Imagine you are an entrepreneur looking for the ideal franchise opportunity to invest in when you come across a low-cost franchise. The appeal of the cost buy attracts you most, but the question that pops up in your head is whether it is a good idea to invest in a low-cost franchise. We say yes.
Low-cost franchises are an excellent option for franchisees who want to reduce risk while increasing opportunity. Although low-cost franchises provide many of the same benefits as their more expensive versions, they offer a few different ones as well. With time, dedication, and the right amount of hard work, these low-cost franchises have the potential to become some of the most valuable franchises in the world.
Here are few compelling reasons and a few cons to consider if you want to invest in a low-cost franchise.
According to FRANdata, there are currently 668 low-cost franchise options available that typically require an investment of under $100,000 and span 29 industries. No one wants to start a company in debt and have to wait months, if not years, to make a profit. You may see a much quicker return on investment for your franchise business with a low initial investment.
Less Potential Debt
You should also invest in a low-cost franchise because you typically won’t incur the considerable loan debt that comes with investments that require higher costs. You can choose a smaller loan financing option with lower debt service. And lower investment costs mean lower operational costs.
This will allow you to develop your company much more quickly. Since many low-cost franchise options do not require high overhead or a large workforce, they can also have a greater chance of surviving an economic downturn.
For most franchisees, their favorite benefit of owning a franchise is choosing their hours and being their own boss. However, with a low-cost franchise, your work weeks may be a bit shorter. Industry research found that low-cost franchisees work approximately 13 percent fewer hours a week than franchisees with high-cost traditional full-time businesses. Owning a low-cost franchise offers versatility for those who want the option to travel and work or earn revenue on the side.
A benefit of low-cost franchises you should consider is how easy these businesses are to scale. As you grow your business, this could result in more cash flow, which means you can use that money elsewhere. A few examples include:
- Purchasing better equipment or software.
- Creating a better customer experience.
- The potential to invest in multi-unit franchising
Competition with Larger Franchises
Like with any list of positives, there are always a few cons that come with it. A thing to keep in mind when investing in a low-cost franchise is that success is not guaranteed. You have to work hard to obtain and maintain a loyal customer base.
Small, newer, and low-cost franchises face a unique challenge. Because they are relatively unknown, they can struggle to compete with more established franchises. That is why low-cost franchises sometimes go unnoticed. If you’re undeterred from the challenge of creating a notable brand, then going the low-cost path is for you.
Higher Vendor Prices
An often-overlooked con to buying a low-cost franchise is you may end up spending more money overall on goods. Larger franchises keep their costs down by buying their food and equipment in bulk and making deals with vendors. Because keeping smaller businesses stocked means smaller product batches, it can result in them paying more over time.
Hundred Acre Consulting
Deciding to invest in a low-cost franchise is one of many different paths you can take to be a successful franchise owner. We hope that this blog has opened your eyes to the idea of considering a low-cost franchise.
If you’re unsure what industry to get into, let Hundred Arce Consulting be of assistance. I have more than a decade’s worth of franchise knowledge and insight and am more than eager to help you find the perfect opportunity for you. I can also consult you throughout your storied franchise career.
Are you interested in working together? If so, contact me today, and let’s chat!
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