What to Consider Before Investing in a Low-Cost Franchise


Prior to investing in any franchise, it’s essential to analyze startup costs, market demand for the product or service, franchise fees, potential revenue, and contract provisions. Other factors to consider while choosing a franchise are if it fits your interests and skill set as well as franchisee satisfaction, profitability, training and support, fees, and the number of successful franchises.

Support: “The best thing about a franchise model is that it offers start-up processes, sales tools, back office, lead opportunities, marketing components, suppliers, resources and so much more for one price. I didn’t have to re-invent the wheel,” says Eddie Diaz of Dream Vacations. “My Dream Vacations franchise provides me with confidence, peace of mind, a committed corporate headquarters team behind it, innovative software, stellar support and simply a group of like-minded individuals all working toward the same goals. Their support, engagement, and commitment are outstanding. All these are key in selecting the right franchise opportunity.”

“Before you make the decision to join a franchise, speak with your family and/or support system. Tell them you’re considering owning a business and ask them what their thoughts are about you being a business owner. Without the support of your support system, it will be more challenging to succeed,” says Chuck Bongiovanni, CEO and Founder of CarePatrol Franchise Systems. “Be ready to commit 100%! Owning a franchise does not mean you are owed success, you have to be ready to earn it.” CarePatrol helps seniors and their families in selecting and transitioning into assisted-living and independent-living homes, nursing homes, and Dementia and Alzheimer’s memory care facilities. About 90% of its franchisees work from home.

Culture: “Make sure the culture of the franchising company aligns with your values and lifestyle. Also research the level of ongoing support provided by the franchisor,” says Tom Hofacre, Creative Director at Town Money Saver. “In addition, evaluate your skills to make sure you’re able to succeed in the industry in which the franchise operates.” Town Money Saver is a monthly direct-mail advertising flyer distributed to homes and businesses.

Competitive Advantage: “Look for a franchise that offers a business model that is so remarkable that local competitors can’t compete,” says Ron Holt, CEO and Founder of Two Maids and A Mop. “In addition to identifying a proven business model that offers a unique selling proposition, look for an internal infrastructure that provides top-notch support and a profitable business plan that will enable you to achieve a healthy bottom line. Finding a franchise opportunity that meets each of these three characteristics will help ensure long-term success.” Two Maids and A Mop offers both an owner-operator and a semi-absentee owner investment model. Its owner-operators work from their respective offices, while its semi-absentee franchise owners work from their homes.

Franchisee Satisfaction: The overall attitude and satisfaction of current franchisees is one of the most critical factors to consider prior to investing in any franchise. It’s important to speak with a variety of franchisees—single unit and multiunit owners, those who have been in business for years and are just starting out etc.—to hear first hand what their experience has been. If you notice rumblings regarding dissatisfaction in a particular area, ask the franchisees you are speaking with about it to see if it is an isolated event or something the majority of franchisees are experiencing. We encourage all franchise companies to survey their franchisees annually, and to share their survey results with franchisee candidates. An independent satisfaction report, like the ones available at FranchiseBusinessReview.com, can help you start to learn what franchisees think about the areas crucial to a franchise system’s health including training and support, operations, franchisee-franchisor relations, financial performance, and overall business satisfaction.

The Franchisor’s and Your Own Financial Well Being: “Look at the Item 19 in the Franchise Disclosure Document (FDD) and have your attorney or representative review the FDD as well,” says Erin Patrick, Director of Operations at Just Between Friends. “It’s a good idea to develop a business plan so you have a starting point and know the goals you are striving to reach. If you need financing, research and know what your options are for obtaining funding.” Item 19 of an FDD provides details on earnings, costs, and other factors likely to affect your financial performance after you sign on to become a franchisee. An in-depth breakdown of the FDD, presented as on-demand video segments, is included in the FBR Franchise Buyer’s Toolkit which is available at FranchiseBusinessReview.com.

Is It a Good Fit: “Ensure the franchise is a good fit for you from both a personal and business perspective. Many folks just focus on the business aspects and assume the personal satisfaction will come if the finances are there,” says Laura Coe, President of Snapology. “I find that if you are passionate about what the business offers, then your chances of success are infinitely improved. “It’s important to love what you do!” 92% of Snapology’s franchisees, who teach robotics and engineering principles through classes, camps, and parties, work from home.

As mentioned above, how satisfied a brand’s franchisees are is a true indicator as to whether or not you should invest in it. A good place to start your low-cost franchise research is our latest Top Low-Cost Franchises report. Only brands whose franchisees ranked them highly on our franchisee satisfaction survey are featured within it.

As the Editorial Director at Franchise Business Review, Emma Pearson reports regularly on today's top franchise opportunities and the latest trends in franchising. She also writes and oversees the publishing of Franchise Business Review's annual Top Franchises, Top Low-Cost Franchises, Top Franchises for Veterans and many other specialized franchise reports. They feature the only lists of top franchises based on feedback from those who know best - the franchisees who own them.

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