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- Buy 1 McDonalds vs. 10 Services Franchises?
You got a budget of $1.5M to invest in a franchise.
Do you buy 1 McDonalds or 10 home-service franchises?
Start-Up Costs
A single traditional McDonalds cost $1.47M to $2.5M. That does not include the real estate, which the franchisor usually owns.
Let's say we're on the low side at $1.5M
A typical home-service franchise costs $100k to $200k. You can operate from home or a small warehouse. You start with 1 service vehicle per territory. You add more trucks as the business grows.
Let's say we're in the middle at $150k.
You can buy 10 territories for $1.5M.
Return on Investment
Disclaimer: these are estimates for mature locations. Nothing is guaranteed in franchising. Average unit sales & net margins vary based on the model & your ability to execute. I'm assuming no debt, depreciation, or owner benefit expenses.
McDonald's
Sales $3.50M
x Net Margin 10%
= $350k Income
Home Service Franchise
Sales: $750k (each)
x 10 units
= $7.5M total
x Net Margin 15%
= $1.125M income
Due to the sheer volume of sales, a home service franchise will provide a better ROI than McDonald's
Employees
McDonald's
You need about 50 low-wage employees to run a single location. You will have constant turnover and must have a strong training process.
Most locations are open 18 hours per day, 365 days per year.
Home Service
Assuming 5 to 7 employees per territory, you'd have 50 to 70 employees to run all 10 locations.
The hours should be more family-friendly. Most operate 9 to 5 and off on the weekends. Some businesses do operate on the nights & weekends for emergency calls.
Most are closed on major holidays.
Management
At a McDonald's, everyone works at the same location. It's easy to observe & coach multiple people at once.
A home service business is more challenging to manage since it's mobile. You have to travel with each person 1 on 1 to observe them in action.
You will need at least one or two District Managers to help run the business.
Scalable
McDonald's
Fast food restaurants are very scalable. It's not uncommon for big operators to own 100, 200, 400, or 1,000+ restaurants between multiple brands.
This is possible because fast food only does one thing: execute.
They have to execute in delivering an identical product every time.
Home Services
In a service business, there are three things you need to get right:
1) Estimate - you need to price things right. Pricing is dynamic in a service-based business.
2) Sell - you have to communicate the value of the service & overcome objections effectively
3) Execute - finally, you need to deliver the service.
This is why home service franchises are more challenging to scale. You have to get everything right. If you can't estimate right, your margins will suck. If you can't sell, you won't have money in the bank. If you can't execute, customers won't return.
Reality
A large barrier exists to entering any "Tier 1" fast food franchise. Most franchisees are already wealthy before they buy into these brands. The franchisors aren't selling single-unit deals. They require a 5-10 unit area development agreement.
There is a low barrier to entering a home service franchise. You can start with just 1 unit for $100k to $150k, then use cash flow from the first territory to fund 2nd one, then 3rd one, etc.
There is no better investment than your own business.
Find A Franchise To Buy
My team helps people buy their first franchise. We'll help you find one that matches your goals, budget, skills & location. It costs you absolutely nothing.
Home services are very popular. People are buying into power washing, painting, moving, roofing, drain cleaning, house cleaning, restoration, dumpster rental, insulation, & more.
There’s also wellness, senior care, salons, fitness, pets, B2B services, & more
Cheers!
Brian Beers