Understanding the Franchise Business Model: From Fast Food to Home Services

What is the first thing that comes to mind when you think of franchising? For a lot of people, a fast-food franchise is the first thing that will come to mind when thinking of buying a franchise. And understandably so, as fast-food establishments have long dominated the franchise industry. Fast food franchises include global brands and household names. But there's a rising franchise industry – home services.

Learn why the home services franchise business model is compelling for many aspiring business owners today.


The Fast-Food Franchise Business Model

The fast food franchise business model has historically been the most well-known, as food franchises account for an estimated 30% of the total franchise establishments in the U.S.

Like the franchise model in other industries, fast-food franchises enable entrepreneurs to operate their restaurants under the franchisor’s name, business processes, and guidelines. In exchange for an initial franchise fee and ongoing royalties, fast food franchise owners benefit from the brand's recognition, established customer base, and business processes. In a truly mutually beneficial arrangement, the franchisor benefits from expanding its reach through a network of independently owned and operated franchise locations. It’s a win/win.


Challenges and Considerations for Fast-Food Franchises

Despite an impressive history, the fast-food franchise model comes with its challenges.


1. High Initial Investment

Acquiring a fast-food franchise typically requires a substantial upfront investment, including franchise fees, real estate costs, and extensive equipment purchases.


2. Employee Turnover

The fast food industry is known for its high employee turnover rates, with an average 150% yearly employee turnover rate. A turnover rate of this magnitude can lead to training and staffing challenges which affect overall consistency and operational efficiency


3. Intense Competition

There is heavy market saturation in the fast-food franchise industry. Not only that, but it is also an industry marked by intense competition from existing and new brands that frequently change menus, concepts, and strategies as they vie for market share. The tough competition in the food industry may often limit the franchisee’s growth potential.


4. Price Sensitivity

Fast food franchises often operate at relatively low margins as they must consider the cost of labor and goods and spoilage, waste, theft, and other issues that may be less common to other franchise industries. And whenever there is an economic downturn, customers can cut back on times they eat away from home as they attempt to cut their expenditures and save money. This can cause food franchises to be very price sensitive.


The Rise of Home Service Franchises

From plumbing and electrical work to landscaping and cleaning services, the home services franchise industry is gaining momentum as an appealing and promising business opportunity. Home services have a variety of offerings that tap into an essential need. Homeowners continuously turn to trusted professionals to repair, enhance, and maintain their homes, causing the demand for home services to remain steady.


4 Advantages of the Home Service Franchise Business Industry

Home services franchises are some of the best to own and have several advantages compared to franchises in other industries.


1. Cost Efficiency and Recurring Revenue

Home service franchises often enjoy lower overall costs compared to fast food franchises. Many can operate without needing high-profile real estate and a traffic rich brick-and-mortar location, particularly when just starting, which can significantly reduce the initial investment and ongoing overhead costs. In addition, home service franchises often benefit from recurring revenue from repeat customers. This provides a consistent income stream that franchise owners can benefit from.


2. Steady Demand

The need for home services remains consistent regardless of economic fluctuations. From routine maintenance to emergency repairs, homeowners rely on these services year-round. Regardless of what goes on in the broader economy, when somebody needs a plumber, they call a plumber.


3. Work-Life Balance

Home services franchises frequently offer a better work-life balance. The nature of their services allows for flexibility as franchise owners can set their schedules and build the type of lifestyle that they would like to have.


4. Positive Impact

Home service franchises are uniquely positioned to directly contribute to homes’ aesthetics, functionality and livability. Some services, such as landscaping, exterior painting, and home improvement, can enhance property value. Other services like house cleaning, pest control, and home organization can directly improve the quality of life for customers. 

Additionally, home service franchises have a significant and positive community impact and meet specific local needs. By owning a small business, franchise owners are creating local jobs, circulating money in the local economy, and inspiring entrepreneurship in others within the community.


Choosing the Right Franchise with Neighborly®

While fast food franchises have historically succeeded, entrepreneurial preferences are shifting toward the home services franchise model. As the world’s largest home services company, Neighborly® offers a range of franchise brands focused exclusively on repairing, enhancing, or maintaining homes.

With steady demand, lower overhead costs, recurring revenue potential, and a positive impact on the community, the home services franchise industry is an opportunity for those seeking financial independence and personal fulfillment in business ownership.

Which franchise brands are right for you? Take the Quiz

To learn more about the benefits of franchising with Neighborly, contact us today.

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Whether you want to achieve your professional goals by starting your first business or have the flexibility to be your own boss, Neighborly® is ready to help you build a legacy in the home services industry.