As a franchise consultant, I often encounter the misconception that franchise ownership is only for the wealthy. It’s true that some franchise opportunities require a large up-front investment. But franchise ownership is accessible for a wide range of people. Keep reading to learn why affordable franchising can be very much within your reach.
Affordable Franchise Options
Franchising is a diverse industry, not just in terms of business sectors but also in terms of investment level. Though area development often requires an up-front investment of a million dollars or more, plenty of franchisors offer affordable franchising opportunities. For instance, my own list of preferred franchisors includes a number of companies who require an investment of as little as $50,000 per franchise unit.
If you’re looking for affordable franchise options, keep in mind that regional or brand-new franchisors often charge lower fees than their national or established counterparts. They are also often willing to sell single franchises instead of requiring a multi-unit buy-in. Though the support systems at these companies are sometimes leaner than those at bigger franchisors, they still provide a business system to help make operations easy. If you have good business experience (e.g., you’ve owned a small business before or worked as a middle manager) but not a large nest egg, a regional or new franchisor may be the right choice for you.
Regardless of franchisor type, home-based franchises are also an excellent choice for affordability. Real estate usually makes up the lion’s share of a franchisee’s budget. In addition to rent or a mortgage, operating a brick-and-mortar franchise comes with the cost of utilities, security monitoring, a cleaning service, special insurance, and more. You avoid all that when you choose a home-based franchise. Not only does this decrease your startup costs, but it makes your ongoing costs lower, too.
One tip: as you’re evaluating franchises for affordability, don’t forget that franchise fees are only part of the total costs. Check your Franchise Disclosure Document carefully for other costs that might make the franchise option unaffordable for you. These might include extensive equipment or inventory requirements, high royalty rates, or high marketing fees.
Financing Is Available
Affordable franchising isn’t just about the type of franchise you choose. It’s also about how you pay for your franchise. I don’t recommend taking on excessive debt to finance a franchise purchase, but you don’t necessarily need to pay cash for all your startup costs.
If you’re looking for favorable loan terms to cover part of your startup costs, start with the Small Business Administration. They have several loan programs, with terms that are often better than those you might be able to obtain on your own. Some are even designed just for franchisees!
In addition, some franchisors offer in-house financing, or have special arrangements with lenders. In these kinds of arrangements, the lender may provide more favorable terms for the franchisee because of the franchisor’s reputation for thoroughly vetting applicants. Just make sure that any franchisor-connected financing program has competitive terms. In-house options are not always the most affordable.
You Can Pay Yourself
Also keep in mind that franchising allows for different ownership models. Some owners are looking to build long-term wealth, not pay their bills. The franchise is not their primary income stream, and they don’t work in it full time. Their day-to-day income comes from another source, such as retirement savings or a day job. If you don’t have another source of income or a large nest egg, however, this kind of arrangement won’t work for you. But don’t worry: franchise ownership can also be a day job.
A franchisee who works in the business full time is called an owner-operator. This is a common setup for those who buy a single-unit or home-based franchise, especially for those who want an affordable franchising option that can serve as their primary income. I generally recommend this path for people who still have plenty of working years left–while it works as a second career, it’s not ideal for those who are close to retirement).
If you go this route, you’ll still need some savings or a second income (e.g., a spouse’s job) to pay your bills for a little while. But you can choose a franchise with shorter time to profitability, so that you can quickly begin paying yourself a salary.
There’s one other misconception I often encounter: that Empowered Franchisee consulting services must be very expensive and therefore are not for the average person. In reality, our services are completely free to the franchisee–we get paid by the franchisor after we find your perfect match. So if you’re looking for an affordable franchising option, my team would love to help. Just a 20-minute call will help us figure out whether we should work together. Book some time with one of us today!
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