Franchise vs. Independent: Choose the Right E-Scooter Model

Do you want to start an e-scooter rental business in your city? You are on the right path because the global scooter-sharing market is rising among all the micro-mobility solutions, with a CAGR of 9.9% from 2023-2030. However, there is one primary concern that most business owners go through, and you are probably going through the same if you have clicked on this blog: whether you should franchise a popular scooter-sharing business or establish your independent scooter rental business.

The process of choosing one can be daunting, especially when both of them have peculiar pros and cons. So, let’s discuss these two popular scooter rental business models and some factors to help you choose the best business model!

Franchise e-scooter rental business model: Get support with low-risk

In the franchise business model, you get a grant or permission from an established brand to use their name and business model in your locality. For example, you can get a franchising permit from established scooter rental service providers like Lime, Bird, or any other e-scooter rental companies. Along with the brand name, you get the brand reputation, resources, and guidance from the franchisor to help you boost revenue and streamline the operation. It is one of the quickest business models to kickstart your business and earn revenue.

The path of franchising a business is popular in diverse business sectors, including the e-scooter rental business. Following are a few benefits of this model that make it lucrative to many:

Reliable and well-tested business model

Businesses tend to franchise when they have established themselves in the market and want to expand their business. It is one of the easiest ways to scale business operations to boost profits. Therefore, you can rest assured that those willing to franchise have a reliable business model that has worked for them in various market segments. Thus, you save yourself the hassle of developing the business model by adopting the one the franchisor uses. It significantly reduces the business setup time.

Brand credibility in the local market

Building customer trust is easier said than done, especially in a service-based industry. However, 75% of customers find franchised businesses trustworthy and are more likely to become loyal customers. So, you get a competitive advantage in your local market by leveraging the brand image of the franchisor to win your target market’s trust.

Both bare financial burden: franchisee and franchisor

When you work with the franchise model, you share the cost of setting up a business, purchasing fleet and e-scooter sharing software, and promotions. The franchisor helps you source the Best E-Scooter and software at affordable rates. It helps you reduce the setup cost and promotional costs significantly. Furthermore, it helps you cut the research time short and kickstart your business without wasting any time is sourcing the necessary resources in the budget.

Support and guidance when needed

Setting up any business is tedious, especially when the industry is new to you, and the offered service is complex. In an e-scooter rental business, you must manage various technical tasks like fleet management, price management, software handling, and non-technical tasks like promoting the business, staff recruitment, and more. With a franchise business model, you get guidance while setting up the business and even after that for smooth operation management. Expert guidance is essential to optimize resource utilization and get the best ROI. You save time by researching yourself and experimenting with various strategies to find the one that works for you.

There are always two sides to a coin: one with benefits and one with drawbacks. Following are a few drawbacks of opting for a franchise business model for your scooter-sharing company.

Limitations in operation management control

In the franchising business model, you operate a business for the franchisor in your locality. Therefore, they have a significant influence on how the operations are managed. From fleet management to promotional activities, the franchisor has significant control over the business. Therefore, you get limited flexibility and the right to customize the e-scooter rental business’s services.

Franchisors charge you franchising fees or royalties on the services, which are often higher. Therefore, you have to give a significant part of the revenue to the franchisor, reducing the profits for you. It can be cumbersome if you are barely making the revenue in the market dip.

Depending on the franchisor

As mentioned earlier, you are using the franchisor’s brand name and business model; therefore, you must inform them of the performance. Furthermore, the franchisor must approve every strategy, such as marketing or fleet management. This creates a significant dependence on the franchisor.

The domino effect of brand reputation

The brand image of your franchise e-scooter rental business is directly linked to the franchisor’s. Thus, if the franchisor’s reputation takes a hit, your franchise business will experience the hit like a domino effect. Therefore, you must be mindful of who you want to franchise for and whether they have a reliable business model and customer trust.

Independent e-scooter rental business model: Growth at your pace

In the independent e-scooter rental business model, you are your sole provider. You are in control, from investing in the scooter and software to deciding the marketing strategy. Therefore, you are responsible for the profits and the potential losses. Let’s look at the benefits and risks of independently starting a scooter rental business.

Following are the benefits of starting a scooter rental business by yourself.

You are in control to make the final call

You know your local market the best. Therefore, you need the authority to create operation plans fitting the market needs and trends. With the independent e-scooter rental business model, you can make the calls and manage your business your way, from fleet to marketing management. All you need to do is thoroughly research the rules & regulations of your locality and the customers’ needs.

Scale your business as you see fit

You can test various strategies and service features to determine what works for you and scale your operations. In the independent scooter-sharing business model, you can scale your business when needed without any pressure to perform well or restrictions from the franchisors.

The profit is entirely yours

The profits from the total revenue are all yours, except if you have a partner with whom you have established your business. Therefore, the profit margins increase significantly! You can use the revenue and profits as you see fit. You can reinvest to boost business growth and streamline your operations.

Personal brand building

You can establish a strong brand presence by addressing the community-specific problem. Create a business plan and services that provide satisfactory solutions to the local community. Thus, you can create a brand image and build a loyal customer base without restrictions from the third party.

The following are the risks of starting a scooter-sharing business independently:

Higher initial costs can be burdensome

Establishing an e-scooter rental business needs significant capital. The capital is used to invest in the fleet (the soul of our business), an efficient e-scooter sharing software, a user app, recruiting staff, and starting the initial marketing. Gathering such a significant amount can be tricky. You might need to rely on external financial aid, which can lead to long-term debt and reduced profit margin.

Risk of higher opportunity cost

When you are new in the market, there is a high chance you’ll miss out on some opportunities due to a lack of market knowledge or funds. The learning curve for the new owners is often the longest, considering the complexity of the scooter-sharing and micro-mobility market.

Expanding a business can be tricky

Entering the new market is tricky, especially when you have no one to guide you in the said market. Therefore, you need more time and resources to understand the new market and expand your business. It often leads to loss of opportunities or choosing a costly resource.

Building a brand image is difficult

Gaining the trust of the locals requires significant effort and time for a new e-scooter-sharing business. Therefore, you need to be patient when building a brand image. You must experiment with various strategies to find what works for you and your target audience.

So, we discussed the popular models for startup e-scooter rental businesses. But how do you choose which is best for you when both have strengths and drawbacks?

How do you decide which business model is suitable for you?

Consider a few factors when choosing a business model for your e-scooter rental service company.

The funds necessary for starting the business

How do you plan on gathering the funds needed to start the scooter rental business? First, you need to estimate the cost of starting the business and fund it for the first three months. Do you have sufficient funds to meet the financial needs to keep your rental business afloat? Or do you have a plan to source these funds from other sources? If yes, you are good to go independent. However, if you don’t have the answers to these questions, consider whether franchising will be a good option.

The risk you are willing to take

Scooter rental businesses are risky, and the probability of failing is high. So, are you willing to take the risk yourself, or do you need someone to share the burden? Franchising helps you reduce the impact and increase the probability of success. However, if you have researched and think your business will operate well, you can establish an independent business.

The experience and expertise needed to run the operations

The franchisors provide invaluable industry insights and have experience tackling various obstacles in launching a scooter rental business. With a franchise model, you get guidance in each matter, from choosing the best scooter for your fleet to understanding the regulations of the local authorities. However, if you go independent, you must do it all within a limited time frame.

The control of your operations

Are you willing to manage your operation based on a strict frame, or do you need a free regime to manage your business your way? The franchise model works under the control of the franchisor’s business model, and you need to get approval to make any changes. On the other hand, in an independent business, you can create a business model fitting your and your target audience’s needs. So, choose wisely.

Choosing one might seem intimidating. But how do you select only one? Yes, there is no right e-scooter rental business model for everyone. So, you can choose one to start and then decide if it works for you or if you want to switch it up.

Whichever business model you decide, one factor plays a vital role in the success of the e-scooter rental business: an e-scooter sharing software, including management software and a user app. They are the core of your service to help you offer seamless service and manage operations efficiently.

Squillion Tech: Your tech partner for seamless operation management!

Squillion Tech is a Scooter Sharing Software development company with expertise in making automobile-related solutions. Or e-scooter sharing software, Eazy Ride is a complete solution for e-scooter rental businesses. The subscription-based software offers an affordable solution for businesses to kick-start their business without compromising efficiency and quality service.

With Eazy Ride, you can get the following benefits:

Customizable user application
Advanced fleet management software
IoT integration for easy management
Effortless third-party app integration
Geofencing for fleet tracking
In-build revenue management system
Divers ride booking options (solo and group rides)
Live notifications and customer support desk system
Team training and consistent support
Transparent policies

Like no business model fits all, we know that subscription software is unfit for many. Therefore, you can now own the source code of the software. Want to know how? Contact Us; we are excited to help you kick-start your business ASAP!

Conclusion

Franchising or starting an independent e-scooter rental business are the industry’s two most popular business models. However, the choice between the two depends on various factors such as the availability of funds, the control of operation, the need for guidance, and the willingness to take risks.

The franchising model allows you to share the cost of operation, establish a brand image, and provide necessary guidance at the cost of operation control, reduced profit margin, and dependence on the franchisor. On the contrary, the independent model allows you to manage your operations as you wish, have a higher profit margin, and build a personal brand, but at the cost of risking your funds and losing opportunity due to lack of experience.

So, consider the above factors to select the business model that fits your needs. Remember, if one doesn’t work for you, you can start again with a different approach.

Franchise or indpendent? Choosing the right e-scooter rental business model