4 low-cost business models for the cash-savvy franchisee
Franchising is full of successful models with worldwide appeal, take for instance the most famous of all; McDonald’s, which has a global network of over 36,000 restaurants across 100 countries.
McDonald’s outlets are overwhelmingly successful, with only a small number of franchisees exiting the network every year, however the initial capital expenditure required to start a McDonald’s franchise can be upwards of $1.7m.
While the McDonald’s system has been proven to generate enormous return on investment for franchisees, the costs involved in establishing the business make it unattainable for the vast majority of prospective Australian entrepreneurs.
So, what are the franchise models that provide a strong return with limited initial capital investment? Here’s four systems that maximise profit without the need for expensive start-up or fitout costs.
Cleaning service providers have long been a staple of the franchise sector, and for good reason.
The low start-up costs, coupled with the no-experience necessary model allows first-time franchisees to develop a business that is profitable, equitable and successful from day one.
Domestic cleaning service, Elm Cleaning provides an opportunity for interested entrepreneurs to enter the world of business ownership for as little as $28,500 plus GST.
The investment cost is offset by ongoing monthly royalty and marketing levy fees, which are calculated as a percentage of your total monthly revenue.
Franchises in the cleaning services industry are generally also backed by an exclusive territory agreement, providing a stable and structured platform for new franchisees to develop their reputation in the local area.
The model is a similar fit to those seen in the outdoor services industry, which has also seen continued success in the franchising sector domestically.
There’s no denying the impact of the Jim’s group portfolio, which has now extended out into a multitude of different areas, such as pool maintenance and real estate, however it must be said that Jim isn’t your only option.
Over the last few years, brand such as Fox Mowing have emerged as low-cost business opportunities for franchisees who aren’t afraid to get their hands dirty.
With an initial investment cost of just $16,000 plus trailer and equipment expenses, Fox Mowing allows franchisees to enter the market with minimal debt and the opportunity to operate immediately.
There are no royalty fees involved and the franchise fee is a flat $125 per week, meaning franchisees can enjoy the comfort of a structured payment program over a prolonged period of time.
When it comes to operating a small business, the two most expensive elements are employee wages and leasing costs, however some innovative franchise systems are reducing the impact of these overheads.
The implementation of cloud-based and online platforms have altered the way many businesses operate in today’s market, giving birth to a new industry of online business service providers.
U.K. based digital marketing and website development business BLAM! Websites and Apps is the latest industry venture to hit Australian shores, and its extremely low-cost model is generating interest nation-wide.
The reliance on online activity allows BLAM! franchisees to communicate with the business’ team of web and app developers 24 hours a day, on a global scale.
With an investment cost of just $15,000, BLAM! is one of the most affordable franchise opportunities in Australia, with prospective partners offered the opportunity to work independently from home, eliminating wage expenses and leasing costs.
Franchises in the business services sector have the benfit of utilising new market technology and real time communication across regions, allowing the opportunity for outsourcing and client acquisition round the clock.
As seen with McDonald’s, a global reputation for franchisee success generally equates to high-cost investment, however that isn’t the case for the world’s largest after-school education program.
Kumon, which boasts a network of over four million students across 50 countries and regions has positioned itself as a low-cost venture for interested franchisees, with initial costs ranging from $4000 to $30000.
Australian entrepreneurs are responding to the low-cost model, in 2018 Kumon’s student enrolment growth rate for the region was 5 per cent, with the franchise opening 10 new locations over that period.
Tutoring and after-school franchises such as Kumon provide a reliable platform for prospective franchisees to develop a strong clientele, which coupled with the brand’s heritage and history as a successful service provider greatly increases a franchisees opportunity for success.
The future of low-cost franchising
A quick analysis of franchising in Australia reveals some key sector challenges, most prominently the cost of retail leasing.
As this list shows, low-cost franchise opportunities are available, however they rarely exist in a traditional bricks and mortar setting, but rather in the service based industries.
Low set-up costs are generally a reflection of low leasing requirements, franchise and royalty fees, in addition to reduced employee wages, which is a major advantage for those franchise systems that provide a service over a physical product.