How to Pick a Franchise Category

Franchising encompasses nearly every product and service category. Whether it be tutoring or day care centers, janitorial services, restaurants, cafes, retail stores, health and wellness spas, boutique fitness gyms or anything else, prospects have a dizzying array of concepts to choose from.

When selecting the right franchise segment, it is important to remember that the difference between a coffee shop and a travel agency concept is much more than just what is sold to the consumer. Each category requires a different investment range, time commitment and business strategy, and that is why the decision to enter a specific industry should be much deeper than simply choosing an interesting concept or one that the prospect has experience in. 

Here are some potential points of consideration that prospective franchise owners should keep in mind when picking a segment of the franchising industry.

Investment Level

For one, franchising costs vary greatly depending on the industry. Although a prospect’s dream may be to open their own sit-down restaurant or retail store, their financial situation may not be best suited for that category. While some initial investment fees are less than $10,000, others can be upward of $1 million depending on the build-out, equipment, staff training, inventory and additional costs necessary to start the business. 

The over 1,300 territories, California-based custom window covering franchisor Budget Blinds’ operations are home-based, for example, and requires franchisees to keep minimum to no inventory, very little overhead and creates high profit margins. 

“So many people want to go into business for themselves but often abandon the idea because — let’s face it — it’s tough to do and it’s expensive,” said Jonathan Thiessen, chief development officer of Home Franchise Concepts (HFC), Budget Blinds’ parent company. “Franchising with Budget Blinds provides those interested, business-minded entrepreneurs with a low-cost opportunity and an easy entry into something that’s already operating successfully.”

Budget Blind’s initial investment of less than $100,000 is a major selling point for many first-time entrepreneurs who may be looking to make a career change but don’t want to break the bank. 

“The beauty of Budget Blinds is that it’s a home-based business that you can grow to whatever size you’re comfortable with,” said Kim Lang, a franchisee with the brand in Kingston, Ontario, Canada. “Working for myself has been ideal. The flexibility I’ve had with my three young kids has been so important to me.”

Franchise categories on the high end of the initial investment spectrum also have their benefits. With a start-up cost of $2,329,223-$3,636,998, the fast-growing swim school franchise Big Blue Swim School*, for example, appeals to high-net-worth entrepreneurs who are looking to invest in a concept that will generate passive income over time and build generational wealth. 

“Building a swim school is expensive, and that means there is a much smaller opportunity for a competitor to come in and challenge the market,” said Dennis Campbell, vice president of franchise development for Big Blue. “In other words, the high costs build a very defensible moat around the business. With swim schools being a very fragmented industry, there is no dominant player, and the demand for formal swim lessons is so high that the investment makes a lot of sense.” 

When researching concepts, prospective franchisees should weigh the initial investment against their expected return, along with their income, wealth and equity goals.

Lifestyle Benefits

Since the range of business models is so vast, different franchise segments also come with completely different lifestyle benefits. In general, becoming a business owner grants franchisees the freedom of being their own boss, but some industries require operators to work more hours than others or to alter their daily schedule.

For example, while many QSR chains require a late-night lifestyle, the 25-unit breakfast chain Famous Toastery appeals to prospects who would prefer to operate within the traditional, eight-hour work day. By tapping into the lucrative breakfast daypart, Famous Toastery franchisees can open up at 7 a.m., close by 3 p.m., and get home to spend the rest of the day with their families.

As parents of two young children, South Carolina-based Famous Toastery franchisees Michelle and Tim McGinnin considered getting into the restaurant business for years, but a fear of the long-hours and overwhelming time commitment initially held them back from actively pursuing an opportunity in the industry. Eventually, they realized that the breakfast category offered the perfect solution.

“We did our homework. We knew breakfast was what we wanted to do. But more importantly, we liked the hours that Famous Toastery offered, and how those hours worked with having a family,” Michelle said. “This was an opportunity to offer a better breakfast option to the community we love, while simultaneously being able to spend time with our family and not sacrificing our personal lives.”

When researching categories, prospective franchisees should sit down and really evaluate what kind of lifestyle appeals to them and determine which industries will encourage those habits.

Hands-off vs. Hands-on Business Models

There are two types of franchisees: semi-absentee owners, who hire staff to manage the day-to-day business, and owner/operators, who are directly involved in running the day-to-day business. 

For those who are looking for the former — an opportunity to diversify their existing portfolio or invest in a business that does not require a daily presence — the home services industry is often a safe bet. The 20-unit residential cleaning franchise Maid Right, for example, offers prospects a semi-absentee business model that doesn’t require a brick-and-mortar location or a large staff.

“There has been a growing demand for a semi-absentee business model option as franchisees look for ways to maintain a paycheck from their previous job, while also opening up their own business and bringing in passive income,” Paul Flick, CEO of Maid Right’s parent company, Premium Service Brands, told 1851 Franchise. “Maid Right franchise owners are able to maintain that model indefinitely or transition once cash flow ramps up. This is a great option for prospects with management experience who are currently employed in the corporate world and don't necessarily want to leave their career. Franchise owners just need a general manager or production manager that can handle day-to-day operations, as well as a cleaner.”

For example, Dallas-Fort Worth-based franchisee Matt McCollum was drawn to Maid Right because he knew the semi-absentee model would grant him the freedom to simultaneously operate several other businesses. “When I bought a resale Maid Right location back in 2016, my wife and I already owned another franchise system called Body Bar Pilates,” he said. “I wanted something that would help create cash flow for my mother during retirement and ended up landing on the Maid Right model.”

Other prospective franchisees may want to enter an industry that requires a more hands-on approach to business ownership, such as child care or early education. 

“Our franchisees have a passion for people, and they understand the importance of coaching and developing people and seeing people prosper,” Celebree CEO and President Richard Huffman told 1851 Franchise. “Whenever we open a Celebree school, and everything is done and all of the furniture is moved in and the ribbons are ready to be cut, you see families coming down the sidewalk and you see it in their faces. They’re grateful you came to the community. For this reason, our franchisees must be active owner-operators. You have to be onsite. You can’t create that feeling without being onsite.” 

Overall, finding the right franchise category will depend heavily on the specific goals and circumstances of the individual prospect. By understanding the differences between certain segments, prospects will be better positioned to find the right fit and dive headfirst into a new industry.