The Pros and Cons of Buying a Low-Cost Franchise

When you’re first starting out, you might not have tens of thousands ready to spend, and you might be reluctant or unable to take out a large loan when your foot is only just in the door. Fortunately, there are low-cost investment options available across a range of thriving sectors. It’s all about finding the right opportunity for you, and your situation.

What is a low-cost franchise?

While doing your research into low-cost franchises, you’ll likely find that the definition varies between experts. There’s no agreed-upon cut-off between low-cost and above within the franchising industry, but the consideration often made is that a low-cost franchise is anything that requires a minimum investment of £10,000 or less.

With one in five new franchisees under the age of 30 [British Franchising Association], many entrepreneurs simply haven’t accumulated enough funds yet to make a larger investment. But there are still options available to business-minded people looking for a new adventure, regardless of their financial means.

One of the most common myths around buying a franchise is that it’s too expensive. What most people don’t realize is that there are many low-cost and low-risk opportunities out there right now that can provide the satisfaction and perks of business ownership, without requiring a huge financial investment.
—Franchise Business Review

Key advantages to running a low-cost franchise

• Reduced risk - With less invested, you’ve got less money on the line, and you’re likely to see a faster return on your investment. You’ll notice profits more quickly, and your cash flow will only improve over time, helping you with potential expansion down the line.

• Low running costs - Many low-cost franchising opportunities are home-based or mobile, meaning franchisees won’t need to worry about office space rent or utilities. Often, low-cost franchises have smaller teams, too, so operating costs are reduced.

• Flexibility - As with any franchising opportunity, running your own business allows you to set your own schedule and complete work largely on your own terms. A career as a franchisee is flexible, and easy to slot into a busy lifestyle.

• The chance to get in on the ground floor - Many low-cost opportunities are offered by newer franchises, who are still in the process of fully establishing their business. If you can invest in a quality business model early, your earnings ceiling will only grow as the franchise does.

Potential disadvantages to running a low-cost franchise

• Lower level of support - The larger the franchise, the more in-built support systems it’s likely to have for franchisees like you. Smaller, low-cost franchises might offer a less substantial package of support and training, which might disadvantage you or mean that you’re working less effectively, without required knowledge.

• Potential that the franchise won’t succeed in the long run - This disadvantage is very much the flipside to “getting in on the ground floor”. That’s all well and good if the lift is moving upwards, but if you stay on the ground floor, it could become an issue. Betting on a less established brand means taking a risk on the franchise’s future success, without extensive evidence and data to back it up.

Evaluating a low-cost franchise

When searching for the right low-cost franchise opportunity, it can be difficult to determine what will and won’t be worth your time and money. Knowledge is power, so make sure you do your research before making a decision. To help you evaluate each low-cost franchise that you’re interested in with confidence, use the following questions:

• Is there demand for the product/service on offer?
• Do other franchises exist that are doing it better?
• Has brand recognition been established?
• Is training available?
• Is ongoing support available?
• Is there room for expansion?

>> Read more:

• Attention First-Time Franchisees: Start a Franchise for Under £10K
• Are low-cost franchises all they seem?
• Top 10 Low-Cost Franchises to Consider in 2020
• Is a low-cost franchise right for you?

Example of a low-cost franchise : Metro Plumb

Founded as a specialist plumbing offshoot of sister company Metro Rod in 2016, this plumbing franchise is a wide network of emergency plumbing experts. Metro Plumb requires a minimum investment of £5,000, with the total investment cost sitting at £10,000, and 1% advertising fees. New franchisees will receive:

• Sales and marketing support, including a dedicated page on the Metro Plumb website, advertising assistance and a full brand pack of marketing materials
• Support generating new business from the dedicated national accounts teams
• Financial assistance and guidance, with back office support for invoicing, payment collection and credit control
• Access to an in-house call centre team who answer queries 24/7, 365 days a year

To become a Metro Plumb franchisee, you’ll need to be ambitious, hard-working and commercially aware. You’ll also need an NVQ Level 2 in Plumbing, or other practical experience which will be evaluated by the training team.

Is buying a low-cost franchise the right move for you?

It’s an exciting time to enter the world of franchising, with 97% of UK franchisees running profitable businesses [British Franchising Association]. But what kind of investment are you looking for? Evaluate your needs, desires and funds, and browse Point Franchise’s comprehensive UK franchise directory to find the right fit.