There are many reasons why the service franchises perform so well for franchise investors, financial potential, marketing mechanisms, market potential, training tools, market demand and others that would drive demand for a particular product or service.
The market niche that has seen considerable growth in recent years though is the construction services segment, which would include market categories such as flooring franchises, roofing franchises, light reconstruction franchises and other ancillary fields such as blind installation or interior decorating franchises.
All of these categories can be a bit reliant on the housing sector, but most of them have found ways to diversify into the commercial side of the business which provides stability and certainly increases the market potential for any of these services. But why in particular have these segments and the construction services franchise market done so well?
1. Lower initial investment – the average initial investment for a construction service franchise is typical $75k-$150k to open for business, whereas a restaurant or retail franchise will generally be a $300k or higher initial investment which means much more overhead, higher debt structure and costs that sometimes make the investment prohibitive, to begin with. Franchise Marketing Systems has seen this growth take place with a wide variety of different franchise brands within this category of the market:
a. Disaster Restoration services and reconstruction – Restoration 1 – this brand has expanded considerably and done very well during the recession. Focus on doing work in mould, water and fire remediation scenarios.
b. Blind installation and repair services – Bloomin Blinds – this brand has performed exceedingly well throughout many of the new markets they have expanded into. The key is a balance between repair work and new blind sales.
c. Xpedite Coatings – this is an epoxy flooring franchise model that provides services to both residential and commercial customers. The business model provides coatings and flooring installation services to customers throughout the U.S.
2. Higher Profit Margins – these construction service franchises offer much higher profit margins than the majority of the franchise systems in more traditional market segments. A profit range of 25-35% is not uncommon in these businesses depending on what revenue stream you are measuring. Because of the high potential profit margins, the return on investment potential is significant allowing for a franchisee to realize a 100% return in only one year of business in some cases.
3. Generally lower levels of competition – most of these categories within the construction services franchise market space offer much less competition than the rest of the franchise market. Many times are fields where the competition really has not developed a brand and certainly doesn’t have the model, systems or infrastructure to scale for growth. When a franchise model comes into these market segments, they have significant advantages over the rest of the field and are typically able to take market share quickly from mom-and-pop competitors.
4. Ability to go get the work – where traditional fixed location franchises will be either made or broken with the success of their location, Franchise Marketing Systems has seen success in the construction services franchise segment through franchise models where the franchisee can go get the work and find their business.
All three models mentioned above, Restoration 1, Bloomin Blinds and Xpedite Coatings all have business models that include marketing systems which drive leads through a variety of different marketing channels feeding the franchisees with new business and creating opportunities throughout their marketplace.
For more information on construction franchise models and how to franchise your business, contact us.