upfront investment and operate without a fixed commercial location. Mobile franchisees offer services directly to customers at their locations, which could be homes or businesses. This model is ideal for business owners who prefer a flexible work environment and lower operational costs. Major costs for mobile franchises include vehicles, marketing, and labor. The all-in investment can range between $100,000-$250,000 as an owner-operator, usually depending on the cost of the vehicle and tools you need. If you want to keep your job, you need to add a manager’s salary in addition to the other costs.
- Home-Based Franchises: Similar to mobile franchises, home-based franchises can be operated from the comfort of one's home, with the difference being you do most of the work at home. These are often service-oriented and include businesses like consulting, recruiting, and various forms of remote assistance. If you have a truly home-based franchise, it is usually because you are the main sales person and the franchise is either servicing the customer or there is no service beyond the initial sale. For example, recruiting is all sales and marketing. Once you made the match between employer and employee there is no further service to offer. These franchises often involve cold calling, networking, and sometimes door-knocking. You either need to be comfortable doing these things or have managed salespeople in the past. The all-in investment can range between $80,000-$150,000 as an owner-operator. The range mostly depends on marketing costs and time to get paid. For example, if you are in the medical industry, insurance may take 90 days to pay you so you need capital reserves to keep going until revenue comes in. If you want to keep your job, add in a manager’s salary.
- Storefront Franchises: These require a physical location and are common in retail and food service industries. Storefront franchises benefit from foot traffic and physical visibility, which can be crucial for attracting customers. Although they involve higher initial investments and operating costs, they have the appeal of having a contained environment where you only worry about getting customers to that location and servicing them there. These include retail, food, fitness, pet grooming or boarding, and health & wellness businesses. The major costs of a storefront franchise will be the lease, buildout, marketing, labor, and materials you will sell. The all-in investment can range between $250,000 - $1,000,000+. The range mostly depends on how big of a space you need, how much real estate costs in your area, how much you need to build out in the space, and how much your merchandise/ fitness equipment/ raw food costs.
Sectors within Franchising
Franchising spans a wide array of sectors, each offering unique opportunities and challenges:
- Food and Beverage: Perhaps the most recognizable sector in franchising, it includes fast food, cafes, and specialty food outlets. These franchises often require significant investment in equipment, inventory, and prime locations.
- Retail: Includes clothing stores, specialty shops, and supermarkets. Retail franchises benefit from brand recognition and standardized merchandise which can draw in a steady stream of customers.
- B2C Service-Based: Encompasses a broad range, from automotive services to personal care. These franchises often are mobile where you go to a house to perform a service. Examples would be renovations, cleaning, and construction. Some services may require a retail space, office, or warehouse. These services could be single sales like a kitchen remodel or recurring services like yard maintenance.
- B2B Service-Based: Similar to B2C but it mainly caters to businesses. This is a major distinction because the customer largely dictates the sales process. A consumer would typically click on an ad from Google or social media, go to a website, and inquire about an appointment. A business owner may follow that sales process but often it requires much more networking, competing quotes, and in-person follow-ups. These services are also typically recurring such as dumpsters, drain maintenance, or parking lot maintenance.
- Fitness and Health: Includes gyms, yoga studios, and wellness centers. This sector has seen growth with increasing health consciousness among consumers.
- Sports: In this category, you are typically running a sports league for adults or ongoing classes for children. This would be characterized by many part-time workers, low overhead, and recurring revenue.
- Health and Wellness: These franchises typically target non-essential services that are paid by the consumer. This could be more “medical” like testosterone replacement therapy or more “wellness” like massages or waxing.
Choosing the Right Type of Franchise
Selecting the right franchise involves assessing one’s interests, goals, and the local market. Prospective franchisees should consider:
- Personal Interests: Aligning a franchise with personal passions can lead to greater job satisfaction and motivation.
- Market Needs: Understanding local demand is crucial. A franchise that fills a market gap has a better chance of success. Also, you can find a market with dozens of players, but none of them are as professional or as technologically savvy as a franchise. The high number of businesses demonstrates a demand in the market. The professionalism of a franchise makes it easy to grab market share.
- Investment and Return: Consider the initial investment, ongoing costs, and potential returns. There is not a correlation between startup costs and return. Your biggest return will come in a franchise that is best suited to your skills or management experience. If you are hiring a manager, have more capital than you think it will take in case something happens to that manager early on and you have to pause the business until you can find a new one.
- Lifestyle Considerations: Would you prefer working from home, going to different homes or businesses every day, or going to a specific location? Are you comfortable with having the overhead of real estate? Are you comfortable managing a team that you can’t directly oversee their work every day because they are at various job sites? Would you prefer having everyone in a single location?
Once you decide what industries you are interested in and have unique skills or connections that you can capitalize on, you can start to hone in on the specific types of franchises within that industry. You don’t need prior industry experience but you may need sales, customer service, networking, or operations skills depending on the specific franchise. How you want your future to look will also determine if you should have a mobile, home-based, or real estate-based franchise.
It is difficult to know what franchise is looking for what kind of owner. That is why organizations like Raintree Franchising exist. Our Franchise Guides will learn about your unique skills and lifestyle preferences and then match you to the best-fit franchises.
If you are interested in starting the franchise matching process, you should start by taking the quiz here: https://www.raintreegrowth.com/own-a-franchise/
