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Low Cost Franchises Tips
Low Cost Franchises
Low Cost Franchises cover a wide range of industries and services, such as snack shops, pizza shops, sign companies, and cleaning services. Each industry has its own general rules of thumb in terms of income potential. However, it generally happens that the lower the cost, the lower the income potential. Offsetting that is your time.
Franchises require more than the passive attitude of "throw in some money and sit back and get rich." You need to invest your time and energy in addition to your money. You'll probably make more money off a low cost franchise that you actively manage than by putting your money in a totally passive investment. Franchises generally require a larger investment of time and money in the beginning. By the third year, however, you should be on your way to a nice income.
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How to Evaluate Low Cost Franchises as Alternative Investment Instruments
Investing in low cost franchises may be a strategically significant method of generating multiple streams of income. Most people consider the purchase of a franchise as a “job replacement” rather than investment however, with their proven business models and turn-key marketing solutions many low cost franchises are attractive investment alternatives.
According to Entrepreneur.com, the top ten low cost franchises for 2007 include a selection of service based opportunities:
Jackson Hewitt Tax Service
RE/MAX Int'l. Inc.
Jani-King
Curves
Liberty Tax Service
Merle Norman Cosmetics
Kumon Math & Reading Centers
Jan-Pro Franchising Int'l. Inc.
Chem-Dry Carpet Drapery & Upholstery Cleaning
Bonus Building Care
Each of these low cost franchises is an attractive option for someone seeking to build a small business, obtain tax write-offs and create the potential for a strong return on investment.
Who might benefit from purchasing low cost franchises? Many people, including:
Married couples who desire a flexible small business partnership.
Working professionals who would like to build an additional second income without leaving their current position.
Retiree’s or Semi-retired professionals who would like to supplement their income without giving up all their free time.
What to look for when researching low cost franchises as an alternative investment:
Some franchises require the franchise buyer to be the owner-operator and actually work on site at the establishment. This is essentially a “job replacement” small business opportunity and will require the buyer to invest a significant amount of personal time to establish and operate the business. Instead, for the purpose of purchasing an investment, search for those low cost franchises that allow absentee ownership. This option will provide the flexibility you require while still providing the benefit of small business ownership.
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Advisory Board for a Cheap Franchise
It's probably not a matter of whether it's a cheap franchise or not, but rather a matter of caring about keeping all franchisees happy. An advisory board can indicate a willingness to listen and learn from franchisees. However, if the franchisees on the board are hand-picked by the franchisor, they may do nothing of any consequence.
A well-rounded franchise advisory board should include people who own multiple franchises as well as people that only own a single franchise. The entire spectrum (inclusive of both large and small markets) needs to be represented. The diversity of the board ensures that as many voices are heard as possible, regardless of the cost of the franchise itself.
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Cheap Franchise Opportunities
As you research the franchises, take note of cheap franchise opportunities. Make sure you include all the costs associated with starting a franchise, however. If low start-up costs are evident but the royalty fee is much higher than normal for that industry, you need to be aware.
Create a chart listing the various charges and expenses you'll incur over the first few years to get an idea of the total cost of a business. The cheap franchise opportunities that don't make any profit could end up costing you more in terms of lost opportunity. Whatever money you invest in a cheap franchise is money you can't invest elsewhere. Choose wisely and investigate and understand all costs.
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Research for your Low Cost Franchise
Whether you are buying a low cost franchise or not, you still need to determine that there is a demand for the product or service. Define your potential customers and figure out how and where they live. Do they buy your product or service on an impulse or is it a pre-planned and researched purchase? A low cost franchise like a snack or ice cream store depends heavily on foot traffic for impulse buys. Location is very important to these kinds of businesses. On the other hand, most people don't hire a cleaning service because they happened to walk by an office one day. For those types of businesses, advertising and publicly displaying information on the business is probably the best way to make an impact (people are more likely to research such services before purchasing them).
*Whether or not you find low cost franchise opportunities, figure out how to reach your prospective customers and what messages will reach them.
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Low Cost Franchises with Fast Growth
The low cost franchise opportunities which are experiencing tremendous growth have both disadvantages and advantages. The advantages are obviously that consumers like the product and the name will become even more known as the growth continues (this is a good thing as it fuels the growth in your business). It probably also indicates a sound financial structure. On the other hand, the franchisor organization is probably growing as fast as the individual franchises and that may cause some difficulties. In any fast growing organization, some things get lost. If you are brand new to the small business franchise, you may not get the support you need and may feel overwhelmed by the fast growth expected of you.
