First of all, what exactly is a service franchise and how is it different than a restaurant franchise? Well, it should be obvious, but a service franchise offers a service to the public instead of selling a product. This can be anything from package delivery (The UPS Store), to taxes (Liberty Tax Service, H&R Block), to really any kind of service you can think of. Restaurant franchises fall under the category of product because, although the employees serve the customers, the real sell of the business is the food.
Now that that is understood, here are five solid reasons why it is better to go with a restaurant rather than a service franchise:
1. A service franchise requires more specialized skills.
If you are going for a tax service, you will need employees who are certified in that area. Same thing if you purchase a dog groomer franchise or really any service. You need qualified people, or else your business will not gain a good reputation. You do not want to be known for the nail salon that accidentally cuts the fingers of their patrons. While a restaurant will require a certain level of competency, the skills necessary are much easier (and cheaper!) to acquire. That is part of the reason why so many restaurants are occupied with teenage employees. The skills required are basic: politeness, courtesy, cleaning, etc.
2. Restaurant franchises are more profitable.
Restaurants are a hot commodity. People tend to go out to eat at least once a month, though for some it is often more like once a week. Food is something people will always need. A service like taxes, though, is really only needed for part of the year. Plus, there are so many different kinds of tax services and a person will only end up using one. Typically, once someone finds a tax service they like, they are not eager to search for another. Whereas with restaurants, the consumer is likely to try out many different places because they want to try something new. In general, a service is typically only used occasionally, when there is a need for it. Your volume of customers will be drastically decreased compared to what you would have at a restaurant.
3. There are fewer restrictions with restaurant franchises.
First of all, there are so many different kinds of restaurants to choose from. Fast food, sit down, American, Italian, etc. You can really find something that you are passionate about. With service, your main choices are limited after you know what service you want. The main difference between two plumbers is more likely going to be their price. But more than that, restaurants have far more opportunities to grow. You could end up purchasing a second location or expanding the one you currently have. Because of the lack of specialized skills necessary as mentioned above, you have more options when it comes to employees as well. A service franchise is a bit more limited in scope. Opportunities to expand will be restricted, as may the number of employees allowed. Whether because of space or budget issues, limiting growth also limits your profit potential.
4. Service franchises can require a lot more attention.
If your employees are limited to a certain number, you may find yourself acting as both owner and maintenance. Or you might be an employee along with the others because you cannot find anyone else. There is a bit more independence expected for service franchise owners, but that means more work on your part. You will have to manage marketing yourself as well as day-to-day operations. These businesses require a great deal of competency from the owner, as opposed to restaurant franchises. Things like marketing and operations are typically handled by the franchisor, which has a standard by which all of the franchisees are expected to operate. While running a service franchise, you may feel like you are operating your own business under someone else’s name. Your location is yours, but the owner still is above you.
5. Restaurants are far more recognizable.
Not only are restaurants more likely to have operation manuals and training to assist you in establishing your location, they also come with the benefit of brand recognition. Many restaurant franchises available are going to be bigger named companies. This means less risk for you as a franchisee as well as assurance that people will see your property and already be able to trust its products. Service-focused businesses require much more word of mouth assistance and there is not always consistency throughout each location. These companies rely a great deal on the employees to generate good word with the quality of service, not the service itself.
As you can see, franchising of any kind has its advantages and disadvantages. Restaurants typically come with increased recognition and built in trust, as well as more assistance from the franchisors themselves. Service-focused businesses rely more on employees, meaning it is the responsibility of the franchisee to ensure that they are competent and will assist in bringing in customers and profit. Service franchises are good for people who want a hands-on franchise that will require a great deal of attention, where restaurant franchises are decidedly more hands-off and rely on the standard set by the owners of the business as a whole.
Zac's Burgers is presently not selling franchises and does not have a certified franchise disclosure document. Zac's is offering licensing opportunities, however, potential licensees must meet all federal and state requirements.
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