Starting a business is a brave undertaking, one that requires detailed research before making a decision. Franchising helps with limiting a variety of the risks associated with independent business ownership, though there are still plenty of questions to have answered before placing your time and money into a new opportunity. The most obvious question you’ll ask: how will this business make a profit? Another common question is: what style of ownership fits my preferences?
But right at the beginning of deciding on whether to franchise is the question of if you can afford to join the system at all.
Perhaps you just want to dip your toe into the new venture and choose between the many cheap franchises that are out there. Or maybe you don’t have much money to spare and want to explore your options. Truth is, you do not have to spend a lot of money to invest in a franchise. Franchise start-up costs vary, from a couple thousand bucks to as much as several million dollars.
Initially, you should begin with an understanding about franchising itself. A franchise is an opportunity for you, the potential franchisee, to purchase the rights to operate an already established brand. You have the benefit of becoming a business owner without having to learn an entirely new industry. The franchise provides a guide to follow its business model so you may feel like you’re creating a start-up, with the safety net of a brand name and a proven path to success. And with franchising becoming such a popular investment option, there are a variety of choices so can weigh your options to find a brand that best aligns with your situation. As a franchisee, you will be in good company, as nearly 4-percent of U.S. small businesses are franchises.
When researching franchise brands, it is best to understand a company’s initial franchise fees, start-up costs, and royalties as well as what your franchisor will provide you for your investment. Find out exactly what support is included in the franchise offering. To do this, you will need to understand a document called the FDD or Franchise Disclosure Document. It provides an understanding of the business as well as establishing the roles of the franchisor and franchisee. There are many choices out there, so find something that suits your needs, interests, and budget.
Cheap Investments
While you will need money for franchise fees and start-up costs, there are options if your budget is tight. You could consider your franchise investment with a partner but creating a financial and business partnership will cost you a few bucks to have an accountant and attorney set up and approve the terms, protecting all parties’ best interests. Another option is finding financing. Larger franchises may offer their own financing or direct you to third party financing opportunities. There’s also the option of using your home’s equity or borrowing from your retirement savings. If you are a veteran, many franchises offer incentives and discounts to encourage ownership making the transition from military to civilian life a bit easier.
Question is, is it worth all that trouble? Experts agree that there are some great low-cost franchise opportunities out there and your investment could yield excellent returns. Here’s the caveat. Are you really saving money on cheap franchises? Typically, when franchise fees are lower, it may mean it’s a business with less overhead and/or providing fewer goods and services to the franchisees which could equate to more work for you. It may also mean the brand is not as well known. That could indicate it may be more challenging for a franchisee to build a customer base when the brand is still building its identity in the market, and there could be strong competition to overcome. There are lucrative low-cost franchises, but you have to find the best fit for you, whether it’s event planning, cleaning services, exercise and wellness, real estate, travel, or retail surrounding certain hobbies.
Those looking for cheap franchises often rely on lists that curate franchises by franchise fees. Those low initial costs understandably attract prospective owners, but it’s important to know the actual value gained – or not – by that lesser fee. Many low-cost franchises are accessible but lack the support many franchisees desire during both start-up and the journey to long-term success. The franchise fee is also not the only expense to factor in. You should have a clear picture of the entire cost and fee structure so you can bring confidence into the investment plan before taking the leap.
There’s the old saying, “you’ve got to spend money to make money.” Remember that when considering your entrepreneurial dream of business ownership. Focusing solely on cheap franchises might save you money up front but could hinder your chances to drive bigger profits down the line. Taking your initial investment up a notch, to a more mid-range model, may mean belt-tightening initially, however, it could be a better pay-off, long term. Be sure to look at a franchise’s profitability through their unit growth, or the number of locations they have opened, their success rate, and financial statements.
Experts indicate those mid-range investments, from about $100,000-$500,000 typically include service sector franchises. There may be no better example to examine than the franchise opportunities at Wild Birds Unlimited. Franchise start-up costs vary, but typically begin at $185,000. That puts us right in line with a mid-range investment. We believe in full transparency and the in value of providing clear expectations. The average gross sales in 2020 for all stores open for a full year – meaning those opened before 2019 – was $687,516.
Consider this: as a franchisee, you have a sense of security from your investment in Wild Birds Unlimited. You have access to industry-leading training and support, from business coaches to assistance with merchandising and everything else needed to build a successful store. As opposed to many cheap franchises, you would be working with a proven business model that has been around for 40 years with strong brand recognition and a loyal customer base. That provides confidence to a potential franchisee. A sign of a strong model is the amount of growth. Wild Birds Unlimited has 350-plus locations throughout the United States and Canada with more on the way. But more than that, the sign of a strong brand is when franchise store owners are happy. In 2021, Franchise Business Review ranked Wild Birds Unlimited in the top two for franchisee satisfaction in the retail category for the 8th year in a row, and No. 2 overall. Besides franchisee satisfaction, there is increasing customer demand and loyalty to this brand and growth is attributed to the thriving industry of backyard bird feeding. It’s a niche market and we are proven leaders.
Bottom line, if you choose a low-cost franchise opportunity, it may provide greater accessibility for your bank account at the on-set, but you may have to work harder to build brand recognition, and it could mean a lower profit margin in the long-run. Do your homework and look for profitability and growth opportunities.
However, if a mid-range investment opportunity like Wild Birds Unlimited seems like a good fit for you, fill out this form and get ready to fly with us!