Low Investment, High Margin Businesses Make Great Franchises
As Published in Franchising USA Magazine: https://franchisingusamagazine.com
Low Investment, High Margin Businesses Make Great Franchises
In interviewing a potential franchise buyer for a home staging franchise we work with, the question arose from the buyer, how can you tell me that buying “air” for a $40,000 franchise fee makes sense? The home staging franchise had great validation with a strong corporate location, years in business and the first franchise location would be literally next to the corporate operation. In my years in franchising, these attributes all lend themselves to what would typically be considered a very strong franchise opportunity. The question wasn’t much of a surprise as I’ve heard it before, even from the business owners themselves when considering whether to franchise their business, will people really buy this franchise even though we don’t have a fixed location with signage? The answer is a resounding yes if you look at the market at large and what franchise brands are selling consistently. Mosquito Spraying, Home Inspection, Home Restoration, Painting Services, Shoe Shining, Deck Building and Process Serving are just some samples of markets that have franchised with incredible efficiency and shown how powerful a home-based business can be for both the franchisor and the franchisee.
Buying “Air”.
Yes, it is true that there may not be as much of a tangible building or set of equipment that you could touch with a traditional fixed location franchise such as a restaurant or a retail business, but that feel good sensation of being able to touch your business comes with a heavy cost and significant risk. My response to this particular franchise candidate when questioning the value of the air being purchased was to first explain how franchising typically worked in most transactions. There is always “air” being purchased, even when there is a fixed location being opened. A McDonald’s restaurant comes with a $45k franchise fee which pays for intellectual property, training, support, guidance and branding, the equipment, restaurant, build out and tangible items are a $1mil to $2mil investment outside of that franchise fee. So in this example, the value of the air really has nothing to do with how tangible the business assets are, the value of the franchise needs to be evaluated based on franchise value itself, not the assets that are required to operate, read more.
Business without the Ball and Chain.
Home Based businesses have been remarkably successful in franchising in large part because it has opened up the opportunity for business ownership to a large pool of potential investors who until recently didn’t have many options. Today, there are countless franchise opportunities one can invest in with less than $150,000 and have money left over for working capital. TrueServe, a process serving franchise allows franchisees the opportunity to get into the lucrative and repeatable process serving market from a home office and presents some of the best, high margin business in franchising I’ve seen. Enviromerica offers compliance training for OSHA and other workplace needs and has created a system which offers franchisees a fully functioning, cloud based platform and the potential to build an incredible business from your guest bedroom. MasterPiece Decks delivers similar financial capacity from a home office scenario. These homebased franchises do not require the heavy debt load and capital burden of restaurants, retail or other high-capital franchises and therefore are some of the most attractive franchises on the market.
Franchise Marketing Systems That Drive Business.
The critical component to what I have seen makes these homebased franchises not only viable, but also scalable on a large degree is the ability to drive business throughout the entire system. The good homebased franchises have incredible marketing systems that can be leveraged, implemented and executed in different markets and by people of different skill sets. Check the computer admin. A strong franchise marketing system integrates local marketing, regional, cooperative and national advertising funds to create a symbiotic relationship between franchisor and franchisee and show measurable top line results for the franchise owners. I am a big proponent for homebased franchises, but first you need to identify which brands have their marketing system defined.
Chris Conner
President
Franchise Marketing Systems