How To Purchase A Franchise On A Budget!

Zero to low funds? Maybe you think the option of purchasing a franchise cannot be achieved for you? Well, think again!

There are always options if you know who to talk to, while it may seem obvious to say so though, nobody should ever make a considered purchase without obtaining a professional opinion, affordability is certainly very important for your own personal life, and just as important in franchising.

What Options Do You Have For A Low Cost Franchise?

There are many franchise options available that are low cost, with the very first fee you might be aware of being the license fee, or franchise fee, and on some franchises of various investment levels covering many sectors, this could range from very little to typically up to £30,000. This does not always mean the total investment required, but we will elaborate on this further down on the article.

With lost cost franchise fees of up to £25,000, there are options to obtain a government backed loan of up to twenty-five thousand pounds, per applicant!

These are not grants, but quite low interest loans, typically payable over years, and for you mean that, at this investment level, you could be paying a few hundred pounds per month on a £15,000 franchise fee rather than requiring that investment level up front, it is still a loan that needs to be repaid though!

You might be some form of partnership, and if there are just two of you in that, there will be an option to obtain as much as £50,000, this could be useful if you are looking for additional funds to provide working capital, simply search for this fund and you will see plenty of support available to guide you through the process.

Does Low Cost Mean Low Income?

This would be a great question to ask! And it is a fair point, when looking at some franchise options that require additional funds for example such as equipment, or in terms of a brick and mortar food franchise, the total investment required will be way more than any advertised franchise fee, and as such there will be additional fees required to cover maybe a fit-out, or equipment and stock, then the franchise fee is relatively low just because of the additional investment required, many of these low franchise fee cost franchises can go on to generate six and seven figures! Go and check them out for yourself, of course it does mean that they typically have higher fixed costs than other types of businesses, so additional working capital will constantly be required, it is very important not to overlook this point in any of your forecasting!

More options that do not need additional investment could be a working from home franchise, seemingly more popular than ever in 2023 if we ever had anything to thank for covid, and often this initial fee would be to cover any initial and ongoing training provided by the franchisor, again, the fee often remaining low to make it even easier for you to commit, and once again, as this means your involvement is most probably your time and perhaps expertise, there are no significant costs to any party, but depending on your specialism, can be very lucrative to the tune of five or six figures per year!

How Do You Choose The Right Franchise?

Where to start? You might well have found this very article on a franchise directory that will have dozens and dozens of franchised options, be careful to not try and look at everything though, as you will probably end up with nothing, instead focus on a few key elements that will help you. These might include sectors you want to be involved with, location will be important for most, even investment level, no point in looking at franchises that are advised require hundreds of thousands of pounds if you do not have access to that level of liquid capital.

Can I Use My Own Bank For Finance?

Yes, you can! And in days gone by, this would probably be your starting point, however, long gone are the days of your bank manager personally knowing you and approving loans, but there will be online options that look at your credit history to see how credit worthy you are, if you can obtain finance in this way, you are then pre-approved for some or all of the franchise costs, quite often these can be unsecured loans too, which might be advantageous to you in some circumstances.

You will undoubtably be advised to seek advice from a specialist lender or broker too, these companies have insider knowledge of the break-down of franchise costs and will advise on what type of finance facility will cover which elements, quite often they can challenge bank rates too as they spread themselves across multiple lenders. Often the very franchise company you are researching will have contacts with people that have relationships with lenders and brokers will be happy to help you.

There are always options within franchising! Seek professional assistance if you are struggling, you’ll find everyone in the franchise sector very friendly and wanting to help you, you would be welcomed with open arms! That is one thing I’d happily guarantee to you!

Richard Pakey is a franchising expert and Managing Director for the award-winning Lime Licensing Group.