Franchise Concepts
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Franchise Concepts
How to interpret this: I believe there are four major categories of businesses and they tend to share similar characteristics irrespective of what they provide. If you can understand the characteristics and how they fit into what criteria are important to you – you can then analyze different types of businesses within a quadrant for best practices and what makes the most sense to you.
Broadly speaking there are 2 types – brick and mortar or storefront businesses and service businesses
Quadrant A
Simple Retail
“People need it and come to you”
Examples: Subway, Supercuts, Great Clips, HR Block, Jackson Hewitt, Liberty Tax, Snap Fitness, LA Fitness
Any business that is transactional in nature
Customers come, buy something and leave
Simple employee model – think 18-year- old kids learning over a few shifts
Range of typical costs (startup fees, build out, marketing $, working capital, fixtures, etc.) from about $50,000 – $2,000,000+
Kiosk business on the low end – McDonalds on the higher end
Lots of options in the $150,000 – $300,000 Range
Average facility is 1,200-2,000 square ft in a strip mall – think Subway
Marketing is REACTIVE – people come to us b/c they know the brand and they need the product/service
Quadrant B
Sophisticated Retail
“You provide a skilled service that people need”
Examples: Meineke, Midas, AAMCO, MAACO, Massage Envy, Fast Signs, SignArama, Urgent Care franchises & Medical Weight Loss
Any business where you semi-customize inventory and need trained people to do the work. The employees may need licensing or schooling / certificates (think of the difference between a guy who can change a transmission at AAMCO and the kid at Subway…)
Facilities are probably stand alone or in a higher end plaza (think of where a Meineke or an Urgent Care business is located and what they look like)
Range of costs can vary greatly but there are lots of options in the $300,000 – $500,000 range. You need to be careful of site selection and build out costs
Average facility is probably 3,000-5,000 sq ft
Marketing is both reactive and proactive (you can target customers in certain areas)
Barriers to entry are higher than simple retail so these businesses tend to stick around longer and have fewer competitors
You look for Brand Recognition as well as marketing, supply chain and operational capabilities here because most people aren’t doctors or mechanics – you need the franchisor to help with finding, training and managing these people. Also, if we’re dependent upon getting parts – we need an efficient supply chain already in place or else we can’t service customers.
Quadrant C
Business to Consumer (B2C)
“You go to see them at their home”
Examples: Property Services – Roto Rooter, Certa Pro Painters, Mr. Electric, Serv Pro, Paul Davis, California Closets, Budget Blinds
You don’t need a storefront – these can be run from a home office, a corporate office or a light industrial space
As you scale up the business, you keep adding people to provide the services, so these tend to be efficient on the costs i.e. when you can’t keep up with demand you hire someone and so on
You are looking at the franchisor’s marketing model to drive business to you – what makes the phone ring?
The model tends to be “this is what we do, this is how we do it, this is where the people that need it live, this is how we connect with them”
Brand recognition is important but the demand for services and the ability to reach consumers is equally important
The owner tends to have good selling and interpersonal skills because you’ll be explaining to people why they should choose your business
Costs are in the $75,000 – $150,000 range. This can increase depending on the level of equipment and personnel you start out with
Quadrant D
Business to Business (B2B)
“Make your back office someone’s front office” Jack Welch
Examples: JaniPro, JaniKing, Vanguard cleaning, Express Personnel, ArcPoint Drug Testing, Pride Staff, ATC Medical
Anything that a business needs, there’s probably a franchise to provide it
You operate from an office and meet with business owners to sell your services to them
Typically, these owners tend to have white collar management backgrounds, are comfortable in professional settings and selling to a board room
Costs can range dramatically but there are many options in the $150,000 – $250,000 range
You’ll need a few employees to start, some equipment, office fixtures, etc. – a professional appearance or else a larger business probably won’t work for you
Sales cycles tend to be longer and the accounts that are landed tend to be larger. Maintaining relationships is important – think of it like this, if you get a bad burger at McDonalds you’ll probably go back but if you provide a bad service to a business – they’ll probably use someone else in the future
Marketing and national accounts, pre-existing relationships with large businesses can be important
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