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When you’re new to franchising, the abundance of knowledge can appear overwhelming. How are you aware the place to start out? You could have a generalized understanding of franchising, however a part of performing due diligence means shifting past the final and entering into the nitty gritty.
In relation to understanding completely different franchise fashions, there are a number of classes to concentrate on. First, you may need to perceive the variations between “brick-and-mortar” and “service-based” franchises.
Location-based (Brick-and-Mortar) companies
Brick-and-mortar franchises require vital upfront funding, significantly for actual property. Establishing a bodily storefront or workplace area can contain excessive prices, and discovering the proper location is vital to success. Consequently, these companies typically expertise an extended ramp-up interval earlier than reaching profitability.
Regardless of the excessive preliminary prices and prolonged setup time, brick-and-mortar companies are recognized for his or her scalability. As soon as a profitable mannequin is established at a single location, enlargement turns into extra possible, with further places benefiting from the prevailing model presence and operational expertise. Many of those companies additionally combine superior know-how options to boost buyer engagement and streamline each day operations.
Nevertheless, the reliance on a selected location introduces dangers. Components corresponding to native competitors, foot traffic, and financial circumstances can drastically affect the success of the franchise. Moreover, in comparison with service-based fashions, brick-and-mortar franchises are usually much less recession-resistant, as discretionary spending tends to lower throughout financial downturns.
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Service-based companies
Service-based franchises provide a number of benefits, making them a beautiful possibility for potential franchisees. They usually require a decrease preliminary funding in comparison with brick-and-mortar companies, have a faster ramp-up time, and are extremely scalable via territory enlargement. With built-in know-how capabilities, these franchises can streamline operations and enhance buyer expertise. Moreover, as a result of providers are carried out on the buyer’s location, they carry negligible location danger, and lots of provide larger recession resistance by offering important providers.
Inside the broad class of service-based franchises, two major fashions emerge: project-based and subscription-model franchises. As an example, think about a roofing firm for example of a project-based franchise. This mannequin entails offering one-time, high-value providers, with income tied to particular person initiatives. Then again, a garden fertilization firm represents a subscription-model franchise, the place clients pay for recurring providers, making certain a gradual revenue stream. Whereas each varieties fall beneath the service-based umbrella, their operational fashions, buyer relationships, and income buildings differ considerably. This distinction permits franchisees to decide on a mannequin that greatest aligns with their objectives, monetary capability, and market circumstances.
Challenge-based mannequin
Contemplate a buyer in want of a brand new roof for his or her dwelling – it is a high-ticket expense. Barring unpredictable climate like excessive winds or hail, they doubtless will not be shopping for a brand new roof greater than as soon as each decade or extra. Subsequently, your customer base is just not depending on recurring clients. Whereas this will not sound like a great factor, there are advantages to this mannequin.
Usually, all these companies can rent contractors based mostly on the wants of a specific challenge. Somewhat than having a big worker workforce readily available ready for patrons to purchase your product, a project-based franchise will wait till an order has been positioned earlier than hiring contractors to carry out the service. It’s possible you’ll solely want your self and an in-office employee to handle initiatives. This presents a variable value mannequin that implies that the franchisee can keep comparatively decrease overhead prices.
That mentioned, pay attention to your strengths. The project-based mannequin requires a extra sales-oriented method. Since these are high-ticket transactions, the salesperson (doubtless you because the proprietor, except you might be hiring a normal supervisor) might want to work together with the shopper earlier than the service is carried out to construct belief and credibility. Moreover, think about what sorts of initiatives you have an interest in taking up. Is your focus residential dwelling roofing? Industrial? The bigger the initiatives, the extra sales-savvy you may must be. Whereas this may result in a a lot bigger and extra profitable business, an understanding of B2B is extremely helpful.
Additionally value noting: whilst you doubtless will not have many recurring clients, there are alternatives to acquire new clients via referrals from complementary service suppliers. This may require extra upfront time and advertising and marketing effort, however it could repay in spades in case you proactively construct this into your course of.
Different “project-based” franchise examples embrace: restoration, fencing, siding, home windows, transforming, flooring, window remedies, and residential or industrial portray.
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Subscription-model
Alternatively, think about clients who require lawn-fertilization providers. That is usually a recurring service which may be wanted bi-monthly (if no more often). Every service is low-ticket, however as a result of ongoing nature of those providers and the power to stack many shoppers each day, this may also be a extremely worthwhile and sturdy franchise mannequin.
In contrast to the roofing instance above that may depend on contractors, a subscription mannequin could have larger mounted prices. Garden care firms require constant labor staff, gear (sprayers, spreaders, vans, trailers, and so forth.), and attainable in-office personnel along with your normal supervisor. These prices add up.
Nevertheless, dissimilar to roofing, which depends on robust gross sales expertise, clients for garden care could not even speak to a salesman. With built-in know-how (which is more and more frequent in these franchises), your clients could merely e-book on-line or request digital quotes from a nationwide name middle. One other value-add to the subscription-model is that your buyer base is basically limitless. Much less time will likely be spent discovering clients and constructing out every challenge to match their wants. A garden care firm provides a selected set of providers that may be templatized and repeated as a plug-and-play service.
Different “subscription-model” franchise examples embrace: irrigation, pest management, pool upkeep, HVAC, window cleansing, restaurant hood cleansing, parking-lot upkeep, pet grooming, little one enrichment, and senior care.
Whilst you’ll actually be taught classes as you go, in franchising specifically, it is essential to not put the cart earlier than the horse. The franchise mannequin you select in the beginning of your franchise possession journey could be the distinction between success and failure. Making certain a suitable match upfront is significant for longevity in your future enterprise.
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