You’ve decided to launch a franchise business instead of starting up something from scratch. Congratulations on making this important choice!
Next comes a decision that could prove just as important to your success as an entrepreneur: whether to buy a franchise that retails a product, like McDonalds, or provides a service, such as ServiceMaster cleaning franchises.
The two franchise business paths – product or service – differ dramatically
Every franchise system has some common denominators, such as a concept owner, a fee structure, a royalty system, and a marketing and administrative program. But the nature and operations of a franchise business differ radically in pushing a product or a service.
“Retail franchises traditionally are opportunities that are driven by having a building, opening the door and waiting for people to walk in, whereas with a service business you’re typically heading out to do the business,” says Lori Kiser-Block, vice president of FranChoice, a Minneapolis-based company that helps entrepreneurs choose a franchise business.
Pros and cons of selling a product as your franchise business
Most product-oriented franchise businesses sell some sort of food, so operating them is like running a small factory. Your up-front investment in the franchise business, and especially in local real estate for the store, will almost always run into the low six figures. The many day-to-day issues include maintaining proper inventories, ensuring quality.
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