Why plumbing franchises are terrific investments
In the past decade, the plumbing 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 plumbing segment of franchising? From my experience, it seems to be a combination of several things.
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 Great Recession began in 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 plumbing spaces in several ways. First, plumbing-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 plumbing service franchises more effective at generating business.
Second, with the increase in the franchise industry segment for plumbing services, there has been a sharp increase in specialization of services. This focus on market segments allows for better, more effective businesses within the subcategories of plumbing franchises.
The plumbing services market within franchising typically provides a fantastic return on investment when compared with traditional fixed-location franchises.
Market categories include HVAC, plumbing, home improvements, and water heater and electrical appliance services for residential customers. The result of this focus is an overall increase in the market, as consumers always choose to work with specialists as opposed to generalists. Much of the plumbing market used to be controlled by generalists who would provide a wide range of services, whereas now there are a multitude of brands and focused businesses all providing unique services within the plumbing space.
Third, the plumbing services market within franchising typically provides a fantastic return on investment when compared with traditional fixed-location franchises. The investment range for most plumbing-oriented franchises is often less than $100,000, and the business has the potential to generate seven figures in revenue and impressive profit margins.
For example, Benjamin Franklin has initial franchise fees of $43,000 for a territory that has a minimum population of 100,000 — yet their franchise model is best suited for plumbing contractors or business owners who reach an annual operating sales volume of $800,000.
The cost to invest will vary based on market demographics, the size and scope of your existing business size, and individual start-up requirements, including: size of the territory you purchase, discounts you qualify for, number of service vehicles you currently have in operation and tools and equipment you already own.
With plumbing 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, plumbing companies had been hindered with a lack of ability to drive new business and revenues, whereas today’s plumbing 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 plumbing service franchises do require that the owner/operator hold a 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 plumbing space in that many of the experienced personnel in the plumbing market are not necessarily good at communicating with others. This needs to be accounted for when investing in a plumbing service business — make sure you have the right people in place to manage the day-to-day business.