The Risks of Investing in a Seasonal Franchise
When you invest in a franchise, the products and services you offer, how they are offered, and when they are purchased is specific to the type of business you enter. Even though each franchise business will typically have a similar core process, meaning a franchisee follows a proven business model that the franchisor sets in place – the business itself will yield different results, which may differ between seasonal and all-year franchise businesses.
A seasonal franchise is going to sell products and services that customers can access during a certain time of year or have peak times or “seasons” when sales and engagement are high. This could be a franchise business that only offers services for the summer or winter, or it could be a product or service that is only applicable for certain weeks of the year. A franchise that offers products and services that are suitable all year is going to provide franchisees with a vastly different experience which requires a different approach.
Before jumping in and investing in a franchise, it is important to understand the type of industry you want to enter and how this industry aligns with your career goals. While the choice is ultimately yours, there are some risks when investing in a seasonal franchise that don’t necessarily exist for franchises that remain steady all year. We have outlined some of these risks below.
One of the more significant risks of investing in a seasonal franchise can be the inconsistencies in income and profit. Maintaining cash flow can be an issue in many businesses, but for seasonal businesses in particular, it can be an even greater hurdle when running a franchise business.
Depending on the franchise business, there will be some months (or weeks depending on the franchise) where you will bring in large sales and generate revenue while other months, this may not be the case and sales are much lower. Of course, there are seasonal franchises that can produce enough sales during peak times to last until the next peak, but this is not always a guarantee. This may be a risk some first-time prospective franchisees may not want to take.
It is also important to keep in mind that there are franchise fees that franchise owners are required to pay on a consistent basis. If off-peak months do not provide profit, paying these fees can be difficult and result in going into funds set aside for future expenses. While seasonal franchises may offer outstanding results during peak months, the risk remains that the revenue that was collected during peak times will not be enough to cover off-peak times.
Handling Off-Peak Times
Off-peak times of the year, whether that be certain seasons or months in the year, may be difficult for franchise business owners that are not used to starting and essentially “stopping” or slowing down for a certain period of time. Especially for those making a career change from a corporate role to franchise ownership, this idea that some periods will generate a great number of sales, while others may not (at least to the same magnitude) may pose the question of what the franchisee will do during off-peak times.
Some who invest in a seasonal franchise may choose to invest in an additional franchise business during off-peak times (i.e., a franchise focused on summer services and another on winter services). While there are franchise ownership models to choose from, juggling two different franchises may be stressful and complicated to handle, especially because it would involve two separate franchise models, trainings, and equipment among other details.
In addition to the team you can build within your business, one of the great components of franchising is the support you receive from the franchisor. While it is not to say that seasonal franchises cannot allow you to build a great team, the risk is that they can be temporary.
If a seasonal franchise is only open during certain periods, the employees working during peak times may not always remain available when the business is closed or has reduced hours during off-peak periods. It is possible these employees could find a different, more consistent job and be unable to return for the new season, thus resulting in a higher employee turnover rate.
Additionally, the issue of finding employees who agree to only work during a certain season may result in a limited hiring pool. This differs from a franchise that offers products and services available all year long as franchisees have the ability to build a team and strengthen relationships over a longer period of time.
Added Performance Stress
Because so much depends on your franchise’s performance during peak times, you may feel the pressure to perform well. This could result in working long hours to generate enough sales or having a consistent underlying worry that you won’t meet business goals for that period. Not to say every seasonal franchisee has this stress, but there can be anticipatory emotions that may develop as a franchisee approaches their peak season. This realization could result in feelings of uneasiness if sales goals are not met. For a seasonal franchise owner, this window of time will determine the trajectory of your franchise business for the rest of the year which may feel risky and daunting.
Strained Work-Life Balance
Feeling the need to work lengthy hours during peak seasons may result in a strained work-life balance. Off-peak periods can offer more balance, but is the tradeoff worth it? Is working hard during peak periods worth having a bit more downtime during off-peak seasons? For some, this style can greatly match their desired lifestyle. For others, the idea of working long hours during peak seasons does not align with their personal and career goals and expectations.
On the other hand, an all-year franchise can allow for a greater work-life balance spread throughout the year. You can develop more of a routine and a consistent strategy that will allow you to create a routine that works for you.
Difficulty Building Customer Relationships
Building customer relationships is a valuable component of any successful business. It can take time and consistency to generate a relationship that turns first-time customers into loyal regulars. For seasonal franchises, this can be more difficult, especially when many customers only think of the business during a certain time of year. Maintaining customer loyalty can suffer during off-peak seasons and may take more effort to preserve a customer’s relationship and interest throughout the year.
Franchising with Dogtopia
If the idea of investing in a seasonal franchise provides too many potential risks, investing in a franchise with all-year products and services can be a more suitable, safer option. Our climate-controlled indoor playrooms allow for a steady stream of dog daycare customers, no matter the weather outside. If you are interested in investing with Dogtopia and bringing a dog daycare to your community, be sure to check out our investment page for insight into some of the costs associated with entering into a franchise agreement with Dogtopia. You can also check out our FAQ page for more details on what is involved when franchising with us.