Home Service Franchises: A lot of Work under One Roof

Popularity, profitability, and scaling potential among franchises never stay the same forever. Trends vary with circumstances and even between markets. As a franchise coach, I’ve seen a lot change in the last three years, some in response to the COVID-19 pandemic, others in response to economic challenges like the changing housing market. As a result, one sector that’s been flourishing is home services.

What are Home Services? 

Home service franchises offer their customers residential maintenance, improvement, and renovation services of various types, from interior and/or exterior cleaning to fixture installation to repairs. Examples of these kinds of services include maid services, exterior power washing, plumbers, electricians, lawn care, and window cleaning. 

It’s no secret that at the height of the pandemic, many people were staying at home for longer periods due to government mandates like travel restrictions and building occupancy limits, as well as general practices like increased social distancing. Remote work was also on the rise as more people found they could do their jobs from home. But even three years after the height of the pandemic, many people continue to maintain the habits they developed, and so have been investing more money in their living spaces, since they spend more time in them. 

Home service franchises have seen remarkable growth and are expected to continue growing over the next several years. For example, industry market researching company IBISWorld reports residential cleaning service franchises have a U.S. market value of $1 billion as of 2022, and steady growth is expected through 2027. Handyman service franchises, meanwhile, have also seen a lot of recent growth and will continue to do so through 2027, if a bit more gradually. As of 2023, the U.S. market value for these franchises is $5 billion.

Regular Revenue vs. Sales-Driven Income

The profitability of any given business idea can vary from one industry to the next. One thing I’ve noticed when it comes to home service franchises is many have become much more sophisticated. Brands are expanding the range of services they offer, like lawn care franchises offering fertilizing, tree and shrub care, aeration, and mosquito control. 

When it comes to profit models, the home care franchises I’ve seen fall under one of two categories: recurring revenue or transaction based. Recurring revenue models use subscriptions, memberships, long-term contracts, or similar methods to regularly bill clients for a set amount of money for a set period, often monthly or annually. This gives the franchisees a steady, dependable revenue stream to better anticipate their income and plan for scaling their business, although it can make growth a slow process. 

Meanwhile, transaction-based revenue is designed around individual purchases by customers. This model allows for greater peaks in profits, but also carries more risk when business is slow. The transaction-based model is popular for one time or infrequent home services, like repair services or fixture installation services. Recurring revenue models are most often found in regularly needed services, like cleaning or lawn care. Overall, the best revenue model is whichever one the franchisor decides is best for their brand. 

Proven Concepts means Competition

With home services in greater demand, more businesspeople are finding out what works and what doesn’t in the industry. This means there’s more data to determine the most proven business models and business ideas, but the proof comes at a cost. Since someone else has already tried these practices to determine their viability, late adopters run the risk of finding fewer untapped markets. Standing out from the competition becomes increasingly important, since there’s a greater chance of not being the only provider in each service area. 

Marketing is an important part of standing out. Franchisees and franchisors alike should know what their customer base wants, what it needs, its trends, and its habits. I’ve seen franchisors in the home service industry pushing their franchisees to aggressively scale their businesses. Previously the first year of operation for a franchisee was spent driving their businesses. In the last three years or so, I’ve seen a lot more emphasis put on first year scaling and marketing investment, especially among those using transaction-based models. 

In some industries, franchises’ biggest competition is from other franchises, or large corporations. In the home services industry, their biggest competition lately has been from small, independent businesses. These “mom and pop” service providers spring up quickly and are the ones from whom franchisees have to win over customers. 

Enterprising franchisees and franchisors shouldn’t be scared of competition. A certain amount of competition is healthy and keeps a business from becoming complacent. If I had to nail down the biggest risk for home service franchises, it would be the need for a good operating system and skilled franchisees. Brands and franchises need talented employees that share the brand’s principles and standards, as well as a clear, organized system of doing business. Lacking one or both will cause a franchise to struggle to retain customers.

One particular employee type that may prove important to franchisees is the manager. While previously many franchises were owner-operated, many have gone to a manager-style form of business model. These franchisees hire site managers to run franchise locations, handling the day-to-day operation, while the owner works directly with the manager, or managers if they own multiple franchises. It’s important to note that manager-run franchises still require some owner involvement, usually about 10-20 hours per week. 

Evolving Industry

Home service franchises have been on the rise through the pandemic and continue to do so with more households spending more on maintenance and improvements. With more brands using more sophisticated business systems and more management-run franchises, the way franchise owners operate is evolving for faster, larger scaling. Home service franchisors are looking for ambitious, multi-unit owners to partner with, and franchisees are in need of hard-working staff that agree with and are willing to keep up the brand’s standards and principles. These circumstances make the home services industry fertile ground to grow a franchise.

 

Rick Bisio is one of the country’s most respected franchise coaches and author of the Amazon best seller, The Educated Franchise – 3rd Edition. Since becoming A Franchise Coach in 2002, Bisio has assisted thousands of aspiring entrepreneurs nationwide helping them explore the dream of business ownership. www.afranchisecoach.com