I recently posted the first installment of a four-part series on the most popular franchise types: quick-service restaurants, retail and automotive franchises, personal services, and professional services. Although the franchise world is full of options for just about every interest and background, these four types of franchises are the heavy hitters when it comes to industry share. This continuing series will break down the advantages and disadvantages of each type, so you can make an informed decision about whether one of these options is right for you.
Retail and Automotive Franchises: Diversity Within a Diverse Industry
This week, we’ll look at the second franchise type on the list. Retail and automotive franchises come in second on the economic output list, at $118B per year. If it seems like retail and automotive is a broad umbrella, it is. There are certain key characteristics that mean it makes sense to lump these businesses together, but there is a tremendous amount of diversity within this sector. On the automotive side, you can choose from dealerships, repair shops, and maintenance (such as oil-change and car-wash concepts). Retail is even more varied, encompassing everything from flowers, pet supplies, and supplements to hardware, home decor, and non-restaurant food service (such as ice cream or smoothie shops). Franchises such as auto-parts stores or vehicle-wrapping businesses bridge both sectors.
These sectors are also diverse in terms of setup. While most automotive or retail concepts require a brick-and-mortar location, there are options that don’t. For instance, with mobile windshield repair or oil-change franchises, you go to the customer instead of them coming to you. You can operate these concepts as a home-based business. You just need a place to park your truck or van and a small amount of storage space for extra supplies!
Retail and Automotive Franchises: The Advantages
The diversity of this sector is an advantage, of course. It means that a wide range of people can easily find something to fit their interests or background. The wide variety of options also means a wide variety of investment thresholds. Household-name concepts, such as popular hardware stores or ice cream shops, can require total startup costs in the $1 million range. But smaller franchises and home-based concepts, such as edible food arrangements and mobile windshield repair, can require as little as $100,000-200,000 to get up and running.
Another advantage: many retail and automotive franchises serve essential needs. For most Americans, their car is a lifeline. It gets them to work, the doctor’s office, and the grocery store. Homeowners must maintain their homes, and pet owners must feed their pets. So even in hard economic times, franchises such oil-change shops, hardware stores, and pet-supply stores can continue to do a brisk business.
Retail and Automotive Franchises: The Disadvantages
For most retail and automotive concepts, the primary disadvantage is operating costs. Both types of franchises usually require maintaining a large amount of stock–about the most expensive stock in the marketplace, in the case of auto dealerships. Although some home-based options are available, most retail or automotive franchises also require a brick-and-mortar location, which creates another ongoing expense. And in most cases, you’ll need to hire staff before you can even open the business. Automotive repair franchises can be especially expensive to operate, due to the specialized equipment and skilled labor involved. Any kind of retail franchise is also vulnerable to disruption, with Americans continually spending more of their shopping dollars online.
The Inside Tip
If a retail or automotive franchise is your dream business, take an inside tip from me. Keep in mind that people become more DIY-oriented when budgets are tight, and they make clearer distinctions between wants and needs. So a hardware store, for example, will be more resilient than a home decor business. On the automotive side, an auto-parts store (DIY) or oil-change shop (essentials) will be more resilient than a car dealership.
Not sure yet if a retail or automotive franchise is your best bet? I’ll be happy to talk through the pros and cons with you! Schedule a call with me so we can chat.
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