Are Low-Cost Franchise Opportunities a Good Investment?

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low cost franchises

Originally uploaded on 08/09/2017. Updated on 07/04/2019.

Entrepreneurs with the ambition to launch and run their own business could realise their dreams by investing in a franchise business. As the amount of low-cost franchises is on the rise, the dream of starting a business is attainable for an increasing number of people.

However, while a franchise that appears to be cheap could offer good value for money, it could also be a risky investment. Not every franchise opportunity is a good one, so prospective franchisees should ensure that they carry out considerable research into not only the business, but also the industry it belongs to, in order to establish whether it is right for them.

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Here are some of the key areas on which you might choose to focus when doing research:

Set-Up Costs

A low set-up cost is a huge plus point when it comes to launching a franchise. Usually, franchisees will have to pay franchise fees and set-up costs of between £1,000 and £15,000, but the old saying is often true: you only get what you pay for. In other words, if a franchise appears to be very cheap, the franchisor has probably made compromises. You may not receive much training or support, for example, so dont be fooled by low-cost franchise opportunities.If you were initially attracted to the franchise model because of the opportunity for franchisor support, find out exactly what support youll receive before you commit to becoming a franchisee.

Flexibility

The majority of low-cost franchises are businesses in the service sector that you can run from anywhere, including from home. Of course, there are advantages and disadvantages to working from home; remember that what you save in rent, you could lose in customer footfall and brand awareness. Therefore, you will need to establish a promotional plan to ensure your business is recognised by consumers.

However, its not just the location of the business that can be flexible. With a low-cost franchise, you can select your working hours to complement your other commitments. There are many full-time franchise opportunities that franchisees can fit in with parenting or caring duties, or part-time ones that can be run alongside a full-time job. Of course, you should bear in mind that the more work you put into your business, the more it will flourish, so it stands to reason that if you reduce the time you dedicate to your business in order to prioritise other aspects of your life, it may not go as far as it could.

Responsibilities

Your franchisor will grant you the rights to their proven business model on the condition that you abide by the regulations set out in the franchise agreement. You will be responsible for managing the day-to-day running of the business and ensuring that your customers receive a satisfactory service. The franchisor has ultimate control over the entire business, but it is your obligation to make your franchise profitable, no matter how small or large the initial investment may have been.

The good news is that there is no correlation between the amount of money invested in a franchise and the amount of money the business can make. This is mainly because the amount needed to buy a franchise is generally dependent on the industry. Restaurants and retail franchises are more expensive because of the steep rental costs and the outlay required to fit and stock the retail space. On the other hand, a franchise business in the service industry, for example, can be started with just a laptop and a decent internet signal. This substantially lowers the initial investment and enables the franchisee to make a profit much sooner.

Franchise Direct lists various home-based and therefore low-cost franchises that you could consider if you want the benefits of franchising without the debilitating costs. These include:

Child-related Franchises - There is a wide range of franchises involving children, from personalised book selling (My World And I) with a minimum investment of £999, to a day nursery franchise (Banana Moon) with a minimum investment of £50,000.

Cleaning Franchises - There are many franchises available in the domestic and commercial cleaning services sectors. Minimum investments vary from £1,995 up to £29,995.

Education Franchises - As parents become increasingly willing to pay to improve their childrens grades in school and prepare them for exams, these types of franchises represent a great opportunity for those with relevant experience.

Internet Franchises - Unsurprisingly, there are a whole host of IT franchises available, as mobile apps, gaming and social media continue to rise in popularity. Minimum investment starts from as little as £450, as all that is needed to get started is a laptop and good internet connection.

Photography Franchises - Starting a photography franchise is a fantastic way to turn a hobby into a home-based business. If youre into photography, this could be an opportunity to create a truly personalised and special business, whether you set up a portrait studio in your spare room or go on the road with a mobile photo booth.

Conclusion

So, forget about any preconceived ideas concerning low-cost franchises. While it is true that you will likely have to put in extra hard work to make any low-cost franchise a success, there is the potential to see a significant return on investment.

The franchise model as a whole is effective because by following the prescribed training, management and marketing guidelines set by the franchisor, you can start a business with little or no experience. Therefore, dont underestimate the importance of the franchisors support. When youre researching franchises, make sure that you know exactly how much advice and guidance is offered by each franchisor, as this support will be crucial to your success particularly if you have limited experience or industry knowledge.

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