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Low Cost Franchise Opportunities

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The word “franchise” often leads people to think about large chains like McDonalds or Dunkin Donuts. Those large companies are good examples of franchises that have been able to turn into multi-million dollar companies, but there are also a lot of smaller, more accessible businesses in the franchise category. The big chains might provide you with a proven method and with an internationally known trademark, but they often require a large initial payment by the franchisee to the franchisor. That’s why it’s a good idea to compare those with lower cost franchises when you are looking to buy one.
 


 
From a financial point of view, you should find out which franchise opportunity will give you the best return on your investment. Your initial budget will dictate which offers you should look at. From an operations point of view, you should choose a sector in which you have already acquired some knowledge or at least, that is of real interest to you. Even if one of the benefits of a franchise is that the franchisor provides you with guidelines on how to operate and often offers training ranging from cooking to balancing the books, you have to remember that you’ll more than likely have to spend long hours running your business in the first two to three years.
 
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Franchises Pros and Cons

 

Pros of Buying a Franchise

  • Plug and Play System: When purchasing a franchise, you get a proven system of operations to generate profits. You will get guidelines on what and how much to purchase and how many people to hire for your new business to be up and running in a short period of time.
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  • Valuable Support : Small business owners often struggle to find answers to the problems they encounter. Being part of a franchise family, you can benefit from the past experiences of other owners and you get the opportunity to share your concerns with a network of like-minded entrepreneurs.
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  • Instantaneous Brand Awareness : The most well-known franchises can offer a brand name that already has an established image in the mind of consumers. This allows you to save a lot of time and money for customer acquisition and focus on operations and staff management.
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  • Nationwide Marketing : Even after benefiting from an established brand name, franchisees, who are required to pay royalties and sometimes other fees to the franchisor, get in return a marketing investment well exceeding their sole capacities. The company’s marketing department has a big budget to set up the right strategy and to cover all of the franchisee’s territories.
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  • Higher Purchasing Power : The combined purchasing power of all the franchisees gives the head office the ability to deal down-lower prices for inventory and equipment. This gives a cost advantage to franchise owners over other small business owners in the same industry.
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  • Easier Recruiting : Just as it’s easier to attract customers to a well known chain, it’s also easier to attract new employees who see job security in an established brand and find it easier to associate themselves with it.

 

Cons of Buying a Franchise

  • High Initial Investment : Buying a franchise always involves an initial payment to the franchisor to enter the family and acquire the brand name. Even if it might be well worth it in the long run, it often represents an higher initial investment than an independent small business, especially for acquiring a franchise from a big, well known chain.
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  • Managerial Constraints : As a part of a franchise organisation, you are required to share financial information and to operate in a predefined way. There is much less space for creativity and innovation than in an independent small business.
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  • Royalties : All franchisees are required to pay a certain amount annually in exchange for support from the franchisor in operations and advertising. The support you’ll get in exchange varies from one franchise to another and may even vary from one region to another for a particular franchise. Sometimes the value you get in return might not be worth the investment you’re making.

 

Resources

There are a lot of websites about franchises and they offer valuable information on each franchisor. Before you pick one, you should know exactly how much support they are able to provide and what are the initial and operating costs. The basic principle of buying a franchise and then paying royalties to the company is to benefit from an often nationwide network of marketing, sales, and distribution. It’s essential to make sure that the value you gain matches the costs you’re paying.
 
Here are some websites which offer valuable information :
 
Franchise Business Review
They offer a 20 pages report on low cost franchises and trends including a list of the top opportunities under 100k
 
Entrepreneur.com
You can find their list of the top 50 low cost franchises of 2012 with costs and description for each.
 
Franchise Genius
They offer a list of top low cost franchise opportunities which can be filtered by industry, location, or price. They describe each offer and you can request more information on each opportunity.