Home Services Franchising 101

Home Services Franchising 101

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People who lead busy lives don’t always have the time to do things around their home like cleaning, gardening, looking after their pets or cleaning their pools. And that’s where someone with a little entrepreneurial spirit can step in and make some serious money with a franchise in the home services industry.

Why Choose the Home Services Industry?

While people can accumulate possessions or money relatively easily, accumulating more time is a bigger challenge. One way for people to get more time for themselves is by not spending it on household tasks. And people who have money are usually quite willing to pay someone to take care of a household task for them so they can spend that time doing something else.

Someone who can afford to have the carpets cleaned for them is more likely to do that than bother renting the equipment and cleaning their carpets themselves. The same goes for general cleaning, pool cleaning, doing home repairs, pet grooming, etc.

And, speaking of limited time, as the population ages, there is also a growing demand for senior home care. Many people want to stay in their homes as they age and this area is ripe for people to get into with a franchise.

At the beginning of 2013, the International Franchise Association’s Franchise Business Economic Outlook estimated that the Commercial and Residential Services category would grow by 1.6 percent over the previous year, employing over 356,000 people and creating $53.2 billion in revenue.

Along with the Business Services category, the Commercial and Residential Services category ranked as the top sector in both franchise employment growth and growth of the number of establishments in 2013.

Variety

The home services franchising industry has a bevy of varied opportunities to choose from to fit whatever interests you may have. These include:

  • Construction and Building
  • Delivery
  • Handyman
  • Home Care Assistance
  • Home Cleaning
  • Home Improvement
  • Home Inspection
  • Home Moving
  • Junk Removal
  • Lawn Care
  • Maintenance
  • Pet Home Services
  • Plumbing
  • Repair and Painting
  • Restoration
  • Security

You may find it suits your neighborhood and area to have more of a niche franchise and those are plentiful, as well.

You can find franchises that specialize in eliminating mosquitoes and other pests (including deer) from yards, cleaning barbecues, mobile pet grooming, window tinting and many others.

Money

Buying a franchise wouldn’t be worth it if it didn’t generate cold, hard cash and home services franchises do just that. In an August 2012 interview with Molly Maids CEO Craig Donaldson, he reported that 30 percent of the company’s 450 franchise owners generate over one million dollars in annual sales and all together, they employ about 7,000 people in the United States.

According to the Franchising Business Review (FBR), a research firm that specializes in franchising, in 2011 the average gross sales for a CertaPro Painters Business was $700,323. That was up from $643,577 in 2010 and $549,215 in 2009.

And franchising website franchisehelp.com says the landscaping franchise industry makes an annual revenue of about $50 billion; the moving franchise industry, which is a low cost industry to join, generates about $15 billion annually; while painting company franchises generate $30 billion. The $11 billion pest control franchise industry has been steadily increasing and grew by nearly six percent last year.

The FBR also released a report in 2012 that showed the top home care aid franchises grossed one million dollars or more, with gross margins at 30 percent to 40 percent. And because the number of seniors continues to increase, that particular sector is relatively recession proof.

Satisfaction

Home services franchises were well represented in the 2013 Franchisee Satisfaction Awards. These awards, given out by the FBR, are based on surveys done with thousands of franchisees across dozens of different industries.

In the category of Top Franchises by Investment Level, 11 of the top 20 were home services. Out of the top 20 franchises with 250+ locations, home services were represented six times.

These franchises included lawn care maintanence, senior home care, painting, carpet cleaning franchises and other home services.

Getting Started

While it’s not easy, there are good reasons to invest in a franchise.

Minimization of Risk: While the failure rate for new businesses hovers around 90 percemt within the first five years of operation, the success rate of franchises is about that same number.

Established Business Product or Service: The success rate of franchises versus standalone businesses is easy to explain, as the franchising business model allows you to adopt a proven product and brand name that people are familiar with already, saving you from having to do the difficult initial push of breaking into the market.

Proven Business Model: Franchise businesses have gotten to where they are because of solid business models. And because they want their franchisees to be successful, they pass that knowledge onto you. The knowledge and experience they pass on includes operating and management systems developed by the franchise company, plus uniform operational standards and procedures.

Brand Recognition: Branding is probably the most important component of marketing, and with franchising, you get an already established brand name in a crowded market.

You can find home services franchising opportunities at a number of places online, including:

All these websites offer free information about the various franchising opportunities available. You can search for franchising opportunities by industry, brand name, investment commitment, or region and read about what franchising option would be best for you.

The home of the International Franchising Association online, franchise.org, also has a plethora of information on the subject and the association’s USA branch site, ifausa.org can help you get yourself set up.

What to Ask a Franchisor

While there are some basic questions you should ask a franchisor when looking to purchase a franchise, the FBR suggests going much more in depth with your questions.

Some of the basics are:

  • How many years has the franchisor been operating?
  • How many franchisees does the franchisor have?
  • Can the franchisor provide a list of all franchisees?
  • How does the franchisor choose its franchisees?
  • How much is the initial franchise fee?
  • What are the franchisor’s plans for future development?
  • What is the competition for the product?
  • What kind of support does the franchisor provide to franchisees?

And the real probing questions the FBA suggests asking are:

  • What characteristics make your top-performing franchisees successful and what is it specifically about my background that you think makes me a good fit for your system?
  • Even in the best business partnerships, disagreements and conflicts happen. If I am a franchisee and I have a problem, what processes do you have in place to come to a fair solution that works for both of us? Can you give me a couple of recent examples of issues with franchisees and how they were resolved?
  • I know that for at least the first few years I will be very dependent on you and your staff to help me succeed as a franchisee, and I think your fees are very reasonable given the support I will need. But in the future, when I am more self-supporting, where will I see the value from the fees that I am paying you?
  • What trends do you see in this industry that could have a negative impact on the business over the next decade, and what are you doing strategically to overcome these challenges?
  • Do you have a franchisee satisfaction report that is publicly available?

These highly specific questions will ensure that the franchisor actually does want to see you succeed and not just sell you a franchise and leave you to your own devices.

Finding Financing

After you’ve found a franchising opportunity that suits you, you’ll need financing to get it up and running. Your options include:

Self-Direct 401k

A Self-Directed 401K program can allow you to capitalize your new business with no taxes or penalties if you have money in a 401K, IRA, profit-sharing, or annuity plan. You can use the money for franchise fees, equipment, working capital, or other expenses.

SBA Loans

Many franchise owners utilize Small Business Administration loan programs.

Conventional Lending

Conventional financing also has its benefits, specifically combining equipment leasing with the ability to also include hard costs like leasehold improvements in a single loan.

Equipment Leasing

Leasing provides fixed rate financing with specialty terms to accommodate your unique cash management needs.

Once you’ve found a franchisor that you feel is a good match for you and you’ve worked out the necessary details, there’s nothing left to do but get down to the hard work. But if you’re passionate about what you do (and being passionate about making money doesn’t hurt, either) you’ll have a successful franchise soon enough.