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Service Based Franchising: Where the Action Is

Last week we ended our discussion of service concepts with the point that many of these businesses are based on customers making the choice to trade money (surplus) for time (deficit). The example we used was maid services, where time-starved customers spend money to buy time they can spend with their family and friends.

Other examples of businesses built on services that customers could perform themselves but choose to pay someone else for include lawn and landscaping services, residential painting, oil change, and installation of home entertainment systems. There are many more (see below).

Another, very obvious customer base consists of those unable to perform the service themselves because they lack the technical skills, equipment, discipline, or confidence. Some of these include the sectors mentioned above, as well as personal services such as tanning parlors, massage, coaching, and fitness training.

Some service sectors are considered "recession-proof," but that's a relative term. If you ask hair salon franchisees if their business has fallen off, it has - though not as steeply as some others. People still need their hair trimmed, but they're choosing to wait longer between visits, are buying fewer products to take home, and are opting for a basic cut and leaving out the coloring and styling extras.

Seniors, pets, and children share one thing: business is booming in these sectors. It's an ongoing source of amusement and amazement how Americans continue to spend so much on their pets, even when their budgets are tight - though franchisees in this sector remain grateful for this phenomenon. Spending on children's after-school enrichment services is benefiting from cutbacks in public school programs. And as seniors live longer and stay healthier, some of the hottest franchise brands are providing services to meet the growing needs of this expanding demographic.

New technologies are forming the basis of several franchise concepts that couldn't exist just a few years ago. Examples include lab testing (anything from blood tests to DNA), detective services, virtual secretarial services and other business support functions that can be performed remotely, and Internet-related services such as web design.

Pros

  • Many choices. Service franchises come in a wide selection, many with a relatively steady demand, no matter what the economy. Here is a list of some of the major categories you can choose from:
    • Automotive: repair, oil change, car wash, muffler and brake, paint and body, transmission
    • Business: tax services, accounting/bookkeeping, coaching, staffing, janitorial, signs, printing, pack and ship, security
    • Children: art, fitness, sports, tutoring, day care, preschool, photography
    • Consumer: hair cutting, travel, photography, sports, coaching, massage, tanning
    • Home: handyman (electrical, plumbing, HVAC, carpentry), painting, security, real estate, inspection, insulation, windows, junk removal, moving, real estate
    • Pets: washing/grooming, training, pet stores, boarding, poop-scooping
    • Seniors: home care, medical services, estate planning, renovations, physical therapy
    • Technical: computer and other equipment service and repair, web design, telecommunications
  • Easy entry. Service franchises frequently allow entry at a fraction of the cost of a retail or food franchise. Yet, the ROI remains attractive to many starting out on a small budget.
  • Low overhead. Many service businesses can be started from home, eliminating the expense of monthly rent and equipment. However, depending on the business, some equipment and supplies will be needed, whether it's tax forms or plumber's tools. And for a mobile business, at least one vehicle is necessary. Also, think about whether you want a business where you have to hire and manage a lot of people or one in which it's you and an assistant or partner. Many husband-and-wife teams with complementary skills have succeeded where one provides the service and the other manages the business and the books.
  • Flexible hours. Some concepts permit you to do business by appointment only, allowing you to set your own hours and balance your personal and business life. You don't have to open the doors at a set time and keep them open till 9 p.m. While you may earn less by limiting your work hours, you are able to maintain contact with your loved ones, versus managing a staff of teenagers 14 hours a day 7 days a week.

Cons

  • Staff. Some concepts will require you to be the manager and hire staff, rather than do it all yourself. How many houses can you paint in a day? If you're the type who prefers to work alone, choose a concept that allows this. Hiring staff is time-consuming and the source of much indigestion and expense.
  • Skills and training. Some service franchises require a specialized set of skills, training, or licensing to do business. It's one thing to fix your own electrical problems; it's another to drive to a job in a van with a brand name logo on the side, representing a company. Also, you may need to brush up on your "people skills": it's different fixing a leak for a housewife than repairing a broken pipe in your old job at the factory. Finally, there's the legal and financial side of managing a franchised business, which can require new tax forms, insurance, hiring skills, etc.
  • Burnout. This can happen in several ways. If business is good, you have so many customers you work around the clock seven days a week. If your business management and organizational skills are weak, you may end up spending 80 hours a week on what could take 50. Some franchisees, especially those starting out and working at home, find themselves distracted, and end up working long hours after the family has gone to bed. And if you're a one-person business, what happens when you get sick, or you have technical problems?

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