Low-Cost Franchises: How to Determine What’s a Worthy Investment
There are many affordable franchises available to entrepreneurs who are interested in business ownership. Many prospective franchisees like the concept of franchising because it provides advantages compared with the challenges of a startup.
Starting a business from the ground up can be an arduous task. According to the Small Business Administration, 32% of new businesses fail within the first two years because owners are not fully prepared to handle the many twists and turns that a new business brings.
It’s no wonder that so many are turning to franchising for its appealing model. Although there are never guarantees in any business venture, franchising typically poses a lower failure risk since the franchised business has been proven in the marketplace and replicated. Based on research conducted over several years, 92% of franchisees studied after placement were still in business after two years and 85% were still successful after five years.
The Secret to Success
Franchising offers entrepreneurs a turnkey business complete with an effective model, operating details, training from experts, ongoing support, well-developed marketing and advertising campaigns and the ability to network with other like-minded franchisees. Instead of the startup struggle, franchisors are dedicated to the success of their franchisees to help build the brand.
That’s why there’s robust growth in the franchise industry. Based on projections from the International Franchise Association, franchising is forecast to be $826.6 billion in 2022. By year’s end, there’s expected to be 792,000 establishments, adding a net gain of 17,000 new franchise locations. This is promising news for investors.
Benefits of Affordable Franchises
Especially since there are many low-cost franchise opportunities to choose from. This allows the franchisee to be in business without piling on debt. Conversely, there are franchises with exorbitant price tags, and you might presume those are the only brands that make money because of the old adage, “you have to spend money to make money.” But high-investment franchises are not necessarily get-rich-quick opportunities. It can take years to recoup the huge investment or pay back business loans. Big price tags often mean the net worth and liquidity requirements are also higher for those brands, putting the option out of financial reach for many entrepreneurs.
The sweet spot for franchise fees on the affordability scale comes in at around $50,000 or less. Luckily, franchises come in all shapes and sizes, which equates to a variety of choices for those ready to be in business.
Many low-cost franchises can produce a healthy ROI. That is the point, after all, to buy low and have a quicker ramp-up, thus faster profit potential. The cash coming in helps grow capital, which can then grow the business. When there’s money in the coffers, there’s opportunity to purchase additional franchise locations. Becoming a multi-unit owner helps you build your portfolio and potentially creates a more lucrative investment.
When looking for affordable franchises, possibilities run the gamut from home-based to emerging brands and well-known names. It’s a matter of finding the right fit — a business that shows growth, aligns with your beliefs and goals, and is in an industry that’s trending and showing long-term growth.
This is one way to determine if a franchise is a worthy investment. Homework and research are necessary to find low-cost franchises that are interesting and potentially good investments.
Consider, too, a franchise with strong and effective management and leadership. Prospective franchisees should learn about the franchise development team, and about the brand. Find out how long they’ve been franchising, what their long-term growth strategy is and whether any franchise locations have closed (and if so, why).
It’s essential to look at the brand’s franchise disclosure document (FDD) to gauge how the brand operates. The FDD is a valuable guide to better understanding a franchise brand.
Pros and Cons of a Low-Cost Franchise
- No need to break the bank to get into a low-cost franchise
- May be SBA Eligible
- Quick ramp-up and profit potential
- Low-cost can mean low support or training. Find out all details up front.
- Lesser-known brands may seem more cost-effective, but it will mean working harder at customer acquisition to establish a customer base.
Affordability and Success with MassageLuXe
At MassageLuXe, we offer an affordable business opportunity in a growing industry. We are a fast-growing franchise-based spa company providing the highest quality customer service, encouraging health, wellbeing, and quality of life. Massage has become an $18 billion industry and is recognized as an effective form of healing for both physical and mental health issues.
Our franchise startup costs include a franchise fee under $45,000. Starting a business with an affordable price tag potentially means quicker ramp-up and break-even.
The top 25% of MassageLuXe locations see an average revenue of 1.2M according to our most-recent Franchise Disclosure Document (FDD.)* This is an attractive investment for either a new entrepreneur looking to enter the business world or a seasoned investor looking for portfolio expansion.
To learn more about spa franchise opportunities with MassageLuXe, scroll down to fill out the contact form below.
*See our FDD for more details