Franchise Face-Off: Product vs Service Franchise Opportunities

Everyone who hopes to launch a small business must first make one critical decision. Namely: whether to offer products or services as their business model.

Here’s a quick definition:

• A product-based company sells a physical object to customers.
• A service-based company offers expertise that the customer may not themselves have.

It’s a critical distinction and one that will affect nearly every part of your business’s operations. In this article, we’ll discuss the distinction between the two concepts. With the right know-how in hand, you can decide whether running a product franchise or a service franchise is right for you.

Here are the main distinctions between a service franchise business and a product franchise business:

Scalability

Your business only stands to make money with each customer you sell to. But what you sell has potential profit limits.

Consider this: service franchises offer a business owner’s expertise and time. Think of a hair salon or a computer repair business as examples of franchise services.

But as a service business owner, the time you have to offer is inherently finite.

Product franchise locations, such as consumer goods stores, don’t have this limitation. They can scale the number of SKUs they sell or the total volume of products they move almost limitlessly.

It’s perhaps for this reason that Forbes notes how scalability is a major differentiator. When comparing service franchise opportunities and product franchise opportunities, simply consider how large you wish to grow.

Sales Pitch

Some believe it’s easier to sell a product because customers are more likely to jump at something they can see. But think about all the service-based businesses you likely use willfully and with regularity. Attorneys, plumbers, hair stylists, and more likely factor into your everyday purchasing decisions, right?

None of these business types inherently struggle for customers. They just need to develop a more airtight pitch for why they should be selected amongst their competitors.

The same stands true for service franchise business locations. Competition may abound, but with the right branding and the right positioning, winning potential customers can be a breeze.

Cost of Operations

Running your business, regardless of the business type, comes with inherent overhead. Everything from your overhead to your payroll contributes to this cost. But what if we told you the cost to operate a business is not even across the board?

According to the U.S. Chamber of Commerce, cash flow is a key differentiator. Specifically: the cost to operate a franchise services business is actually lower than product-based franchises. Why? Because there’s no inventory to order and manage.

A Winning Franchise Model

Whether you decide to pursue product franchises or service franchises makes no difference to your potential success. It simply depends on what kind of business owner you wish to be. But regardless of your choice, when franchising it’s critical to align yourself with a franchise model that’s proven.

Consider the Woof Gang Bakery franchise family. Our pet-loving franchise network is a perfect balance between a product franchise and a service franchise. And our franchisee’s customer base loves this blend. They can learn about great pet products as they experience our top-notch pet grooming services.

Discover the impact of industry-leading franchise training to launch your next great small business. Learn more about our stress-free franchise process!