Why buy a home service franchise?
Updated: Mar 16, 2020
Why should you buy a home services franchise?
When you begin your search for the right franchise for you, you could become overwhelmed by all the choices available. There are roughly 4,000 franchise brands and opportunities available in the United States. How the heck are you supposed to figure out which one is right for you and your future? Well, the same way that you make every big decision, by narrowing down the options.
Read our blog about how to decide whether a franchise is right for you: https://www.honestaberoofingfranchise.com/post/what-is-the-best-franchise-to-buy-in-2020
This article will help you decide if a home services franchise is right for you.
When most people think of franchises, they think of food franchises (McDonald’s, Burger King, Subway, Dunkin, etc.), but there are a ton of other types of franchises available that most people never even know exist. A large category of these relatively unknown franchises are in the home services industry (roofing franchise, window franchise, cleaning franchise, disaster restoration franchise, flooring franchise, painting franchise, etc.). These types of franchises, while unknown to some, can be hugely profitable!
Here is a list of the top 5 reasons to invest in a home services franchise.
1. Recession Resistant – Most home service franchises offer products or services that are needs, not wants. That is one of the main reasons why home service franchises are considered to be recession resistant. No matter what the economy is doing, if a person NEEDS something, they MUST get it. Think about it – If your roof is leaking, what choice do you have but to call a roofing company. Enter the roofing franchise! A roofing franchise can give someone the opportunity to serve the homeowner in the scenario above, even if the franchisee does not have roofing experience.
The roofing franchise example is just one of many examples that show how the home service franchise industry is recession resistant. The same story could be told about an HVAC franchise, a plumbing franchise, an electrical franchise, and so on. The ebbs and flows of the economy will have a dramatic impact on the franchises that offer wants (food franchises, retail franchises, travel agency franchises, real estate franchises, etc.). So, if you’re worried about the next recession, you should lean toward a home service franchise to hedge yourself from experiencing the perils associated with owning a business during a downturn in the economy.
2. Low Start-up Costs – The average cost to open a QSR (quick service restaurant) franchise, is in the high hundreds of thousands of dollars (millions of dollars for some). The costs include equipment, build out, real estate purchase, training, a hundred or so employees, GM salary, marketing, and huge amounts of working capital. All of those expenses come before you even serve your first burger!
Juxtapose that with the cost of opening a service franchise. The average service franchise start-up cost ranges from $20,000-$200,000. Most service franchises (especially roofing franchises) fall under the $100,000 mark. That’s a far cry from the millions of dollars it could cost to open a restaurant franchise. That means that the service franchise is a much more realistic way to start a business for most folks. With a home services franchise, you don’t have to be a millionaire to open a business, you can open a business to become a millionaire.
3. High Income Potential – One of the best reasons to open a home services franchise is for the enormous income potential, compared to the relatively low-income potential for some QSR and retail franchises.
A look at the Annual revenue numbers as reported in Item 19 of the respective FDD’s for franchises from each retail/resale franchises, food (QSR) and full-service restaurant franchises, and home services franchises:
Plato’s Closet – $391,795 (low) - $1,241,001 (high) GNC Franchise – $456,588
Subway (QSR) – $422,000 (No item 19 – source: https://www.businessinsider.com/what-it-costs-to-open-a-subway-2015-3) Dunkin Donuts (QSR) – $1,299,700 BWW’s (Full Service) – $2,99,947
HOME SERVICES FRANCHISE:
Paul Davis Restoration – $930,245 One Hour Heating & Air Conditioning Franchise – $1,117,395 (low) - $2,197,252 (high) Honest Abe Roofing Franchise – $8,521,187
As you can see from the examples above, the revenue potential in the Home services franchises supersedes that of the food and retail franchises – by a substantial margin in some of the brands. Couple those facts with the fact that it could cost you more than 10 times the amount in initial start-up expenses to open your food or retail franchise compared to your home service franchise, and those numbers look even better.
4. Open for Business Quickly – If you want to get your business open fast, you need to really consider a home service franchise. Compared to the amount of time between signing the franchise agreement and opening for business for a food franchise, the home service franchise is substantially faster. In most cases, you can have your home service franchise open within a month or two after signing the agreement. The average food franchise could take up to a year to get open – The average is 8 months. During those 8 months you will be burning through capital with large payroll, construction, training, and equipment purchases.
So, if time is of the essence, then you need to really consider a home service franchise for your new business.
5. Single Investment Scalable – The greatest strength of a retail or food franchise is it’s predictability. You open, you get customers, you earn revenue. It’s easy and predictable. Most food franchisors can predict with tremendous accuracy what kind of revenue you can expect as a franchisee. That kind of comfort and predictability is what draws thousands of people to open a food franchise every year. But, as with everything in life, one’s greatest strength can also be the greatest weakness. In the case of the food and retail franchise, its predictability is the greatest weakness.
The reason the revenue is predictable is because the sales are dependent on the traffic and population density of the logical geographic radius from which they are likely to pull customers. They will top out of that revenue potential quickly. Usually the revenue generated year 1 is similar to the revenue generated in year 10. The only way to scale the business (grow beyond a plateau) is to buy and open another location.
Compare that to the home service franchise – while the revenue levels will be less predictable, they are also very fluid and can be influenced by the franchisee greatly. Year 1 in a service franchise is typically the lowest in revenue. As the franchisee begins to grab market share, the revenue begins to increase. The revenue will continue to increase year after year (as long as the franchisee is assembling a great team that is being held accountable to the key performance indicators) until market share cap has been reached. But, since the chances of attaining that large of a percentage of market share is unlikely, the home service franchisee can continue to scale his/her business year after year, all without investing another dime of his/her own money.
Now that you understand the strengths and weaknesses of the different types of franchises available, you can continue to work towards determining which is best for you. On paper it looks like a home service franchise is the best choice – and in a lot of ways, it is. The real truth is that it depends on the individual. Being successful in a food or retail franchise takes a lot of money, a home service franchise takes a lot less money, but a lot more effort.
If you would like more clarification regarding which industry is best for you, call 866-587-5171 to speak to one of our knowledgeable Franchise Advisors today.