Opinions expressed by Entrepreneur contributors are their very own.
For those who’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 transferring past the final and moving into the nitty gritty.
In the case of understanding completely different franchise fashions, there are a number of classes to concentrate on. First, you may wish 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 house 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 extra areas benefiting from the prevailing model presence and operational expertise. Many of those companies additionally combine superior expertise options to boost buyer engagement and streamline day by day operations.
Nevertheless, the reliance on a selected location introduces dangers. Components similar to native competitors, foot site visitors, and financial circumstances can enormously 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.
Associated: See Which Manufacturers Topped Entrepreneur’s forty sixth Annual Franchise 500
Service-based companies
Service-based franchises provide a number of benefits, making them a beautiful choice 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 by means of territory enlargement. With built-in expertise 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 plenty of provide increased recession resistance by offering important providers.
Throughout the broad class of service-based franchises, two major fashions emerge: project-based and subscription-model franchises. For example, take into account 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. Alternatively, a garden fertilization firm represents a subscription-model franchise, the place clients pay for recurring providers, guaranteeing a gradual income stream. Whereas each sorts fall below the service-based umbrella, their operational fashions, buyer relationships, and income buildings range considerably. This distinction permits franchisees to decide on a mannequin that greatest aligns with their objectives, monetary capability, and market circumstances.
Venture-based mannequin
Take into account a buyer in want of a brand new roof for his or her residence – this can be a high-ticket expense. Barring unpredictable climate like excessive winds or hail, they probably will not be shopping for a brand new roof greater than as soon as each decade or extra. Subsequently, your buyer base shouldn’t be depending on recurring clients. Whereas this will likely not sound like a great factor, there are advantages to this mannequin.
Usually, a lot of these companies can rent contractors primarily based on the wants of a specific venture. Moderately than having a big worker crew readily available ready for purchasers 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 price mannequin that implies that the franchisee can preserve comparatively decrease overhead prices.
That mentioned, pay attention to your strengths. The project-based mannequin requires a extra sales-oriented strategy. Since these are high-ticket transactions, the salesperson (probably you because the proprietor, except you’re hiring a basic supervisor) might want to work together with the shopper earlier than the service is carried out to construct belief and credibility. Moreover, take into account what sorts of initiatives you have an interest in taking over. Is your focus residential residence roofing? Business? The bigger the initiatives, the extra sales-savvy you may must be. Whereas this may result in a a lot bigger and extra worthwhile enterprise, an understanding of B2B is extremely helpful.
Additionally value noting: when you probably will not have many recurring clients, there are alternatives to acquire new clients by means of referrals from complementary service suppliers. This may require extra upfront time and advertising effort, however it could repay in spades if you happen to proactively construct this into your course of.
Different “project-based” franchise examples embrace: restoration, fencing, siding, home windows, transforming, flooring, window therapies, and residential or business portray.
Associated: The One Issue the High Franchises of 2025 Have in Widespread
Subscription-model
Alternatively, take into account clients who require lawn-fertilization providers. That is usually a recurring service that could be wanted bi-monthly (if no more regularly). Every service is low-ticket, however because of the ongoing nature of those providers and the flexibility to stack many purchasers day by day, this may also be a extremely worthwhile and sturdy franchise mannequin.
Not like the roofing instance above that may depend on contractors, a subscription mannequin could have increased fastened prices. Garden care corporations require constant labor workers, gear (sprayers, spreaders, vehicles, trailers, and many others.), and potential in-office personnel along with your basic supervisor. These prices add up.
Nevertheless, dissimilar to roofing, which depends on sturdy gross sales abilities, clients for garden care could not even discuss to a salesman. With built-in expertise (which is more and more frequent in these franchises), your clients could merely ebook on-line or request digital quotes from a nationwide name heart. One other value-add to the subscription-model is that your buyer base is actually limitless. Much less time can be spent discovering clients and constructing out every venture 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.
When you’ll definitely be taught classes as you go, in franchising specifically, it is vital to not put the cart earlier than the horse. The franchise mannequin you select at first of your franchise possession journey will be the distinction between success and failure. Making certain a appropriate match upfront is important for longevity in your future enterprise.
