New searcher here considering a home-service franchise.

searcher profile

May 19, 2023

by a searcher from Northwood University in Brentwood, TN, USA

Basically the title, I'm a long-time W-2 that is new to the searcher space. This is a new world to me and I'm at the point of exploring all options.

I've found a home services franchise and at first glance, it appears to be a good opportunity. It's a niche industry with no national presence, simple to get up and running, and high margins###-###-#### % after royalty and franchise fees). What kind of things should I be considering as I evaluate? Just looking for general thoughts or guidance from anyone that has taken the franchise path vs. traditional search.

Thanks!

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commentor profile
Reply by a searcher
from Rutgers in Philadelphia, PA, USA
Without knowing the industry, I would be concerned about how high those margins are. Home services for things like skilled trades often comes in with SDE around 15-20% of revenue. If it's really niche it may be possible, or it could mean the owner is severely understaffing and you're buying an 80 hour a week job.

I think franchises are definitely looked down on in the ETA world because of the more limited geographic growth options, but when you find a good resale it can be a great platform for expansion. Make sure you talk to other franchisees in the network (preferably something that they didn't refer you to) so you can get a realistic idea of what it's like to work with that franchisor.

Other things that could bite you in a home services acquisition: vehicle transfer fees, insurance costs being different from the old owner, family/friends doing free work for the business that will need to be replaced by paid employees, etc. Really dig into the insurance part, especially auto insurance and workers comp, as previous owners may be riding with lower premiums because no audit has been done recently, whereas you'll get audited immediately your first year and any sleeping issues will immediately show up in your new premium.
commentor profile
Reply by a searcher
from Texas A&M University in Coppell, TX, USA
Gary, I recently explored franchising after realizing a part time search could take a couple of years. In the end I decided against it. My reasons were twofold but yours could be completely different:
1. The time frame to get to the same level of EBITDA that I’m targeting could take as long or longer than the private search itself. And during that period I’d be an underpaid solo operator when I’m looking to put in place a management team ideally.

2. My personal skills are around strategy and innovation. In the long run, I fear I’ll be hampered by the constraints of the franchise model. The advantage in the early days would become my anchor later on
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