“Start small first and perfect that. Once you have perfected it, you can copy and paste it into bigger opportunities. It takes time and perseverance to get there. That’s what has enabled us to grow into 40 more locations in the course of 4 years.”
Isn’t this excellent advice?
So, to learn how anyone can do that, we talked with Timothy Phelps, owner of the Techy Franchise. And we will let you in on how you can achieve the same success as well. You can also listen to the podcast here.
But before we delve into the nitty-gritty of expanding your repair business, let’s explore the potential of growth in the cell phone repair industry.
Did you know that the cellphone repair industry’s market size in 2021 is around $4 bn in the US alone? And it is expecting a rise of 1.5% by the end of the year?
With the industry getting bigger, it is time for you to get a bigger chunk of it. So, learning from Timothy’s experience, we have devised a comparison between opening new locations and franchising. Our comparison will help you pick one or both options to expand your cellphone repair business.
Do keep in mind that you must already be successfully running one or multiple repair shops and that efforts have been made to build your brand. Only then should you consider opting for either of the options.
And if that sounds like you, read on.
So, the two options you have to expand your cell phone repair business are opening new locations or franchising. Both have their pros and cons. And we will be going in-depth into these options, comparing them as we go.
Table of Contents
When Is The Right Time?
You’re ready to expand your business but don’t know which way to go? Let us make it easier for you.
You’ve often wondered whether or not you should open a new store. You ask around if it really is the right time for you to open a new store. We asked cell phone repair industry experts that very same question in our 10 Common Mistakes Cell Phone Repair Shop Owners Make webinar and here’s what they collectively had to say.
“You’ve got to know what position you stand in. Where are you at in life? What’s your mindset? How’s your finance, how’s your trust in your hiring process, your system? You need to have a good system that communicates between both stores together. You need to know what’s going on there when you’re not there. If you don’t know what’s going on there, don’t open.”
So, considering the above and speaking from other experience, open new locations only when:
- There is an increased demand for cellphone repair services in the area
- You come across a new market/area that is not offering cellphone repair services
- Your existing location is doing well
- You have a growth mindset
- You already have SOPs in place
Now, you may think you have the basic retail knowledge acquired from setting up your first shop. But keep in mind that the finer details vary from location to location. So, thorough market research must be conducted.
However, if you want to explore franchising, the rules change.
You cannot build a franchise out of one store. You have to have multiple stores running and a brand name.
One of the reasons behind Timothy’s Techy Company’s rapid growth was adopting the franchise model.
“If you want to grow rapidly, then franchising is the right way to do it. It has worked tremendously for us, which has helped us expand to more locations all over the country”.
So, in order to open a franchise, here is what you need to consider:
- Is your cellphone repair business suitable for franchising?
- Do you have an impeccable sales record and good profitability?
- Do you have a brand that you can sell to potential buyers and will your brand bring in enough customers to help grow the franchise?
- Is your cellphone repair business easy to replicate and systematize without needing the franchisee to add their personal touch to succeed?
- Is your cellphone repair business salable? Can it be replicated? Are the returns worth it?
- Do you have a mission statement that your franchisees can adhere to?
- Do you have your SOPs in order?
Once you have answers to the above questions, you will know if you’re ready to franchise or not.
The considerations for opening a new location and franchising are different. So, know your own business and your vision for your business to make a decision accordingly.
What are the Capital Requirements?
Again, capital requirements for a new location and a franchise vary.
A new store location can cost anywhere from $10,000 to $25,000. But $25,000 would be a safer amount. Plan out how you will be financing your new cellphone repair shops. Will you be taking out a loan or do you have the money saved?
You need to consider that your new locations might take 2-6 months to start generating profits.
When it comes to franchising, the case is totally opposite. In franchising, you do not have to invest any capital. Instead, you will be earning through franchise fees, royalties, and marketing fees.
The franchise fee is the upfront cost franchisees pay to open a shop in the name of the franchise. It starts from around $15,000 in the cell phone repair industry. This is a one-time expense on the franchisee’s part and a one-time revenue on the franchiser’s part.
The royalty fee is a monthly percentage of revenue that the franchiser charges. It ranges from 4% to 12% of the total monthly revenue of the franchisees. They can be negotiable at times so don’t forget to bargain.
Marketing fees vary from franchise to franchise. If the franchise provides marketing services, then a certain percentage of the revenue is charged on a monthly basis.
For example, if you are charging a 2% marketing fee and the franchisee’s average monthly revenue is $25,000, they will have to pay $500 monthly, i.e., $6,000 annually.
If you are planning to open a franchise store, make sure you have at least $50,000. This can go up to $150,000 in some cases so make sure that you have that kind of money to open a franchise.
How to Pick the Best Location?
Location is an integral component in the success of your cellphone repair shop. You need to choose the best location for your cellphone repair shop. Because it will help you generate revenue without incurring a lot of marketing costs.
To open a new location, you need to ensure that your shop is not too close or too far from your current location. If it’s too close, you will be targeting the same audience. And if you haven’t been overwhelmed with work lately, it won’t be profitable.
On the other hand, if it’s too far you will have to travel more to monitor your shops. Ideally, your new cellphone repair shop should be at a 20-30 minutes distance from the existing one.
You also need to study your target audience in the area you plan to set your new shop in. For example, if your new location has a lot of millennials, it’d be prudent to stock more selfie sticks, cellphone cases, speakers, headphones, etc., as these items are high in demand amongst millennials.
When picking a new location, you have full authority to pick whichever place you like. That will most certainly be determined by how much you have to invest in the new place.
In the case of franchises, usually, the franchisee has to pick an area similar in demographics to other shops of the same franchise. This formula promises success and a more homogeneous implementation of SOPs.
Thus, with a franchise, the franchiser works with the franchisee to determine the best location for a shop.
What Should the Hiring & Training Procedures Be?
Whether you’re opening a new location or selling/buying a franchise, hiring new employees and training them is an integral part of the process.
With a new location, you have full freedom to go about the hiring and training process as you will. You will also be responsible for all hiring and training. You will also need a store manager who can overlook operations in your absence.
Since you will be hiring more employees for your new store locations, having an employee handbook is a good idea. Your employee handbook should contain all the valuable communication resources for you and your employees, such as your values, history, procedures, mission statement, etc.
In the case of a franchise, however, there are set SOPs regarding hiring and training that need to be followed. You won’t have to hire any employees, but depending on your franchise model, you may have to train all the employees.
You may, however, have to hire staff members whose sole focus will be assisting franchisees. Other hires will include a creative director, a trainer, a marketing assistant, and a franchise manager for starters. They can help franchisees use the cellphone repair shop software and replicate the processes smoothly.
You will also have to create an official handbook that all franchisees will have to follow to offer a uniform service.
Insufficient training will make the franchisees ill-equipped to replicate your system productively. Your training programs will ensure that a consistent experience is given to everyone.
Timothy shared how his employees helped him in his journey to success. He initially dealt with everything himself. But gradually, he hired more employees and delegated tasks. He associates all his success with his employees. Because if they hadn’t put in the hours, Timothy would not have had the time to plan for the business.
“Initially, everything was going through me, and I had control over each and everything happening at our cellphone repair shop. But the employees I started with are still with us today, and they managed to take things off my plate. This is the reason I grew, which allowed me to open up the second store, the third and the others just followed.”
So, whether you are opening a new location or franchising, having a good team is imperative.
Getting a Cellphone Repair Shop Software
Customers want a consistent experience at every store they visit. Delivering on their high expectation can be daunting for cellphone repair shop owners. Thus, getting a POS software for your shop whether you are opening a new location or franchising can help you manage your processes.
Inventory management, employee management, repair tickets management, customer invoicing, etc., can be challenging without a cellphone repair shop software.
Most cell phone franchises use the same cellphone repair shop software within their stores. For those opening a new location, getting the same POS software as the existing shop makes sense. Because they will be able to monitor all stores from the same POS.
With RepairDesk, not only will you be able to manage your customers, employees, inventories, invoices, but you can also efficiently market your services. It’s a high-end cellphone repair shop software that will cater to all your needs.
In terms of franchising, once you have onboarded franchisees, you can have visibility of all the operations and sales. You can do this by integrating your franchises in your cellphone repair shop software.
RepairDesk allows you to integrate franchisees into it. You can easily manage all your franchises while keeping track of all the tickets sold.
How to Work Around Vendors?
If you’re opening a new location, the best way to go about vendors is using the same, trusted ones that you have been using all along. Since your volume will increase with a new shop, try to get discounts. Also, keep in mind that owning additional store locations enhances your buying power so leverage that while bargaining.
Most franchises, on the other hand, have authorized vendors that they can buy from. This ensures the quality of the products. Franchisees are allowed to buy inventory from other vendors as long as they are sure of the quality the vendor will provide.
Overall, franchises are in a better position to negotiate deals with vendors. It is also easier for them to provide exclusive services that other cell phone repair shops might not be able to offer.
What Legal Requirements Must Be Considered?
The legal requirements for open new store locations will be the same which were applicable when you opened your first location.
These legal requirements include:
- Limited Liability Company Agreement
- Abiding by MSRP
- Filing for an EIN
- Apply for Business Licenses and Permits
Whereas to legally vend franchises in the United States, your cellphone repair business must register a Franchise Disclosure Document with the Federal Trade Commission.
You will be required to provide information about your business. It includes a franchise operating manual, audited financial statements, and a short description of the industry’s management experience.
Other than these requirements, some states have their guidelines for selling franchises. We recommend hiring a franchise attorney or consultant who can help you with the details.
Growing and smoothly running your cellphone repair locations and franchises can be challenging. You need to know your business inside out. We hope our tips can help you pick the right way forward to growing your cellphone repair business.