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April 11, 2012 | Comments: 0 | Views: 182

A variety of low-cost franchises exist, many of them starting at about $10,000. The initial investment cost is low, but some franchises have higher ongoing maintenance costs. Compare the total cost to determine if the franchise you are about to invest in is truly low-cost. Use all sources available, including franchise websites, franchise disclosure documents, input from existing franchisees and entrepreneurial websites.

Low-cost franchises include mobile franchises, home repair and landscaping services, used clothing and consignment businesses, to name a few. Newly established franchises with fewer training and support programs also are typically cheaper to buy in to. What you are paying for with more mature franchises is a well-known brand, excellent marketing materials and a proven business model. Investing in inexpensive franchises does have its risks. To be a successful entrepreneur, you need to manage that risk by finding the right information to make a decision.

One typical pitfall of low-cost franchises is consumer perception of products and services. Because consumers correlate higher priced products with higher quality, you need to overcome their objections. Before investing in a low-cost franchise, do research with the Federal Trade Commission's Franchise Disclosure Documents (FDDs). The FDD document shows the number of units and actual earnings for franchisees, along with other representations of financial performance.

After making the decision to invest, reduce the perceived risk by offering potential customers samples and discounts. Offer extended warranties for products and guarantee services, and watch your customer base grow. Don't underestimate the power of word-of-mouth referrals.

In addition, you do not have the benefit of marketing an established brand, so you will need to budget more money for advertising. Fortunately, because your initial buy-in was smaller, you have adequate resources to advertise. Factor the cost of increased advertising into the overall equation to ensure the franchise is really a low-cost. Typical advertising fees for franchises average 6 to 7 percent. Those costs help cover your share of national advertising campaigns and ongoing marketing products and support. A good way to compare advertising fees and other franchise statistics is to read the annual Entrepreneur 500 Study, published every January.

In addition to the franchise's advertising fee, you will probably need to invest in your own local advertising campaign. Make sure to check with the franchisor to ensure your supplemental advertising does not violate any franchise rules. Contact existing franchisees and ask them to compare their advertising budget with their actual revenue. A slightly higher advertising fee may be warranted, if customer volume makes up the profit margin.

If a low-cost franchise does not work out for you in the long-term, consider another important factor. Low-cost franchises are easier and faster to sell in any economic climate. With less resale risk, you can afford to invest in multiple franchises.

Whether you own one or more inexpensive franchises, you can benefit from the investment in a relatively short amount of time. Even though you may not have the benefit of marketing an established brand, you have adequate savings on the initial investment to target additional advertising and offer discounts to build a customer base.

To view additional low cost franchise information and profiles for 1,500+ franchises opportunities, please visit

Source: EzineArticles
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