Did you know that over 5% of all small businesses are franchises? Franchises employ more than 8 million people in the United States alone, and that number is only going to continue to grow!
One of the main concerns (and rightfully so) when considering franchise opportunities is your required initial investment. Franchise investors must pay an initial franchise fee, (usually) an ongoing franchise fee, and have enough working capital to cover business expenses as the new business launches and grows.
All of these costs can really add up! For example, Wendy’s requires franchise investors to have $2 million in liquid assets and $5 million in net worth to begin opening up/investing in locations!
The good news is that not all franchises come with a sky-high Wendy’s-esque price tag. In fact, you can get started (assuming you can qualify for a small business loan) for as little as $20k initial capital.
This week we’ll be discussing the benefits of investing in low-cost franchises!
1) Less initial capital is required than most business ventures
This is kind of an obvious benefit of low-cost franchises, but it is one of the most important for potential franchisees. Whether you’re looking to launch a franchise or non-franchise small business, having enough money to get the ball rolling is one of the most significant barriers to entry for most people.
Low-cost franchises keep your initial investment requirements to a minimum, which in turn makes them a realistic opportunity for many individuals.
2) Securing a loan will be much easier
Even if you have a decent amount of money saved up, taking out a loan for your new franchise business might still be a smart choice. Franchise investors commonly apply for small business loans, borrow money from friends or family, and a variety of other strategies to secure initial funding.
Since your initial investment requirements for low-cost franchises will be less than other entrepreneurial endeavors, qualifying for a loan to cover your costs will be much easier than it would be for more expensive franchises.
3) You get a recognized brand name and customer base
One of the greatest benefits of low-cost franchises is that you get to take on a known brand name in your chosen industry that already has an extensive customer list. If you were starting your own small business from scratch, you would have to spend much more time building up brand recognition. You would also have to spend lots of time to gain an initial customer base as well as online reviews of your products/services.
Low-cost franchises provide a ton of value in this regard since you don’t need to spend a lot of time brand-building, but your required initial investment is similar (or even less) than if you tried to strike out on your own!
4) You will (likely) begin seeing profits sooner than later
If you fork over a large amount of money to begin running a franchise, it could be a long time until you break even on your investment. It could take even longer for you to begin seeing substantial profits.
With low-cost franchises, you will likely break even on your investment in a shorter amount of time than if you went with a more expensive company. Your overhead costs will likely be lower than they would be with other franchises, which means your profit margins will be higher and you can see solid profits that should only grow over time!
5) Scaling your business should be a smooth process
If you went with a more expensive franchise choice, you could run into issues when trying to scale your business. A higher initial investment, overhead costs, and employee headcount can all be bottlenecks when growing your operations.
With low-cost franchises, none of the above factors should prevent you from scaling your business!
If these benefits sound great to you, contact us today to learn about your business ownership options!