There is a huge surge of people in America that are leaving the corporate world and jumping into the small business world in order to experience the freedom and excitement that comes from being their own boss and owning their own business. If you are an entrepreneurial type businessperson there has probably been many times in your own work experience where you have felt the desire to leave that corporate job and enter the world of Franchises and small business to be your own boss.
There are many benefits and appealing aspects to owning your own business and being your own boss, there are also a significant amount of risk factors that should be considered before making that jump. Many people have a tendency to take the first opportunity that comes by in the franchise business, or they are so eager to begin their franchise experience that they purchase the cheapest franchise that they can find based simply on affordability. There are some key things to keep in mind when considering a franchise and whether or not a low cost franchise is the right option for you.
Low cost franchises are extremely appealing to the new franchisee because they are simply that: low cost. There are certain things that you need to keep in mind when thinking about a low cost franchise option.
1. Is this a full time, high growth potential franchise?
Many low cost franchises are low cost because they are a slower capped rate of income style franchise. With a low cost franchise there are not likely going to be a lot of high-priced add campaigns nationally so there are going to be recognition drawbacks to most low cost products or services. The other thing to keep in mind with a low cost franchise is that a low cost product that you are providing as a franchise owner, even with a mark-up to generate profits is going to be a low cost product to the consumer. This means that your sales will have to be high in order to generate a high profit. Most low cost businesses especially in their initial phase are going to be franchise opportunities to create additional income rather than be a mainstay source of income.
2. If the franchise is operated at a high capacity does it retain its low cost status?
Frequently a franchise that is billed as a low cost franchise is also a low yield and part-time franchise as stated above. As a franchise is successful and makes profits there is usually room for expansion an growth. In the case of VendStar, a successful vending machine franchise, the initial start-up for this vending machine franchise is a low commitment low cost franchise option. One machine that offers three products is the initial business model for VendStar and the investment bills as one of the lowest cost franchise options available at under $10,000 required capital. However, this low cost model is for one machine in one location. Obviously this requires an extremely low amount of time to service the machine, and a low amount of cost associated with stocking the machine before profits are realized. This also, however, restricts the profits that are gained each month to the frequency that this single machine is visited and the frequency of the product being restocked and the change emptied from the machine. As a franchise owner realizes profits and desires to expand this franchise the process begins to multiply the complications. Multiple machines means more money invested into each product, developing service routes, understanding the frequency and consumption of each individual location, and each machine requires the same investment as the initial machine requiring profits to be significantly reduced each time a machine is added to recover start-up costs. With franchises that have larger bases and initial investments expansion happens as a natural part of the business and does not usually require additional large investments. With most low cost franchises each time the franchise is added onto it is typical to have the exact same start-up cost and experience as the initial purchase. So managing a growing franchise when begun as a low cost franchise actually is much more similar to operating multiple small franchises instead of one fluid business.
3. Is the franchise the right fit, or simply the right cost?
Without a doubt the most important key to being successful in any home-based franchise regardless of the cost, is a passion and understanding of the franchise by the franchisee. Choosing the right franchise for you is the most important business decision you will make after the choice to actually going into business for yourself. Don’t let the attractiveness of a low cost franchise seduce you from going after the business that you will be passionate about running. Personally being invested into a franchise is more than just a financial status and choosing a franchise simply based on affordability and cost rather than a desire to be in that particular field of business can be a critical mistake to a franchisee. The patience to wait for the perfect franchise opportunity that excites and drives you as a franchise owner is extremely important. If the franchise that will really be something you are proud to tell people you own and operate is out of your price range rather than settling for a low cost franchise that you will not be passionate and content with consider other options such as obtaining a business partner or looking into financing assistance options.
Low cost franchise options can be a great way to make extra money, to develop business skills and practices, and can grow into profitable and successful business. They can also be business failures, time consuming, and frustrating with their growth and profit margins. Make sure that as with any business opportunity you sit down and really figure out whether or not a franchise of any cost is something that can be successfully maintained in your particular market. Know the benefits of a low cost franchise and the risks, and weigh those carefully against the time, money, and passion required of other franchise opportunities.
Remember to be careful in your timing. While nothing is more exciting and rewarding than being successful and growing your own home business into a thriving franchise, there are few things that are more costly and devastating than a business failure as a result of settling for the wrong franchise. Don’t be too taken in by something that seems to good to be true, put the time and effort into really asking yourself what you want to get out of a franchise and look again to see if that low cost option is really going to be a path that leads you there. And more importantly do something that you love, do something you are proud of, provide a product or a service that you would use and recommend to other. If you care about your business, other people will care about your business, and that is the biggest asset to building a successful franchise.
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