Ahh mobile franchises, the freedom of not being tied to an office or retail store, wind in your hair and dog in tow, off to the next appointment with no need to pay exorbitant rent and staff costs.
I can get my lawns cut, my hedge trimmed, my car repaired, house cleaned, and dinner and groceries delivered to the door!
Mobile franchises are a great option where you can work your own hours and work as hard or as little as you like.
They may not suit everyone but in the digital age we are in and with more people working from home mobile franchises are more popular than ever and although low-cost entry you still need to choose wisely.
The benefits of a mobile franchise
- They require a much smaller up-front capital investment and therefore more affordable.
- They offer greater work life flexibility than a traditional site-based franchise.
- The operating costs are also much less than a retail franchise and can still deliver a reasonable return on effort due to the lower overheads.
- Taking your business to the consumer is a great way to generate work without carrying the huge overheads of a fixed site.
- They are generally owner operated so you do not have staff costs nor need to manage staff.
- The franchise fee is usually the biggest cost apart from the need to lease a vehicle, branding and equipment costs as opposed to a fixed site franchise.
- With a retail or premises franchise the franchise fee is usually the lowest cost but you need to have substantial working capital to fund stock, the shop fit out, lease costs and insurances.
- Generally mobile franchises have limited stock holding as opposed to a fixed site franchise.
A mobile franchise may charge an up front franchise fee of around $20,000 to $30,000, plus the cost of the vehicle and equipment. The vehicle and equipment can usually be leased which reduces the capital outlay.
The negative is that even though a mobile franchise has less up-front costs (which means less risk) it may also mean a smaller income or return and you may not like fighting traffic to travel from job to job!
Some mobile franchises charge a fixed monthly royalty rather than a royalty based on the gross turnover of the business. This can be positive if the business is successful and growing but a fixed monthly royalty can become just a debt owed to the franchisor if the business is not successful
Fixed site Franchises
A typical fixed site franchise may require investment of anything between $350,000 to $800,000, of which the franchise fee may be $40,000 to $60,000 as opposed to a mobile franchise where the overall investment may be around the $60,000 to $100,000 mark.
Fixed site franchises generally charge royalty based on the turnover of the business of between 4% to 10% of gross turnover (revenue) and a marketing fund contribution of around 2% to 5% per cent.
The royalty payable on a mobile franchise may be somewhat higher depending on the model and no two franchise models are alike.
The stock has to be funded up front and the working capital for a fixed site franchise over the first six or twelve months of operation will be much greater if it is a new greenfield site.
What to consider when looking at a mobile franchise
Here are some key things to consider:
- Do you get allocated an exclusive territory or can other franchisees compete in your territory.
- Does the franchisor direct leads to you or do you have to find your own customers?
- Is your territory close to where you live? You may not want to be travelling across town to service your area?
- Do you have to travel long distances within your territory to service clients for a small fee, in which there may be little profit?
- Can you still take time off and have a break without impacting on the business if you are a sole trader?
Do the numbers work?
Even though it may be a lower entry cost you should still talk to other franchisees in the system to gain feedback and do your own financial due diligence and cash flows with your accountant to see if the business is viable to at least pay you a reasonable salary for your effort.
If the numbers don’t work, then don’t commit, as mobile franchises can be difficult to sell.
You may also need to accept that by taking up a mobile franchise, you will be simply buying yourself a job but there is nothing wrong with that!
Training and support
You should ensure the franchisor provides adequate training up front and ongoing training and support and they have the latest booking and CRM software for ease of bookings and payment. There is really no excuse these days for outdated systems and software.
Also check if the franchisor has a social media presence to market and promote the brand and they are active in promoting the Brand overall.
The exit plan
All franchises have a “life span” after which you will want to sell and exit and for most it is around 5 to 7 years, so you need to look at the transfer or assignment costs when you sell, restrictions on selling the franchise and any non-compete clauses that may restrict you from setting up in competition after you exit the franchise.
If things don’t go to plan it can be difficult to get out and sell a mobile franchise and you may crystallize a loss if you walk away during the franchise term.
So, before you “get on the road again” like Willie Nelson did back in the 60’s, do your analysis and get advice from your Specialist Franchise Lawyer and financial advisor to limit your risk so you can make an informed decision before you commit.
Robert Toth is Special Counsel and Accredited Commercial Law and Franchise Specialist at Sanicki Lawyers, with over 35 years of experience in franchise, licensing and distribution law and regularly publishes articles on line.
Sanicki Lawyers [email protected]
Mobile 0412 67 37 57
www.sanickilawyers.com.au
