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Investing in a franchise is a popular route for entrepreneurs looking to run their own business but don’t know how or don’t necessarily want to start one from scratch. If you’ve done your homework and are ready to commit to a franchise business, it’s important to then find a franchise that suits you, your skills, interests and career goals. In this article, we are going to be comparing retail franchises vs. service franchises so you can get a better understanding of each, including their pros and cons.

 

What is Retail Franchising?

Retail franchising is a type of business franchising that most people are familiar with. If you’ve heard of McDonalds, or Sumo Salad for example, then you know what a retail franchise is – one that sells a proprietory tangible product However, there is so much more to know about retail franchising, especially if you’re considering investing in one.

 

The Pros and Cons of Retail Franchising

Retail franchising offers its very own set of pros and cons. In the right circumstances, retail franchising is a great career move for many people and can provide a substantial income. However, as with anything, it’s important you do your homework before making any final decisions.

Retail franchises come in all shapes and sizes, such as; restaurants, real estate and car rentals just to name a few. In Australia and New Zealand alone there are literally thousands of opportunities for entrepreneurs looking to enter the world of franchising. Usually, brand recognition is a highly enticing draw card for individuals looking to invest in a franchise. However, big brand names often come with heavy prices. Capital investment and initial fees for some of the big-name retail franchise brands out there can be substantial. However, if executed well, the potential payoff and ROI can be just as significant. Furthermore, if you are thinking of investing in a retail franchise, you’ll want to think about location. A retail franchise is often only as successful as the amount of foot traffic it gets. Invest some time looking for locations near you that could support a retail franchise and its demands.

When comparing a service franchise and a retail franchise, one of the biggest differences is your employees. In a retail franchise, you’re most often going to need a lot more employees. This means you’ll be spending time hiring, training, retaining and in some cases, firing employees. That’s why HR is a big part of operating a retail franchise. It’s true that finding and retaining good employees can be a challenge, but when you do find the right ones, they can really take your retail franchise to the next level.

Finally, it’s important to note that retail locations require building, remodeling, maintenance and updating every so often. They also require permits, insurance, and other regulations that need to be kept up to date. And of course, they require STOCK.

 

What is Service Franchising?

You might be wondering what service franchising is, as it’s not as well-known as retail franchising. Some common service franchising opportunities that are available in Australia and New Zealand include: trade and handyman, landscape, childcare, tutoring, education, brokering, lending and business coaching.

 

The Pros and Cons of Service Franchising

In general, service franchises offer a much more economical start-up and running cost than retail franchises. They also generally require less people to run the daily operations. A service franchise also often allows franchisees a lot more flexibility and mobility, including the opportunity to work from home. Many service franchisees enjoy not being restricted by long retail hours, which is a big incentive.

Perhaps the most enticing aspect of a service franchise is that they typically allow investors to enter at a fraction of the cost of retail franchises. However, the income potential can still be significant. Basically, from the get-go, service franchises are affordable and offer a lower upfront risk. Furthermore, because most service franchises do not require a bricks and mortar location, overhead is generally lower. And, it’s quite easy to create a quick and healthy cash flow when you work from a home base.

However, there are some disadvantages to service franchising. Due to the nature of service franchising, franchisees may not receive the same kind of customer transaction and volume as retail franchisees do.This can often limit how profitable your service-orientated franchise is. This is especially true if you are working alone, as there are only so many appointments you can fit in in a day.  

All in all, it’s important to evaluate the pros and cons of both retail franchises and service franchises. Either way, you can’t really go wrong when investing in a franchise if you’ve got the passion, drive and dedication to succeed as a franchise and business owner.

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