In our myth-busting series, we tackle all the myths you may have heard about starting a franchise. In this article, we focus on the common belief that an enormous investment is always needed to start a franchise. This is certainly not the case, and we’ll tackle where the myth comes from and why it should not deter you from becoming a franchise owner.
It’s true that many people are reluctant to invest in a franchise because the investment fees appear to be out of their budget. At the same time, many are unaware of the low-cost franchise opportunities that exist and the help you can get to invest. In this article we’ll investigate all the options you have to start up a franchise with a smaller budget.
Franchise opportunities don’t all involve the costs of setting up and opening your own store, which can come at a hefty price. Some big-name businesses even have connections to third-parties to help you raise the cash temporarily. Franchising offers opportunities for a range of potential franchisees, not just those with big budgets and previous industry experience.
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Low start-up cost franchises
There are plenty of franchises with start-up costs under £10k and promising turnover prospects. Mobile and home-based franchises are the perfect example: any business that’s van-based or can be done remotely is the best way to go if you’re unable to fund pricey start-up costs. What’s expensive about investing in a franchise is usually the property it requires for the store or outlet and the furbishing.
Low-cost franchises also may depend on who’s required to run the business. Affordable options are usually run on a single-operator basis, so this is something to take into consideration when investing. Nonetheless, what started off as a one-person home-based business could expand as it generates more revenue and allows the original franchisee to recruit staff and invest in estate if necessary.
There are affordable franchises to start up in a variety of different industries, such as cleaning, car valeting, IT, pet services and delivery. Whichever route you go down, there is always the potential to grow and expand your franchise from there.
A franchise-fee breakdown
When franchising, there are a number of different costs to be covered on behalf of the franchise. This is why the start-up costs may seem steep. Let’s look at what your investment is typically used for and what you’ll get out of that. It’s advisable not to take a cost at face-value until you know what the fees are going towards – this might encourage you to reconsider the investment. A lot of these fees will ensure the process of running your own business a lot easier than if you were start from scratch.
The initial fee could be considered a ‘package fee’. Let’s take a look at a potential breakdown of what you would typically get for an investment:
- Training. The training you receive as new franchisee is typically extensive, involving classroom and on-site training courses for sometimes weeks at a time for both you and your potential staff. Although it could raise the price, it is highly necessary if you have no prior experience and you will reap the rewards in the process of the running the business.
- Royalty fees. When starting a franchise, you’re getting behind a big-name brand. For this, you need to pay trademark fees for the use of the brand-name, operating system and usually its décor theme (if you have an outlet) and logo.
- Staff. If your franchise does require staff recruitment, as previously stated, this will increase the price of the initial fees. You can always opt for starting up a franchise alone and once you start earning a reasonable wage, delegating roles to additional staff.
- Equipment. As with any franchise, you will be supplied with the specialist equipment or vehicles are necessary for the business, as well as signs and possible even furnishing.
- Property sourcing. If your franchise does require property, you will need to fund the costs of sourcing a suitable profitable location and possible architectural analysis from estate agents and experts.
- Reimbursement. We must not forget that you’ll always be refunding the franchisor the fees of turning the business into a franchise.
There are also ongoing or extra fees to take into consideration, such as resale, renewal, legal advice and insurance. But once you start generating a turnover these should be easier to manage. These are not always applicable to every franchise, so it’s something to look into when choosing a franchisor to partner with.
Take your time to assess
It’s important to consider the above when you’re starting a franchise. Will you recruit staff? Will you work from home? Will you require property for a store? These answers must suit your needs and it’s always best to be realistic. However, if you do opt for a cheaper start-up cost in a franchise, you need to ensure you agree with the amount of support you’ll be receiving in return.
Low-cost opportunities on Point Franchise
Tubz Brands is the number one tower vending franchise in the UK & Europe.
- Becoming a Tubz franchisee: Investors have the flexibility to run the franchise in the way that best suits them, so you can operate it from home as a part or full-time business, depending on your preference. To learn more and sign up, click here.
- How much you need to invest: This is a low-cost franchise opportunity; you’ll only need to make a total investment of £3,295.
- What you get for your investment: There are no management, monthly or annual fees when you become a Tubz franchisee. You’ll get full training and ongoing support, a two-year guarantee on all new equipment and branded product stickers and uniforms. The franchise package also includes stock from popular brands like Pringles, as well as the opportunity to introduce a nutritious snack tower for the growing number of health-conscious consumers.
ComputerXplorers is the leading provider of technology education for children between the ages of three and 13. The goal of this exciting franchise is to deliver engaging, educational and fun classes so that children learn computer skills in an enjoyable environment.
- Becoming a ComputerXplorers franchisee: If you’re prepared to work hard, are comfortable dealing with people and have a positive mindset, you’re just the type of franchisee that ComputerXplorers is looking for. You’ll introduce young students to podcasting, digital photography, programming, robotics and the internet. Click here to find out more.
- How much you need to invest: The total cost of investing in a ComputerXplorers franchise is £14,950 plus VAT.
- What you get for your investment: As long as you’re prepared to follow the tried and tested franchise system that has a proven track record of success, all the other skills you’ll need will be included in the training programme.
Aiming to contribute to the healthy lifestyle of dogs, cats and horses, Husse offers a home delivery service of premium dog and cat food, cat litter and pet accessories. The Husse brand has grown at great speed since being introduced to the UK back in 2012, making it the most rapidly growing pet food franchise in the country.
- Becoming a Husse franchisee: You’ll be in control of ordering pet food and accessories from the supplier and delivering them straight to your customers’ doors. As pet food is needed all year around, you can be sure that you’ll be generating high profit margins throughout the year. Click here to find out more.
- How much you need to invest: This pet franchise asks for a minimum investment of £9,000 and a total investment of £20,000.
- What you get for your investment: You’ll take part in a comprehensive training programme that will cover everything from sales techniques and marketing to product knowledge and website administration.
>> Read more:
- How Investing in a Franchise is Worth it
- Franchise Investment: The Good, The Bad and The Ugly
- Invest in a franchise or go it alone?
- 5 reasons to invest in a franchise
- Making your mind up: Top 5 things to consider before you invest in a franchise
- Reasons why you should consider investing in a new franchise system
Other finance options
Many franchises have third-party connections to bankroll a loan for you to invest in the business at the best possible interest rates, and they can lend you up to 70% of the franchise fee provided that you suit the franchisee criteria. If the franchise doesn’t have links with any banks, it’s worth inquiring yourself because many banks see franchises as a more favourable option for a business loan.
Franchising - more affordable than you might think ...
Hopefully this article has busted any myth about franchise fees you may have. No matter what your budget, there are always option that makes your franchise dream a reality. If you’re interested in any of the low-cost opportunities, take a look at our directory for affordable franchise opportunities.
Georgina Crothers, Point Franchise ©