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When people want to become franchisees, they have to make a big decision: What type of business do I want to run?
There are thousands of brands and concepts to choose from-hair salons, fitness studios, lawn care companies, moving services, and more. But they all generally fall into one of two business models. There are "location-based businesses," like hair salons and fitness studios, which have retail storefronts where the customer receives the service at a fixed location.
Then there are "service-based brands," like lawn care and moving companies, which do not have a storefront. The service is provided wherever the customer is.
There are some key differences between brick-and-mortar and service-based businesses. There are different criteria to start them and to grow them. Here are the six most important.
1 Investment cost
Real estate is usually the biggest factor here. The more real estate intensive a business is, the greater the investment level. Location-based, brick-and-mortar franchises generally have higher initial investments.
Building the retail space can be pricey. Picture a fitness studio. You need equipment, like stationary bikes or pilates machines, but also a high-tech sound system, televisions, changing rooms, showers-not to mention the flooring, interior architecture (walls, stage, various rooms), trade dress, and more.
On the other hand, a service-based brand doesn't necessarily require real estate. (Some may even operate from a home office.) Some service-based brands may require storage space to house vehicles or equipment to be deployed at the customer's location. But these sites are ideally less visible and lower-cost industrial spaces which require few leasehold improvements compared to a customer-facing retail space.
This story is from the Startups - Summer 2024 edition of Entrepreneur US.
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This story is from the Startups - Summer 2024 edition of Entrepreneur US.
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