The Four Franchise Categories
With nearly 4,000 franchise concepts in the United States, sifting through all your available options can be a daunting task. QSRs (Quick Serve Restaurants) are the most recognizable type of franchises, but the franchise universe extends far past Colonel Sanders and the Golden Arches. In fact, every franchise can easily be segmented
into one of four categories. No one category is “better” than the others, but they do have different client bases, employees, marketing strategies and owner involvement. To avoid wasting time and energy exploring businesses that do not make sense for you, you should first focus on understanding which of the four categories best fits your vision, professional background, no deposit bonus australia local market and desired involvement in the business. This will allow you to conduct a more targeted search, making your quest for the perfect business far more manageable.
Here are the four main categories of franchising:
Simple Retail
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Simple Retail franchises are cash-and-carry businesses usually found in small strip centers. By definition, a Simple Retail franchise provides a product or service that consumers already know they want- a customer walks into McDonalds knowing they want a cheeseburger.
Since Simple Retail requires a physical storefront, identifying an ideal location for your business is of upmost importance. Simple Retail relies on unskilled labor, which can result in higher than normal turnover. Although employee retention is low, hiring new employees is generally not too challenging. Simple Retail franchises are easy to operate, but earning potential can be limited. Subway is a well-established franchise brand, but a single location may only net $40k per year. For this reason, your path to scale a Simple Retail franchise is through acquiring multiple locations. Scaling to multiple locations is relatively straight-forward. The formula doesn’t change! If you can effectively operate one location, it’s reasonable to assume you can effectively operate ten locations.
The best known examples of Simple Retail franchises are food, hair salons and fitness concepts. Since business is generated through marketing and site-selection, candidates without a desire to do direct sales are commonly drawn to Simple Retail. Owner involvement can vary, but semi-absentee and fully passive concepts are common in Simple Retail.
The average total startup cost to open a Simple Retail franchise is $150k-$300k.
Sophisticated Retail
Sophisticated Retail is like Simple Retail, but with a larger scale of operation and a different approach to sales. In Sophisticated Retail, you must provide the customer some sort of consultation before they can make a purchase. Automotive Repair is a good exampleof this type of transaction; before a sale can be made, a mechanic must first diagnose what needs to be fixed. Since the sales process is more nuanced, operating a Sophisticated Retail franchise requires specialized labor. Specialized labor is harder to find, but easier to retain.
A Guide To Franchise Exploration
When exploring Sophisticated Retail brands, you should look for a franchisor with a strong process for identifying and hiring employees. Sophisticated Retail requires more than a strong physical locationmarketing, referrals, advertisements, and direct mailing are also used to attract new business.
Sign Shops, Printing Shops, Urgent Care, Beaty Care and Automotive concepts are all examples of Simple Retail.
Since Sophisticated Retail generally requires more equipment and space than Simple Retail, the average startup cost is $300k-$500k. Like Simple Retail, your path to scale a Sophisticated Retail franchise is through adding more locations.
B2B
A business-to-business franchise provides other businesses a service that is more cost effective for them to outsource. This type of franchise will usually require you to travel to the businesses’ location and give an estimate before closing a deal. Of the four franchise categories, B2B concepts require the most marketing with cold calls, networking, and advertising.
B2B franchises typically appeal most to candidates who are experienced in professional settings and have a propensity for selling (or a willingness to hire for it). Most B2B concepts do not require a physical storefront, which lowers operating cost. B2B franchises also tend to be more recession resilient than retailbased concepts. Rather than open additional locations, your path to scale a B2B franchise is through adding employees.
Examples of B2B franchises include Commercial Cleaning, Marketing Firms, Back Office Support, Drug Testing, Business Coaching, Employment Services, Staffing Agencies and Cost Reduction. The average total startup cost to open a B2B franchise is $75k-$250k.
Home Services
A Home Service franchise is like a B2B franchises in that a physical location is not typically required. A Home Services brand is one that provides a service directly to a consumer, usually in their home.
Like B2B concepts, Home Services brands require proactive marketing efforts. When evaluating Home Services franchise brands, you should look for a franchisor who can make the phone ring for you. Some Home Services franchises even support their franchisees with a corporate call-center.
This franchise category typically appeals to candidates with a blue-collar background and strong interpersonal skills. Like B2B concepts, the path to scale a Home Services franchise is through adding crews, trucks, caregivers, etc. Home Services concepts also tend to be recession resilient.
Examples of Home Services concepts include Painting, Home Rehab, Handyman, Senior Care, Pest Control Services, Property Management, Childcare and Emergency Restoration. The average total startup cost to open a Home Services franchise is $75k-$150k.