Last updated: 5th Jan 2018
For many years, franchising has been a go-to business model for local services like cleaning and gardening, offering entrepreneurs a head start in establishing a functioning business.
According to a recent report, common services such as cleaning, gardening and construction represent 28.1 percent of all franchises in Australia, generating hundreds of millions in fees for franchise owners. The median start-up cost for a new non-retail franchise in Australia is $59,750. An initial franchise fee of $28,000 is also charged by 87 percent of franchise brands.
Jim’s Group for example – whose services range from window cleaning to computer repair – boasts more than 2900 franchisees in four countries, generating tens of millions in fees. These businesses are cash-cows.
But the emergence of lead generation sites like ServiceSeeking.com.au represent somewhat of an achilles heel for franchisors, enabling sole traders to get up and running with a steady flow of work for a fraction of the price.
The median cost to launch a new business on ServiceSeeking.com.au is just $1200 per year and the average business will receive approximately 1,700 new leads. In the cleaning industry alone 1700 leads a year should generate $170,000 in revenue*. Jim’s Group charges $25k for the same number of leads on average, approximately 1,983% more.
Frustrated franchisees who can’t generate sufficient leads from head office often jump on the bandwagon. Over 400 Jim’s Group franchisees have joined ServiceSeeking.com.au since 2007 after discovering the secret to online lead generation.
At only 2 percent of the price of signing up for a franchise, it’s not surprising small businesses are moving to lead gen websites where they can build their own reputation, rather than pay for it.
*Based on ServiceSeeking.com.au data