Why Construction and Flooring Franchises are the Best Investments
In the past decade, the construction segment of franchising has experienced enormous growth in both numbers of units opened and volume of business generated through the market segment.
What’s driving this apparent increased demand in the construction segment of franchising? From my experience, it seems to be a combination of factors that are driving the sector.
First, the franchise market has transitioned to a lower investment, work from home business model focus. Traditionally, franchising was engulfed by restaurants, retail and fixed location businesses that required a higher initial investment and had lower operating margins. Brands such as Subway, KFC, Batteries Plus and others were typical of what people thought of franchising in general. Since the recession of 2008, the majority of franchise investments have been made with cash as opposed to pre-recession franchising where the majority of franchise investments were done through highly leveraged financing arrangements. This transition has pushed more home-based, lower investment franchises to a higher degree of growth. With this growth has come the development of the construction space in several ways. First, construction oriented businesses have evolved to more modern business practices. Marketing, branding, technology, web presence and overall business practices have improved in presentation, functionality and adoption rates making construction service franchises more effective at generating business.
Second, with the increase in the franchise industry segment for construction services, there has been a sharp increase in specialization of services. This focus on market segments allowing for better, more effective businesses within the subcategories of construction franchises. Market categories such as flooring markets, concrete work, driveway installation, basement renovations, gutter installation and other focused services within the construction space have been separated out as franchise businesses entirely focused on this particular category of work. The result of this focus is an overall increase in the market, consumers always choose to work with specialists as opposed to generalists. Much of the construction market used to be controlled by generalists who would provide a wide range of services where now there are a multitude of brands and focused businesses all providing unique services within the construction space.
Third, the construction services market within franchising typically provides a fantastic return on investment when compared with traditional fixed location franchises. The investment range for most construction oriented franchises is many times less than $100,000 and the business has the potential to generate seven figures in revenues and impressive profit margins. With construction services, the cost of goods is generally much lower than other market segments allowing for cash flows unheard of in other franchise markets. In the past, construction companies had been hindered with a lack of ability to drive new business and revenues, where today’s construction service franchises have efficient marketing systems and business models in place the ability to drive in revenues has become a strength for the market segment.
Many construction service franchises do require that the owner/operator hold a contractor’s license and have the appropriate licensing to provide services in their respective market. The business models also require someone with communication skills at the helm. This can be a difficult element of the construction space in that many of the experienced personnel in the construction market are not necessarily good at communicating with others. This needs to be accounted for when investing in a construction service business, make sure you have the right people in place to manage the day to day business.