There are a bewildering number of franchise opportunities online, and some advertise very low upfront fees. But which should you choose and can you trust what you read? Here’s our guide to navigating the maze of low-cost franchise opportunities.
To make the right choice, you’ll need to understand the nature of the overall business you’re buying into, the franchise opportunity itself, and all of the costs involved. Trust your instincts when it comes to evaluating promises that look too good to be true, offering ‘easy money’ or ‘unlimited earnings’ for example, and ensure you understand what all the numbers mean before going ahead with anything.
With thousands of entrepreneurial Internet searchers on the hunt for low-cost franchise opportunities, franchisors have looked to structure their fees in a way that makes them look attractive. Advertised fees of under £1000 are easy to find online (for example, for delivery, online or cleaning businesses), but it’s unlikely this figure will cover your total investment.
If you’d like to know whether franchises with upfront fees of under £1000 are available, then the answer is clearly yes. But if that £1000 represents all you have available to invest in your new venture, you’ll probably need to limit yourself to opportunities with upfront fees that give you a good margin for other costs.
The franchise fee is likely to be the headline amount you’re looking for when in search of a low-cost franchise. Some sites quote this number while others advertise the ‘minimum investment’ according to the particular criteria they set.
The British Franchise Association lists two costs on its members’ directory , which are (1) the typical total start-up cost and (2) the minimum personal investment. The definitions of these terms are given on its website. But even in the case of BFA, they do not include working capital in their numbers.
In fairness to the BFA and the various directories available online, it’s impossible to set out the total investment you’ll have to make in a single one-size-fits-all figure.
To understand how much you’ll have to invest, either from credit or your own savings, you need to have a grasp of all of these:
In many instances, you’ll need to fit out your franchise yourself - refurbishing a shop or leasing a van, for example - using your own money. In others, the franchisor will take on all or some of these costs.
The initial franchise fee is the upfront charge for the licence to distribute the franchisor’s products and services - this is the headline rate most people associate with the cost of a buying a franchise.
Beyond the initial fee, there will be on-going fees from the franchisor. These are likely to be a percentage of your sales, but there are also fixed monthly arrangements with some franchises.
Don’t forget to factor in your need for working capital - in other words, funds for the day-to-day operation of your business - as the lack of it could quickly see your plans unravel.
Your franchisor may charge you a fee to contribute to the cost of advertising across the whole network. Alternatively, it may be expected that you set aside a budget to cover these costs yourself. Your arrangement may also involve a combination of the two.
The costs involved in buying a franchise vary both within and between industries, so it’s worth considering a wide range of sectors if you’re looking for a less expensive way to get started in business. However, let’s consider some of the most common industries in which you’ll find low-cost franchises.
From luxury ice-cream vendors to pubs, you’ll find a host of food-related franchise businesses to choose from. The range includes little-known one-person food delivery businesses as well as some of the biggest names in franchising - probably the biggest in fact, as McDonalds is primarily a franchise operation.
There are plenty of low-cost courier franchise opportunities available across the country, with advertised fees in the hundreds of pounds, but some are large-scale freight operations with a price tag to match.
Retail franchises aren’t just shop chains, so it’s worth browsing this category on franchise directory sites even if you’ve ruled out this kind of business (for assumed cost reasons, for example). Some of the lowest-cost franchises involve door-to-door or workplace sales, and these could put less pressure on your cash reserves since there’s a good chance you’ll be able to continue your regular work around them.
Internet franchises can offer a low-cost way to enter self-employment and make a good living. The terms ‘online franchise’ and ‘internet franchise’ are both slippery, however, involving a wide range of business models. Some involve promoting offline services on the Internet (essentially acting as an affiliate) while others involve promoting digital services (such as virtual PAs or accountancy apps) using offline means.
Domestic cleaning franchise opportunities can be found with initial fees of £1000 - £2000, while commercial outfits and dry cleaners are likely to be considerably costlier. Specialist cleaning businesses like maid services, chimney sweeping or decontamination can also be found.
Unsurprisingly, with so many low-cost franchises competing for your attention online, some of the claims they make can be very bold indeed. Try to cut through the hype and get to the details, seeking independent advice where possible. You can find this from a specialist franchise consultant or even a lawyer if necessary.
It’s also worth finding your own testimonials, rather than relying on those provided by the franchise. The BFA has a Code of Ethical Conduct to which its members must adhere, so if your franchise is associated with this group, this will provide some degree of protection against over-enthusiastic marketing (or worse).
Franchising isn’t the only way to start a business without having to inject lots of capital.
A powerful brand is a big draw, but if you’re considering buying into a franchise you’d never even heard of before starting your research, then perhaps you could think about going it alone instead. If you’d like to go into domestic cleaning, for example, you may be able to build your own client base yourself. Use techniques like recommend-a-friend discounts, having an active social media account and engaging in some old-fashioned door knocking.
If you have basic web skills and a knack for writing, then affiliate marketing and/or hosting PPC ads on your site(s) can also bring in significant income. This doesn’t usually involve any initial fees at all, since it differs from a franchise arrangement in important ways. Well-known brands like Amazon will pay you a proportion of the sales you make from your site (or emails, etc.), and huge numbers of websites profit from Google’s AdSense programme. There are countless affiliate schemes available, covering basically every industry.
If, on the other hand, you believe becoming a franchisee could be the right move for you, take a look at our article on buying a franchise .
Whether you want to buy a low-cost franchise or start a business from scratch, you’ll need to take care of your own insurance. Accidents happen in all industries and the results can be extremely costly if you’re caught uninsured. Take a look at our Public Liability Insurance today.