Firstly though, what do i mean by a low cost franchise? Many franchises cost 50,000 upwards, some coming in at several hundred thousand pounds. A low cost franchise is generally anything under the 15 thousand pound mark and is close to an investment level that everyone can afford.
What are the reasons for a low cost franchise being in the lower price bracket for buying a franchise?
Well - here are some of the main reasons:
1. Lack of expensive equipment needed to operate the franchise. Many franchises need specialised equipment and lots of it. This can bump up the cost of the franchise considerably.
2. Lack of a shop front, warehouse, garage or office. Many franchises are located on high streets or, as with car based franchises, based in garages. Many also have high street offices or need restaurant/ cafe style buildings. As you can imagine this can take a franchise up in price by many tens of thousands of pounds.
3. It may be a new franchise. When some franchisors franchise their business they first offer several pilot areas out at cut price. Although there may be some risk involved you could be grabbing yourself a bargain by buying into this type of low cost franchise.
4. It may be a home based franchise. A low cost franchise is almost always ran from home and without the need for expensive shop fronts the franchise price can be considerably lower than it's shop counterpart.
What to watch our for in a low cost franchise?
Quite simply you often pay for what you get. There are many multi level marketing style businesses trying to operate as a franchise to give themselves a better name, however these in almost all cases do not work and are not tried and tested system, making money only for the franchisor and not for people buying into the system. There are also unscrupulous people out there who set up what may look like a good business idea but have in fact never tried and tested the system themselves or for that matter, run the system as a standalone business. In these cases the "franchised business" is there to make money from the franchise fee which is something no one in the franchise industry recommends.
When buying a franchise, whether it be a low cost franchise or of the most expensive variety, you should always do your research. asking questions of the existing franchisee base as well as the franchisor can ensure you are buying into a viable and profitable opportunity. Do not make the mistake that many have and jump in head first without doing your proper due diligence as this can only lead to disaster and you being either left in debt or without your life savings.
