Becoming a business owner, being your own boss, it is a dream many have but don’t pursue. There are a number of reasons why some choose not to go down the route of business ownership. Lack of enthusiasm is caused by a number of factors. One being possible lack of experience, the risk of failure. Cost is another. Not knowing where to start, also a common reason. But did you know, franchising has all these points covered? What’s more, many franchises can be started with less than £10K of your own personal funds. But is it too good to be true? Let’s find out.
What is Franchising?
Franchising refers to a method of business expansion, where the rights to trade as a business are given to a third party under license. Rather than the business owner setting up additional units at their own expense, they can go down the franchising route. Reasons why include:
- Less financial burden on the intellectual property owner, ie the franchisor. Franchisees bare the cost, at the benefit of actually owning the business themselves in their own area. Less financial cost to the franchisor means additional units can be set up reasonably quickly.
- The franchisee – the party investing to set up their own business – knows their local area much better than the franchisor, empowering greater marketing leverage.
- The franchisor still makes some money through royalty fees, whilst the franchisee business still retains most of the profits and has an asset they can later sell as a resale.
Obviously one of the biggest benefits of franchising is brand awareness. As more units establish, greater brand awareness arises and recognition results in better business.
A Business in a Box
Investing in a franchise gives you access to not just the brand, but the business model, operations manual and full training and support. It is often referred to as a business in a box. A way of getting into business for yourself but not by yourself. As part of the franchise package, you usually receive full initial training, along with ongoing support. Many trusted franchisors put your monthly royalty fees into further support, research and development.
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Do Franchises Really Cost Less Than £10K?
Although it might sound too good to be true, there are many franchise businesses for sale in the UK that cost less than £10K. These will be advertised on franchise directories in a number of ways. Some of the wording can be as follows:
Franchises with £10,000 Minimum Investment
Minimum investment usually refers to the absolute minimum you will be expected to invest. Costs herein will usually vary depending on things like:
- Premises based units, the establishment fitout costs varying with the size of your unit
- Van based units, the size of the van and therefore the conversion work required, or livery variations in signwriting.
- Your franchise package, whether you choose one that includes different levels of investment.
Franchises with £10,000 minimum investment can still be purchased from less than £10K. Why? Because many banks and franchise lenders can provide you with up to 70% of the franchise investment, repayable over a number of years. There is even a government backed start-up scheme able to lend up to £25K.
Franchises with £10,000 Total Investment
Franchises with £10K total investment, or £10K+VAT, usually refers to the full franchise package price. You should request a prospectus or learn more, if it isn’t already clear whether the figure is just the franchise license fee or if it is the total investment price. Although £10K doesn’t sound like a lot when it comes to franchising, there are many franchises for less than £10K total investment.
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Franchises with a £10,000 Franchise Fee
Franchise license fee, franchise fee and license fee, these are not the same as the investment. An easy mistake to make, the franchise fee usually covers access to the brand, trademarks and the rights to trade. You’ve then got the initial startup costs, or initial investment, on top of that.
Many franchises on Franchise Planet combine the franchise fee with the investment, but you should make sure you thoroughly read the profile. If it isn’t clear, it’s free to request a prospectus using the form on the profile. The franchise prospectus will almost always have a pricing structure breakdown of the investment, along with earning potential.
Know About Working Capital and Fees
Working capital often goes ignored or unheard of until the person interested actually gets onto the phone and speaks with the franchisor or recruitment team. Not all franchises require working capital, for example, some businesses are cash positive from early on, meaning you start making money near immediately. However some businesses do require working capital.
Working capital is one of the costs associated with buying a franchise. It is a sum of money you set aside, to help market and run the business early on. There may be times during the initial launch where costs continue to exceed immediate turnover, for example staff recruitment costs and marketing.
Are Low Cost Franchises Profitable?
One of the most common misconceptions is that franchises under £10K are considered too cheap to generate substantial profit. This is wrong. Every franchise in the UK requires you to put in your own efforts to make the business a success. The initial franchise package is part of what will determine that initial franchise investment figure. If a business requires less tools to launch, eg a van or home based franchise, the cost of startup will obviously be lower. One of the biggest benefits of a franchise for sale less than £10K is breakeven will come around sooner than a franchise that requires higher investment. True, there are some businesses under £10K whose turnover and profits might trickle slower leading to a later ROI, but in the final analysis, the more you put in, the more you’ll get out.
Investing in a franchise under £10K is great as a low cost starting point, and there are many franchises which cater for this. Vending opportunities like Tubz, pet franchises like Husse, these businesses usually offer scalable business models. You start out on a small package to build your confidence, minimising initial expenses, before garnering the opportunity to expand, take on more of your territory and up the ante.
Examples of Franchises For Sale Under £10K
There are too many to list, but here are some great examples of franchises under £10K.
- Oven Wizards – Oven cleaning franchise. Despite there at least 5 other oven cleaning franchises that can be thought of off-hand, almost all franchisees report profitability showing a clear demand within the market.
- Dor 2 Dor – A marketing and leaflet distribution franchise for £7,500.
- SkyCam – The sky is the limit with a drone and aerial photography franchise, this business is available for less than £5K.
- Tubz Vending – Available from £4,995 but with multiple packages available for less than £10K, a perfect choic for new entrepreneurs.
- Molly Maid – Amongst other cleaning franchises, many are available for less than £10K. Management businesses often require working capital similar in amount to the franchise fee.
- Local Shops Franchise – Low cost app franchise where franchisees take profits from the sale of products via the app, on local businesses listed on the franchisee’s area.
- Window Cleaning – At least 5 franchises off-hand are available from less than £10K. UK Window Cleaning, My Window Cleaner, Sky High Window Cleaning.
Become a Franchisee with a Low Cost Franchise
Many banks favour franchising and are able to lend a generous sum of the franchise investment. Repayable over a number of years, with little or no interest, even if you don’t need help sourcing funds to invest, it may come in handy to give your local marketing presence a boost. Utilising finance, a £10K franchise can easily cost less than £10K total investment. Why not explore low cost franchise opportunities at Franchise Planet?
