A Home Based Franchise Requires The Right Type Of Franchisee

By Ed Teixeira , Contributor | Tuesday, June 19, 2018

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The home-based franchise category continues to grow and includes many products and services. According to Franchise Direct:
  • Home-based companies are now an established and accepted way of doing business, generating well over $400 billion per year nationally.
  • There are approximately 38 million home-based businesses in the country.
  • It's estimated another home-based business starts every 12 seconds.
  • 70% of home-based business can be termed as "successful" within 3 years of founding.
There are certain advantages for franchisees that own a home-based franchise. however, there can also be some disadvantages. To take advantage of the benefits a home-based franchise can provide, requires franchisees with the right qualifications and organizational discipline.

As home-based franchises grow in popularity franchisors and franchisees need to recognize this fact. Home-based franchise opportunities offer advantages for prospective franchisees. Because a franchisee doesn't need to find a site and pay for a permanent location, the initial investment and on-going operating costs will be lower. Also, since it's a home-based location, there will be less equipment costs. The result is a franchise investment that can range from $25,000 to $50,000. Other advantages include the time needed to start-up a home-based location is less compared to a franchise with a "bricks and mortar" location. In addition to the lower investment in a home-based franchise, there is the added advantage of the franchisee being able to work from home. These features should make it easier for the franchisor to sell a home-based franchise since they can appeal to and choose from a larger pool of candidates.

Despite the advantages of a home-based franchise, there are elements that can be problematic:
  • The low franchise investment can attract candidates with weak qualifications and franchisors may be tempted to sell home- based franchises to these candidates.
  • Most home-based franchise concepts are based upon the franchisee being sales orientated, as a result franchisee with weak selling skills may find a home-based franchise more challenging.
  • Although the investment is low, the possibility of litigation from disgruntled franchisees and damage to a franchisor's reputation still exists.
  • Some franchisees may lack the discipline that working from home requires, compared to the structure that a company location provides. This could lead some franchisees to neglect their franchise and veer off in other directions.
  • Prospective franchisees should be aware that a low investment franchise doesn't mean less work. Many home-based franchises are one or two-person operations This means that the franchisee may not have anyone else to help with the work load.
  • Conversely, home- based franchisees that utilize other employees should possess good leadership, management and organizational skills. It can be difficult managing people from a home- based location compared to a business location where employees report to work.
  • Many home- based franchises require that the franchisee have good computer skills since there may be a greater reliance on technology to help operate the franchise.
A low franchise investment doesn't necessarily convert into less business skills or effort required by the franchisee. A home- based franchise opportunity can provide a way for people to own a franchise for a modest investment. However, some candidates may not be fully qualified to operate this type of franchise. When evaluating candidates, franchisors should be aware of the unique challenges that a home-based franchise can present. For their part, prospective franchisees should consider the skills that a home-based franchise requires and determine if they can meet those requirements.

The Franchise Mall is a home-based business.

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