Multi-Unit Franchise Experts

Exploring Questions for Investing in a Cheap Franchise

As consultants dedicated to helping people achieve their business dreams, the International Franchise Professionals Group (IFPG) is proud to bring you our exhaustive guide to frequently asked questions (FAQs) about cheap franchises. Investing in a franchise business is no small financial commitment, so it’s important to arm yourself with all the information you need to ensure that such a venture is a success, and that it allows you to find the best balance between work and family. This guide is specifically designed for those with an interest in investing in a franchise but concerned about the cost implications.

What is a Franchise?

A franchise is an agreement between a business owner (also known as the “franchisor”) and a third party, such as an individual (known as the “franchisee”) who operates a distinct business under the franchisor’s brand name and in accordance with the franchisor’s standards, procedures, and requirements. The franchisee is obligated to pay fees and royalties in exchange for the rights to use the franchisor’s name and other trademarks, and may have to meet certain performance standards, purchase supplies from specific vendors, and adopt franchisor products or services.

What Are the Advantages of Franchise Ownership?

Franchise ownership offers a range of advantages that make it a popular choice for business owners. These include:

•Access to an established and successful business model.

•The backing of an established brand name that comes with its own customer base and a reputation to build on.

•The value of a tested operating system for setting up, operating, and expanding a business.

•Training and support from the franchisor on setting up the business, running it, and understanding the industry.

•The opportunity to purchase supplies from vendors in the franchise network.

•Reduced risk and greater chances of success, as the franchisor stands to gain if the franchise succeeds.

Are There Disadvantages to Owning a Franchise?

Franchise ownership has some downsides that must also be taken into consideration before taking the plunge. These are some of the most common frustrations that come with investing in a franchise:

•Restricted promotional options. Although success will depend largely on how attractively the franchise is presented, franchisors may impose limits on the franchise’s visibility by restricting local marketing efforts.

•A fixed royalty fee. Franchisees need to pay a royalty fee for the ongoing support that franchisors provide.

•Potentially tight control. The franchise agreement may limit the franchisee’s control over staff hiring and firing, product selection, and pricing.

•Limitations on supply lines. The franchisor often requires franchisees to purchase their supplies from specific vendors, this means that the options for finding the best deal on supplies are limited.

What Is a Cheap Franchise?

A cheap franchise is one in which the total initial startup cost (also known as the franchise fee) is lower than the industry average, typically ranging from $6,000 to $20,000. These franchises offer a great opportunity for entrepreneurs and aspiring business owners to get started with minimal upfront costs.

What Are the Initial steps when Investing in a Cheap Franchise?

The initial steps when investing in a cheap franchise are as follows:

•Research and analyze the investment. Evaluate the franchise’s business model, concept, and financials to determine whether it’s a good fit for your background, skills, and long-term goals.

•Discuss franchise options. Review available franchise opportunities to find the one that best suits your needs and budget.

•Access capital. Explore funding sources and funding options to cover startup costs and ongoing expenses.

•Review the Franchise Disclosure Document (FDD). The FDD must be provided by the franchisor and provides critical information about the franchisor and franchise offering.

•Negotiate the franchise agreement. As the franchisee, you should have an attorney review the agreement and negotiate the terms to ensure that they are fair and beneficial.

•Absorb initial costs. Cover all the initial costs incurred in setting up the franchise, such as the franchise fee, premises, equipment, supplies, etc.

•Obtain business licenses and permits. Ensure that you comply with all municipal, state, and federal rules and regulations.

•Market your business. Doing so will help generate brand awareness and a steady customer base.

What Else Should I Consider before Investing in a Cheap Franchise?

Before investing in a cheap franchise, it’s important to consider the following factors:

•Location: The success of a business often depends on the site. Choose a location that is convenient for customers and makes it easy for them to visit your franchise.

•Competition: Consider the competition in the area so that you can accurately assess the potential of the business.

•Longevity: Assess the franchise’s future outlook so that you can estimate the long-term sustainability of the business.

•Adaptability: The franchise must be able to adapt to changing consumer needs and demands.

•Business Leadership: Make sure that you can provide strong leadership and steer the franchise towards success.

•Operating Model: Learn about the operating model of the franchise and how it can help the business grow in the future.

•Financing: Evaluate the franchise’s capital requirements and the sources of funding available.

•Growth Potential: Measure the growth potential of the franchise in the long-term.

Topics: Cheap Franchise, Franchise Ownership, Franchise Agreement, Investment

Download your free copy!

Explore multi unit franchising opportunities and uncover the mysteries of franchising in this e-book.

And learn to evaluate franchise concepts like an insider.

Request a Franchise Evaluation