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How to buy for less and make big returns

Sarah Stowe

So you want to buy a franchise with an initial investment of less than $50,000. Here is how you can make big returns on a cheap buy-in.  

You’re gearing up to buy yourself a budget franchise, or in other words, a business that will cost you up to $50,000. Yes, they exist.

The bracket is home to many franchise categories that could be a good fit for you, including financial services, education and tutoring, catering, business services and much more. The possibilities are endless, and you’re focused on exponentially increasing your return on investment (ROI).

Know what you’re getting into

Here is what you need to be aware of before you sign the dotted line:

  • Do your research: Although putting your money in a budget franchise would be less risk financially, an investment is still an investment and due diligence is a requirement for any franchisor you choose to partner with, whether the buy-in is high or low.
  • Don’t skim the franchise agreement:  Don’t assume that because the financial risk may be comparatively lower than a high-end investment your legal obligations are lessened and you can take a shortcut by not reading the franchise agreement. Most agreements share key points, so read between the lines and speak to experts if you need to.
  • Getting finance is not that simple: In most cases, not having bank accreditation means that it is almost impossible to get finance for a budget franchise unless appropriate security is provided.
  • Check the numbers: A franchise may seem like a steal when considering the initial investment cost, but make sure you are aware of on-going costs throughout the term and other operational requirements that could set you back. Mobile business owners for instance need to cost in travel time and petrol when estimating how many clients can be serviced daily.

But budget franchises would not be so without benefits:

  • Less of a splurge: A budget franchise comes with reduced financial risk should the business become unsuccessful. And it may be easier to get out of one depending on the total amount in fees payable during the franchise term.
  • Not your average franchise: Many lower-cost franchises are mobile in nature or allow franchisees to work from home. This means that total overheads such as leases and utilities are comparatively lower than models that require a site.

How to make it count

  • You only get out what you put in: Budget franchise operators are required to be particularly proactive in developing the business and developing client relationships. Although all franchises require the hard yakka at the start, starting from base zero with a budget business means you’ll need to put extra effort in to get clients on board.
  • Be an expert in your craft: A common theme amongst budget franchisors is that franchisees need to be skilled in their specific industry. Superior customer service and organisational skills are a requirement across the categories.
  • Stick to system: A franchise system is there for a reason – it’s usually a proven one and a fruitful road to success. Veering off course is unlikely to prop up your ROI.

And last but not least – don’t forget to love your work!