Buying a budget franchise: Kumon

Sarah Stowe

Many franchisees invest in a budget franchise, that is, a franchise with an initial investment cost of $50,000 and under.

For some franchisees, the decision is made for the lower overhead costs, family friendly hours, and the choice to work as a sole trader. For others, it’s a calculated decision to optimise return on investment (ROI). Lower cost means lower risk.

Tim Kilham, director at financial services firm Lanyon Partners, says budget franchises come with a reduced financial risk should the business be unsuccessful.

However, Kilham advises potential franchises to still work hard and be skilled at their job even if they opt for a budget franchise.

“Generally, ROI for budget franchises depends on the labour you put in,” said Kilham.

Jane Garber-Rosenzweig, principal at Gable Lawyers, says that although investing in a budget franchise would be less risk financially, in all other respects, an investment is an investment

“Thorough due diligence should be performed in all cases,” said Garber-Rosenzweig.  

“Most franchise agreements are very similar, regardless of investment.”

But there are benefits.

 “However, depending on total fees payable during the term of such franchise, it might be cheaper to get out of than other non-budget type franchises.”

“Most of the budget franchises are mobile so issues such as conditions in the lease, tenure, (and) increase in rent are generally not relevant,” she explained.

Kumon: up to $20,000 

Specialising in providing an after-school learning programme from the largest international organizations, Kumon Australia and New Zealand offers franchisees training and support nurtured by 31 years of expertise. Customer service and managing client relations are paramount at Kumon. Image: Kumon Australia and New Zealand

“Our best practice training and support allows us to assign a personal development consultant to each franchisee for their duration at Kumon,” said Alexander Cork, spokeperson for Kumon Australia & New Zealand.

“We are also able to keep costs down for franchisees as our product (the Kumon worksheets) is provided to franchisees free of cost.”

“Never having to purchase products or pay for delivery means that franchisees always have the required materials to run their business.”

Kumon franchisees can enjoy greater flexibility in their working hours, and are supported by a like-minded network of instructors and company staff. However, Cork explained that the franchisee needs to be skilled in managing client relationships and provide excellence customer service.

“Franchising is a highly interdependent relationship between people, and at times there are differing views to reconcile.”

Although there is a trend for franchisees to have tertiary degrees and be above 30, Cork said the demographic is wide-ranging.

“Our franchisees come from a wide range of backgrounds. Some franchisees have experience running a business, while others have had a teaching or corporate career. All have at least an undergraduate degree.”

His advice for potential franchisees is to maximise quality customer service and franchisee reputation.

“If you want to get the most out of your investment, focus on providing the best service and quality to generate word of mouth. It’s also important to follow the training and be prepared to undertake ongoing learning.”

Find out more about becoming a Kumon franchisee.