Thinking about buying a franchise, but are concerned that you don’t have enough money? We have good news! There are hundreds of franchise opportunities listed on our website, and many of them don't require a huge cash investment. If you have the drive to start a business and run your own franchise, but are short on capital, you’ll still find many options here.
Why Franchises Cost What They Do
As you’re seeking franchises that meet your investment level, you probably have found yourself wondering during your search, “Why do some of these franchises cost so much?”
The cost to open a franchise varies by the franchise system and location the franchise unit will be run from. For franchises where the estimated initial investment is under $10,000, the administrative responsibilities of the franchise can often be done from home. Since there is no need for a commercial lease or real estate purchase, the average initial investment for these franchises is drastically reduced as the purchase and renovation of real estate is commonly the most expensive and variable cost in opening a franchise.
Other factors that can influence the initial investment level of a franchise include whether the franchise’s operation requires specialized equipment or materials. With franchises where what is needed for operation is less specialized, the opening cost is lessened.
Benefits of Lower-Cost Franchises
Obviously, the biggest draw of these more affordable franchises is that they provide entrepreneurs with a way to be their own boss without taking on too much—or any—debt to start.
However, there are many other smart reasons to invest in a “cheap” franchise, too. For instance, being accountable to yourself and nobody else is one popular reason why people choose to invest in a franchise. You work hard because you know that in the end, it will pay off for you.
Another benefit to starting a lower-cost franchise is, in many cases, you can keep your day job while you get it up and running, so you still have financial security. Once you start making a profit, you can transition into making it your full-time occupation. After that, you can consider expanding or even buying a second franchise.
What Kind of Franchises Are Out There for Under $10,000?
Whether you're looking for a more “turn-key” franchise that takes minimal time to run, or an online franchise that allows you the flexibility to work from home or elsewhere, there are plenty of franchise business opportunities out there starting under $10,000.
Some of the franchises that don’t require large start-up costs or franchise fees include options in the industries of financial services such as tax preparation, vending machine ownership, lawn care, medical billing, cleaning and janitorial services, booking travel, even children’s dance instruction.
Is This Opportunity a Franchise?
Something you will need to be aware of when searching franchises at this investment level is that you will run into a different subset of opportunity: a business opportunity.
A business opportunity (sometimes referred to as a “bizopp”) is the sale of a system the licenser has cultivated and is confident will be profitable when replicated, similar to a franchise. However, once the purchase is finalized, and training—if applicable—is completed, the relationship is usually over. Because they usually don’t come with the typical training and support franchises offer, business opportunities tend to cost less than franchises.
However, just because it’s classified differently doesn’t mean that a business opportunity can be any less fruitful than an opportunity classified as a franchise. Both require the buyer to be dedicated and hard-working to find success.
Both of these approaches to making a business investment are suitable for those who don’t have their own unique product or service to bring to the marketplace, but still want to run a business. The greatest distinguishing factor between the two is how much support you desire.
If you’re simply looking for a jumpstart and desire more flexibility, a business opportunity could be the route for you. If you’re looking for consistent support, and can handle more restriction (or desire more guidance) in the procedures of your business, a franchise might be the path for you.
Staying Away from Scams
Similar to how franchises are subject to providing a certain level of disclosure to buyers before agreements are signed, business opportunities are also—to a certain extent.
To combat the risks, the FTC has taken steps to crack down on businesses that have provided false claims over the years. They are also working to educate those looking into business opportunities with a website with tips on spotting a potential fraud, and ways to contact them if you believe you’ve been misled by a company offering bogus business opportunities.
In addition, back in 2012 the Federal Trade Commission did enact the Business Opportunity Rule. Under the rule, sellers have to give you—the buyer—a disclosure document overviewing your potential investment before any binding agreement is made.
The business opportunity disclosure document is required to be produced in any language that a business opportunity is promoted in, and must be updated every quarter year.
Although not as thorough as the FDD—franchise disclosure documents can be hundreds of pages in length while business opportunity disclosure documents can be as short as one page—the information from the document can be used to fact-check what the seller tells you about the opportunity and what you’ve discovered from your own due diligence (aka research).
It’s also worth noting that simply because franchises currently have more federal regulation than other business opportunities, it doesn’t mean that they are without risk. There are several risks to owning a franchise as well. For instance, there could be expenses for equipment or materials needed to run the business that aren’t specified or made clear in the franchise disclosure document that mount up.
When opening any business, it’s paramount to do your research and understand that there is risk involved—no matter the classification.
Browse the several of the lowest initial investment level franchises out there on our site. You can view quick facts and request more information about the ones that look best for you. Happy searching!