Service franchises cost less, but are they best for you?">
May 20, 2016 12:12 pm
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Service franchises cost less, but are they best for you?
In a previous article, I discussed the pros and cons of buying a retail franchise business. In this article, I’ll discuss the pros and cons of buying service franchises.
Just about every type of business has been franchised, so when you buy a franchise you’re not locked into one or a few industries. People often mistakenly believe that franchising is fast food, or that it’s coffee shops, or ice cream shops, but there are some 3,000 different franchise brands in North America alone.
If you don’t want to own a fast food business, or a business that serves food and beverages, you’re in luck. There’s a huge variety of service businesses waiting for you to discover them.
Are you a good fit for franchising?
Keep in mind, however, that no matter which franchise you decide to buy, you’ve got to be a good fit for franchising in order for it to work. Most of the failures we see in franchising are a result of misfit franchisees, or a misfit between the franchisee and the franchisor.
If you don’t have the personality for franchising, or if your value and belief systems are not consistent with those of the brand you decide to buy, chances are pretty good that you’re headed for a disaster.
You may be one of the thousands of prospective franchisees who are destined to buy a service franchise, and while a franchise in the Service Sector may be the perfect fit for you, you’ll still need to think about the pros and cons of your decision.
Pros & Cons to consider
You’ll find 400+ franchise opportunities, including retail and service businesses, as well as new businesses, at the International Franchise Expo at the Javits Center in New York City. This expo is sponsored by the International Franchise Association and occurs annually, usually in June. It’s the largest franchise expo in the USA. There are other IFA-sponsored expos on the West Coast and the Southwest
What are the pros of buying a service franchise? Here’s a short list for you to consider, along with my insights:
The advantages of a service business include:
That’s a huge money saver for you.
Unlike a retail business, where you’ve got to stock goods for sale, a service business might consist of zero inventory, or a very small amount of inventory.
Service businesses usually will not require a bricks and mortar location (which is another advantage – saving you rent money). You can work from your home, a small office, or a vehicle.
While you might want to stock up on certain items that you use daily or weekly, you don’t need to keep your shelves stocked, or store products in a warehouse.
Retail franchisees need to continually invest money for inventory, but that’s not an issue for the service franchise operator.
You’re the expert
People call you because they need your services and they know you’re the expert in town!
Yes, there are competing service brands, both franchised and non-franchised, but they’re often less visible than retail brands. This makes it easier for service franchise operators to brand themselves as local experts.
When someone needs their lawn cared for, or their appliances repaired, or their tax return completed, or their house painted, or their shoes repaired, etc., they want to rely on the local expert.
Good franchise service brands make certain that their franchisees know how to brand themselves in ways that make it easier for customers to remain loyal to them.
Once you repair the garage door, you slap a sticker near the handle to promote your name, your expertise, and your contact information. That’s just one way of planting your expertise with the customer.
Want your weekends free? They can be with certain service brands.
Unlike the franchise retailer, you don’t have to be open seven days a week and all hours of the day and night.
You probably can’t operate your business only when you want to, but the nature of service businesses are such that you can schedule your work so that it meets your personal needs.
Of course, some service franchises must be available all hours of the day and night. Plumbing, for example, and fire and water restoration. These services can’t wait for your personal schedule, and you may be called on during the middle of the night, or smack dab in the middle of the Super Bowl.
Service experts must be available when customers call, but not all service businesses deal with emergencies. How often does your dog need a haircut immediately?
Steady flow of work
You can stay as busy as you’d like with most service brands.
Granted, if there’s an abundance of competition in your market for the service you provide, you may not get all the business you want.
And, if the franchise brand you buy isn’t marketing savvy, you may see more business going to competitors than to you.
Nonetheless, homeowners and business owners, and consumers of all kinds, need services every hour of the day. Just in the time you’ve been reading this article hundreds of hot water tanks are bursting across the USA! (Okay, maybe only dozens, but you get the point).
Few or no employees
It’s another cost savings, not to mention other benefits such as keeping your sanity!
One of the major challenges for retail franchise owners is recruiting, training, managing and firing employees. It’s a constant struggle.
Even in a country with high unemployment rates, some jobs are hard to fill. Retailers aren’t known for paying high wages, so they tend to attract teenagers, senior citizens, people with no or few skills, and, unfortunately, people with a criminal record.
How big do you plan to build your service business? The answer to that question dictates your need for employees. You might be able to handle it yourself, but you may need help.
When you’re out in the field, for example, who’s taking your phone calls? Who’s scheduling your jobs? You could find a franchise that provides these and other services for you, or you may need to hire an assistant.
Some service brands do, in fact, require employees. You probably aren’t going to paint many houses all by yourself. Or if you’re the only maid in your maid service franchise, you’ve only got so much capacity.
And what if you’re ill?
Think about your desire to work (or not) with employees, and then buy a franchise that meets your needs.
The disadvantages of a service business include:
What are the cons of buying a service franchise? Here’s a short list for you to consider, along with my insights:
Must be good at face-to-face selling
If you don’t like sales, who’s going to sell for you?
You may be the local expert in providing your service, but customers still expect to be sold. Sometimes you can close the sale by phone, but often times you’ll need to meet the prospect in advance to close the deal.
Keep in mind that other local experts may be bidding on the business, too, and the most persuasive expert will likely get the business. Sharp interpersonal skills to relate to customers is important in a service business.
Are you good at selling, and building relationships with customers?
Retail franchise buyers can expect the customer to come to them, i.e. at the mall or at the franchisee’s store location, etc. Selling is still required, but selling tangible goods can be easier than selling an intangible service.
Franchisors frequently include sales training for franchisees to help them attract and win business. But if you’re not cut out for sales, you may not be ideal for a service business.
Clients want you, the expert, not your employees
If you’re working solo in your business (which limits the amount of money you can make), you may not mind selling the job and showing up to complete the job, too.
In fact, your customers want you, the expert. Customers often resent it when the expert sells the job and sends an employee to do the job. However, that’s all a matter of how the job is sold and closed.
You can learn how to sell a job and let the customer know that you, personally, will not complete the job, but another “expert” from your company will.
Low entry barrier, so competition is keen
Lots more franchise buyers can afford a service business than a retail business. In addition, people who don’t want to buy a franchise often start service businesses because they’re not very costly.
Service businesses sell quickly often because the buyers are looking for an investment under $100,000, or even under $25,000. There are service businesses priced under $10,000.
With more people buying service franchise businesses, as well as already owning non-franchised service businesses, you can expect more competition. That’s why it’s important to brand yourself as the expert, and a good franchisor will help you do that.
If you’re entrepreneurial, and you like the idea of generating substantial sales for your own business, you may be most comfortable in a service business. You may not have to pay rent, you won’t need inventory, and as long as you’re okay with getting out into the community and selling your service, you can create a thriving business.Tags: Service franchise
This post was written by John Hayes