Starting a new business doesn't necessarily mean starting from scratch.
A franchise lets you tap into the brand power and proven business concept of a larger company,
while still giving you the freedom to be your own boss.
But, what if you don't have the money to invest in a huge franchise like a McDonald's or a
Burger King?
Well, there are plenty of low cost franchise opportunities.
You just need to know how to spot them.
I'm Priyanka Prakash, small business expert and senior staff writer at Fundera.
I'm going to cover five tips to uncover hidden low cost franchises, so you can get into business
today without completely breaking your budget.
Tip number one: Review the franchise's FDD.
FDD stands for Franchise Disclosure Document, and it's basically like the instruction manual
for owning a particular franchise.
Legally, a franchisor, which is the name for the parent company, must let you see a copy
of the FDD before you pay them a franchise fee or sign a contract.
The FDD contains a wealth of super useful information, especially around pricing.
You'll be able to see a full overview of the fees that are required to buy your franchise
and to operate it on an ongoing basis.
You'll also be able to see success rates of franchise locations so you can evaluate if
there's a realistic chance of success for you owning this franchise or if you should
look elsewhere.
Here's a sample FDD from a yogurt franchise called Yogurt Labs.
You can see that every cost, its purpose, when it's due, and to whom it’s owed are
covered in detail in the FDD.
Tip number two: Ask about discounts.
Sometimes franchisors will offer discounts to potential franchise buyers.
For example, dozens of franchises offer discounts for veterans, including UPS and Dunkin Donuts.
Other franchises, such as Lawn Doctor and Fantastic Sams, offer discounts for entrepreneurs
from minority backgrounds.
The franchise ownership rate among minorities is 30%, compared to 18% for non-franchised
businesses, so this is a welcoming way for minorities to test business ownership.
At the very least, no matter what your background is, it's a good idea to get your negotiating
hat on and see if the franchisor will offer you some meaningful discounts.
Tip number three: Try a home-based franchise.
Running a franchise at a commercial location, such as a restaurant franchise, can get pretty
expensive when you factor in the property leasing or ownership costs.
In contrast, overhead is low with a home-based franchise.
Most of your money goes to training and marketing, not to real estate and overhead costs.
There are plenty of home-based franchise opportunities, such as cleaning franchises, fitness franchises,
and educational franchises.
Many of these franchises require an initial franchise fee of just a couple grand, and
you can work as much or as little as you want to, so it's also a flexible opportunity for
business owners.
Tip number four: Get franchisor financing.
You might have the perfect skill set for a particular franchise and just be missing the
money.
Fortunately, many franchises offer internal financing to make their franchises more accessible.
For example, franchises like Molly Maid will offer to finance a portion of the initial
franchise fee.
In other cases, franchises might team up with specific lenders to issue financing for their
customers.
Lastly, many franchises are approved for expedited loan processing by the Small Business Administration
(SBA).
You can check if your prospective franchise is SBA-approved by reviewing the SBA’s online
franchise directory.
The good news is that franchise financing often comes with lower rates and fees than
regular financing because a franchise has a documented history of sales for the lender
to review.
Tip number five: Find a franchise in an industry that you have experience in.
Granted, you still might end up paying the same initial franchise fee to begin with.
However, since you already have experience in the industry, you'll be able to make smarter
financial choices and decide which marketing campaigns you want invest the most time and
resources in.
And that's it.
Those are five tips for learning more about low cost franchise opportunities.
To learn more about small business ownership and entrepreneurship ideas, go to youtube.com/funderaloans,
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Thanks for watching!