Drum Roll for Low Investment Franchises

Low investment franchises have enjoyed some good press recently. And why not? They allow prospective franchisees on a low budget and unwilling or unable to get a bank loan to start their own business.

Time to take a look at the size of the “low investment” franchise brand market in the United States. There are around 4,000 active franchise brands in the country. Of those, about 10% require an average initial investment of below $50,000, a threshold after which most cannot rely on savings, friends and family and perhaps a credit card to find the necessary funds.

• Prospective franchisees on a budget should take a closer look at three industries:     Business Related
• Health & Fitness
• Maintenance Services

Combined, they account for just over 20% of all franchise brands in the United States and well over 35% of brands requiring an average initial investment of $50,000 or less. Prospective low budget franchisees have quite a number of concepts to choose from.

Can franchisees make money with a low investment brand? Of course, some can even become very affluent. It’s a simple numbers game. Say, you buy a truck to operate within a maintenance brand, or you invest into a personal trainer franchise. The amount of money you can make with one truck is finite and the same applies to the number of customers you can train. As with all businesses, the return on your investment depends on how much you re-invest in your shop.

The same applies to franchisors. The initial training for a cleaning brand requires fewer resources than for system that is based on complex processes. Still, franchisors need to price their initial training as well as their ongoing support relative to the services they provide. Any brand, regardless of the industry and the required initial investment needs a franchisor who selects qualified franchisees, monitors his franchisees’ performance, and knows what to track and measure. The franchisees are already invested. They need a franchisor that has skin in the game and enables them to succeed.

How can a low investment franchisee find the right brand? Some industries will be out of reach. If your budget is not more than $50,000, forget about hotel brands, full restaurant brands and pretty much anything that requires substantial real estate. Instead look out for stable systems that enable their franchisees to get beyond that one truck or kiosk. Talk about the initial and ongoing support. Find out whether the franchisor is interested in organic growth rather than simply signing up anyone with the required investment.