For business owners, especially small business owners, there’s enough to do and keep track of before you add in specialized regulations and functions. Imagine you are a small business owner (maybe you don’t have to imagine), do you know the answer to the following questions?
- What are the regulations for how reflective a business sign can be in your area?
- If you have employees, how do the changes to overtime regulations apply to your workers?
- If you ship items, do your packages meet the national design specifications for mailing?
- What is the correct bleed when printing flyers?
Instead of reading up on those regulations (and possibly misinterpreting them) or spending valuable time figuring out how to do the items listed above, you could enlist the services of one of these franchises to help: FASTSIGNS, Express Employment Professionals, Unishippers, and Minuteman Press. All of these franchises – and many, many more – are part of the business services franchise industry.
Overview of the Business Services Franchise Industry
Number of U.S. Business Services Franchise Establishments 2007-2016 (*Estimate; Source: Statista)
The business services franchise industry deals in two areas that will always be in demand: help and advice. Because you can give help and advice in virtually any area, the diversity of options within the business services industry may be greater than all other franchise industries. Here’s a sampling of the areas business services franchises cover:
- Business coaching
- Communication/marketing support
- Drug testing
- Event management
- Information technology (IT)
Because the term “business services” fits so many types of businesses, it can be hard to get an exact grasp on its impact on the general economy. However, Statista estimates that business services franchises will make over $175 billion dollars in 2016, a 33% increase from 2007 and 36.5% better than the economy’s lowest point during the recession.
Annual Output of Business Services Franchises 2007-2016 in Billions (*Estimate; Source: Statista)
As alluded to above, small and medium sized businesses (SMBs) benefit from and utilize the services of franchises in this industry the most. SMBs are companies that typically have less resources when compared to their larger counterparts. Because they have less resources, it’s harder for them to keep up with the constant changes the business landscape goes through.
With the assistance of business services franchises, these business can outsource certain functions. By outsourcing certain tasks like printing or hiring, it allows those businesses to focus on other infrastructure needs and reduce the strain on their operations. Also, in terms of consulting franchises specifically, getting an outside perspective can help these businesses fight off stagnation and move their businesses forward towards greater profitability.
The Ongoing Shift in Work Behaviors and How it Relates to Business Service Franchises
According to Murphy Business & Financial Corporation, a business broker franchise, the most common reasons it hears for franchisees coming into the field are:
- Tired of the corporate environment
- Tired of doing the work for someone else's benefit
- Ready to have more control of their time, finances and business goals
Those reasons closely mirror a general shift in the work environment over the last several years. In 2009, when the U.S. was at the lowest point of the Great Recession, unemployment was around 10%. Many workers by force adopted what some term “alternative work behaviors.” These behaviors include transitioning to independent contractor status and performing gig work – doing short term projects for one or more companies at the same time or back-to-back.
Over 10 years, from 2005 to 2015, the percentage of these workers within the general worker population rose from 10.1% to 15.8%. After the economy rebounded, some of these workers found that they had discovered a better way for them to work. According to the Freelancers Union, a nonprofit of over 300,000 members, nearly nine in 10 of its members surveyed said they would not return to a traditional job setup if given the chance, despite its purported stability.
Furthermore, according to an Intuit study, more than 80% of large corporations will be planning to utilize a “flexible workforce” of freelancers and part-time workers by 2020. It’s also expected that as many as 40% of Americans will be working in a gig economy, or freelancing, by that time. Essentially this work setup is what business services franchisees are already doing, performing limited-time jobs for other companies concurrently or in quick succession to one another.
Finding a Business Services Franchise Opportunity
“Franchising can be a great way to start a business, whether you are looking for executive franchises in areas such as coaching, consultancy and finance, management franchises such as recruitment or care services, or a business in print and design, there is a wide variety of options open.”
~ Nigel Dunand, Sandler Training
How much experience is required?
If you have expertise in a certain field, taking advantage of it is a wonderful opportunity to use your existing skills to make your franchise a success. However, it’s not 100% necessary. If you don’t have experience directly related to the area you want to open a franchise, franchisors offer training programs and ongoing support that will provide you with the skills you need to operate a successful business. In fact, in some cases, previous experience in an area can create some habits that might need to be unlearned to run the franchise successfully.
As Ray from The Growth Coach says, “experience and passion for coaching and supporting business owners is a necessity.” The franchisor’s training program can fill in the gaps.
Are you prepared to give up a little bit of control?
Normally, business consultants are very self-assured – and why not? They’re usually experts in their respective areas of expertise. But, at the same time, following the system is a very important part of the franchise model. As Ray says about franchisees that come into this franchise industry and one of their most common missteps, “[they] come in with years of experience and leadership. There is a tendency for them to want to come in right away and want to add their own twist on the business. We encourage them to follow the system at the outset and learn the product and the brand before branching out.”
By working within the confines of the franchise system they’ve selected and following the process the franchisor has developed, franchisees will be better set up for their quickest path to success.
Please note: the provisions and fees illustrated below are some of the most common and not a complete listing. All financial figures come from the Franchise Disclosure Document (FDD) of each respective franchise dated 2016. Please review the FDD of a franchise for all of the provisions and fees related to investing in that particular franchise.
Initial investment costs for business services franchises vary widely because of how many areas they cover. Because many of these franchises involve traveling to the site of other businesses, those franchises tend to be lower in startup costs than others. At the same time, there are other business services franchise options that require real estate away from the franchisee’s home to operate, along with specialized equipment (e.g. a printing franchise). Franchises in the latter categories will obviously cost more to start.
In the graph below you can view the initial investment ranges for 10 sample franchises covering the following wide range of services: technology, accounting, staffing, printing, security, green and energy efficiency, business coaching, shipping, and cleaning.
Estimated Initial Investment Ranges for 10 Sample Business Services Franchises
When setting your franchise budget, don’t forget about the ongoing fees.
In addition to normal business operating costs like payroll and utilities, franchises collect fees for things like advertising and proprietary software. Also typically collected is a royalty, which serves as payment for the franchisee’s continued use of the franchisor’s system. The manner in which franchises assess royalties vary. Examples of how royalties are collected are provided below for each sample franchise.
No Royalty fee is due for the first month immediately following the month franchisees complete the initial CMIT Solutions franchise training. The Royalty is calculated by a sliding scale of 6% to 0% of Gross Professional Services (GPS) revenue or minimum royalty whichever is greater.
60% of the first $5,000 of annual Gross Receipts (50% if paid to the franchisor within 4 days after the end of the Reporting Period to which the royalty relates and no other amounts payable are overdue) and 40% on the annual Gross Receipts in excess of $5,000 (30% if paid to the franchisor within 4 days after the end of the Reporting Period to which the royalty relates and no other amounts payable are overdue).
8% of Gross Billings or 34-42% of Gross Margin, whichever is greater
6% of total gross revenue, subject to the Royalty Incentive Program
4% of Gross Revenues during the previous month
A monthly royalty fee equal to the greater of: 5% of gross revenues for the month or $300 per month for the first 12 months of operation following completion of the marketing setup; 5% of gross revenues for the month or $500 per month for the next 12 months; and thereafter, 5% of gross revenues for the month or $700 per month.
20% of the annual Gross Revenue, or 50% of the annual Gross Revenue (depending on type of franchise purchased)
10% of Gross Revenues; $750 monthly minimum for 18 months; $1,000 monthly minimum thereafter
The greater of: 18.5% of Gross Profit Margin on shipments zero to 150 pounds and all other services and products. 15% of Gross Profit Margin on shipments over 150 pounds -or- The Minimum Royalty Payment, as defined in the Franchise Agreement.
10% of monthly gross revenues
Royalties for Selected Business Services Franchises
(Click on the Franchise Name for More Details on the Franchise and Its Costs)
In addition to regularly assessed fees, other fees are charged on an “as needed” basis such as audit fees, or for additional, non-mandatory training.
Prior to investing, prospective franchisees should do their research and carefully review a franchisor’s FDD for more detailed information on all systems, procedures and costs.
For more information on a number of business services franchises, please see our business services franchise profile page.