What is the Difference Between Product vs. Service Franchising?
You have decided that franchising is the right path for you, and you are ready to get the journey started. Now comes the part where you must decide what type of franchise matches the vision you see for yourself as a franchise owner – will it be a product-oriented franchise or a service-oriented franchise?
Despite both being classified as a franchise, there are some key differences between the types. While it may be difficult to choose, it is important to remember that both offer several benefits, but it all comes down to factors such as your business goals and where your interests lie. To help you decide, we have outlined key factors about both franchising types and what they can offer you as a franchisee.
What is product-oriented franchising?
A product-oriented franchise centers around the production of physical goods (aka products). For example, a frozen yogurt franchise could be a type of product-oriented franchise because it produces a product that gets sold to consumers. This type of franchise is heavily focused on providing consistent, quality products, as this is what the entire franchise business is built on.
When we break down the nature of a product-oriented franchise, certain requirements must fall into place. Let’s use the frozen yogurt franchise as an example. For every franchise that opens under this frozen yogurt trademark, there must be a quality standard that is met, especially in this case when a product is sold in a variety of different franchise locations. This way, there is consistency across the brand, and no matter which location a customer visits, they can expect the same type of product made in the same type of way.
Subsequently, maintaining inventory is key for a product-oriented franchise; if there is no product, there is no business. For a product-oriented franchise, franchisees must maintain a certain number of products within their inventory, and this is usually outlined by the franchisor. That way, inventory levels are always updated in order to provide the product to the public.
There are a variety of advantages of a product-oriented franchise, including pricing. Since this is still a franchise, there is support that a franchisee can rely on. Product pricing is typically established by the franchisor/head office, so that is one less responsibility for the franchisee.
Another element that is typically the responsibility of the franchisor, which can be an advantage for franchisees, is the marketing and advertising, which will usually be outlined more in detail within your Franchise Disclosure Document. Since product-oriented franchises are heavily reliant on ensuring they reach an optimal target audience, which is largely because if there isn’t an interested audience, then the product(s) won’t be successful, marketing needs to be as optimized as possible. Again, this is another thing that the franchisee doesn’t have to worry about, which can be a major plus.
One of the possible downsides of a product-oriented franchise is the reliance on public interest. If you join in on a franchise agreement for a product that is popular or trendy right now, you cannot guarantee that in three, five, or even ten years from now it will be just as popular. This can be a bit unnerving, especially since franchising requires such a large investment. As a result, prospective franchisees need to consider this element in their initial research.
What is service-oriented franchising?
Similar to product-oriented franchising, service-oriented franchises are very straightforward – the franchise is based on providing a service to the public. However, there are a variety of key differences between the two. For one, some service-oriented franchises don’t necessarily require such an emphasis placed on location. A residential cleaning franchise business, for example, is more focused on providing the service externally, such as in someone’s residence, rather than a product-oriented franchise that places greater attention internally in order to bring customers within the store to purchase the products. This can be an advantage for many prospective franchisees who want to put forth a bit less of a monetary investment than compared to what they would for a retail franchise. As well, for established franchisees, there can be fewer overhead costs because there is less inventory and no brick-and-mortar location or it is not as expensive.
Service-oriented franchises can also reach a greater audience, mainly because there is such a variety of services that are offered. Additionally, depending on the business, there is likely a constant demand. For example, electricians or plumbers are likely always going to be needed, so investing in a service-oriented franchise can offer a bit more long-term security and can help you generate a loyal customer base as a result.
As with any franchise, a benefit is that there is already a “blueprint” in place that outlines how to run the business successfully. This helps ensure that each franchise follows a consistent level of quality. With service-oriented franchises, there is less guesswork involved in the process of running the business and providing the services thanks to this blueprint to success, which can be an advantage for prospective franchisees who may not be entirely familiar with the services being offered.
Another advantage to service-oriented franchises is that some can be a bit more flexible with working hours. This means that rather than working typical retail hours, it can be appointment-based (if the types of services allow). There are even instances where service-oriented franchises can operate remotely, which offers a great deal of freedom.
Service-oriented franchises rely on skilled staff to provide the services, which as the franchisee, requires a bit more hands-on approach to ensure that each job is followed through. In this case, client support is very much needed in this type of franchise, which can be a pro or a con depending on your business goals and how much involvement you want to have in the process. As well, since services are being provided, franchisees need to be extremely organized and self-motivated to help ensure that the services are carried out correctly and efficiently. Again, depending on your working style, this may be an advantage or disadvantage.
What type of franchise is right for you?
While only you can make the decision, it is always a great idea to consider the pros and cons of both types to help make your choice an informed one. Determining your preferences, strengths, and weaknesses can help gear you toward the type of franchise that you will feel most comfortable investing your time and money in. Both can lead to success, but it comes down to the type of business model that you find matches your goals and lifestyle best.
If you are interested in franchising with Dogtopia, please check out our FAQ page for details about our franchise process, and be sure to fill out our online inquiry form to get in contact with a member of our franchising team.