Service Franchise vs. Retail Franchise: What’s the Difference?

Category: Entrepreneur

Service Franchise vs. Retail Franchise: What’s the Difference?


Can you really have a business without an office location?

The answer has always been “yes.” And in the work-from-home era, it’s become even more common.

There are two primary types of franchises: service and retail. The most notable difference between the two comes down to real estate.

Service franchises are based in homes, small offices, light industrial settings, or even vehicles.

Retail franchises, on the other hand, require storefronts. In a retail business, customers come to you to buy goods and services.


Service franchises

Starting a service-based franchise is often more affordable than starting in retail. Startup costs are typically in the low six figures, plus the cost of equipment.

Service franchises that can be operated from a home or vehicle present cost savings because there is no lease, rent, mortgage, or facility maintenance.

Office-based service businesses are often still less expensive than retail locations. Though the business has a physical location, rent for a small office is typically far less than that of a retail footprint.

Entrepreneur magazine’s fastest-growing franchise of 2021 was a service franchise: Century 21 Real Estate. Other examples of service-based franchises include house cleaning, landscaping, or home repair and remodeling.


Retail franchises

Retail franchises require a physical location customers visit to transact their business. Startup costs for a retail franchise start around $250,000. That doesn’t include the cost of rent or mortgage, janitorial, or facility maintenance.

“Retail” immediately brings to mind stores, where customers might buy anything from groceries to furniture to hardware. Gas stations and convenience stores are popular franchise opportunities.

But retail franchises go far beyond shopping. They encompass any business that requires customers to physically visit the location. That includes restaurants, fitness centers, and preschools.

Hot trends in retail franchises include cannabis and CBD-related businesses, automotive businesses, and businesses focused on health and personal care.


Location, location, location

There are many factors to consider when choosing between retail and service franchises. If you’re looking to make a smaller investment or you like the idea of spending your days out and about, visiting customers where they are, a service-based franchise might be right for you. If your dreams of business ownership include a storefront with your name by the door, you’re probably looking for a retail opportunity.

In either case, the most important features of a franchise are how well you fit into its corporate culture and how suited it is to helping you achieve your dreams. You’re likely to find contenders meeting those criteria in either category.

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