These Are the Cheapest Franchise To Open and How to Finance Them in 2024

These Are the Cheapest Franchise To Open and How to Finance Them in 2024

These Are the Cheapest Franchise To Open and How to Finance Them in 2024

If you want to start a business but don’t want to start completely from scratch, a franchise can be an appeal option. Franchises offer a structured business model with established systems and support. With a franchise, you can step into an existing brand and benefit from proven strategies, training, and ongoing assistance.

Some franchises can cost hundreds of thousands of dollars or more to open, which puts them out of reach of many entrepreneurs. 

But there are low-cost franchise options, and financing to help bridge the gap between savings and startup costs. 

Here, we’ll explore some of the most affordable franchise opportunities available in 2024 and discuss options for financing them. Whether you’re a first-time business owner, or an experienced entrepreneur looking to expand your portfolio, these options could help you achieve your entrepreneurial goals without breaking the bank.

Top 7 Cheapest Franchises To Open

The price of a franchise is going to depend on several factors including the industry, the brand, interest and what they offer. If you’re looking at a food franchise, for example, a well-known fast food restaurant like Taco Bell will have a much higher price tag than a regional Mexican restaurant, for example, because of the brand recognition. 

Here are 7 of the lowest cost franchise opportunities in 2024:

Name of FranchiseFranchise Legal NameCost*Industry
Fit4MomStroller Strides, LLC$8,245 to $28,685.Health and Wellness
CruiseOne Dream VacationsCRUISEONE,INC.$2,590-$21,870Travel
Cruise PlannersCP Franchising, LLC$1,945 to $20,465Travel
360Clean360BRANDS, INC.$22,000 to $36,500Cleaning
Stratus Building Solutions of Milwaukee (“Stratus Milwaukee”) M & R Cleaning Solutions LLC $4,450 to $79,750Commercial cleaning
Help-U-SellInfinium Realty Group, Inc.$29,650 to $67,650Real Estate
SCA Appraisal ServicesSCA FRANCHISING CORP$27,300 to $79,950Appraisals
Information obtained from Franchise Disclosure Documents (FDD) obtained September 25, 2024.  Always review up to date FDDs for the latest information.

Why Open a Franchise

Franchises offer potential franchisees the opportunity to be a part of a successful brand. Unlike starting your own business from the ground up, franchises already have an established brand, name recognition, marketing strategies, and a proven track record. Plus the majority of franchises provide training and support for new franchisees allowing them to step into the role of business owner easily. 

Here are the top reasons for considering a franchise:

  1. Established brand: Franchises offer you the chance to be part of a successful, recognized brand. This instant credibility can help attract customers faster than building a brand from the ground up.
  2. Proven business model: Unlike starting from scratch, franchises come with a tested and refined business model. When that business model is strong (and tested), it may reduce the risk of failure. 
  3. Marketing support: Most franchisors provide comprehensive marketing strategies and materials. Again, this can save your business time and money versus developing your own campaigns.
  4. Training and support: Franchisors typically offer extensive training programs and ongoing support. For new entrepreneurs, this can be much easier than developing your own as your business grows. 
  5. Easier financing: Banks and lenders may view franchises (especially successful ones) as less risky, making franchise financing sometimes easier to obtain.
  6. Purchasing power: You can benefit from the franchisor’s bulk purchasing power, potentially reducing your costs. (On the flip side, you may be locked in to certain vendors.) 
  7. Built-in customer base: Well-known or loved franchises like Chik-fil-A or Culver’s often come with a loyal customer base, which can result in sales from day one. 

That said, don’t assume that opening a franchise offers your best chance at entrepreneurial success. 

“It is very risky for a franchisee to buy a franchise in a system that does not yet have many franchises, and where there have been many closures of franchised businesses,” David T. Azrin, partner at Gallet Dreyer & Berkey, a franchise law attorney who works with both franchisors and franchisees. 

Make sure you thoroughly research your options, and don’t assume cheaper is better. 

Qualifying to Purchase a Franchise

When you decide to buy a franchise, you may need to meet certain qualifications set by the franchisor. These requirements vary between companies, but they typically include a minimum net worth and liquidity level. 

Some franchisors may have additional criteria, such as relevant experience or specific educational backgrounds.

If you’re planning to self-fund your franchise, meeting the franchisor’s criteria might be enough to move forward. However, most prospective franchisees need to secure additional funding in the forms of small business loans, lines of credit, and/or business credit cards. In this case, you’ll need to meet both the franchisor’s requirements and those of potential lenders.

Qualifications for financing depends on how much you are trying to borrow, and your qualifications. Lenders may want to see a business plan, but in the case of a franchise, that may or may not be necessary.  (The experience and reputation of the franchise may be more important.) 

Credit

Often, there will be a personal credit check and/or business credit check. Good personal credit scores may be required, and a personal guarantee may be required. 

You won’t have business credit if you’re just starting out, but over time you’ll want to establish business credit. Learn how to establish business credit.

Financial capability

When qualifying for a small business loan, many lenders require proof of revenue. But with a franchise you won’t have revenue yet. So, instead they will want information from the Franchise Disclosure Document, and information about the borrower’s financial qualifications. You may need to provide personal tax returns, bank statements and/or proof of your assets/net worth. 

A down payment may be required. 

Qualifying to purchase a franchise is just the first step. Carefully review the franchise agreement and consider seeking advice from a lawyer or financial advisor to ensure you’re making an informed decision.

How to Research Which Franchises To Open

A good place to start is by considering your experience, interests, and where you want to open your franchise.

If you have spent your career in the travel industry, it may be a lot easier to open a hotel or travel-related franchise than, say, a car repair or pet-related franchise. That’s not to say you can’t pivot to something you’re passionate about, but the learning curve will likely be greater. 

Once you have an idea on what industry you are interested in, consider businesses you like. You want to believe in your product/service and with a franchise you get to know what you will sell before you go into business. 

The next step is seeing which of these franchises want to open in your area. Not every franchise wants to expand to every state or every area within a state. Or there may already be too many franchises in an area, or territory restrictions that may prevent you from opening where you want.

“Most importantly, make sure the model is making money and is it something you can see yourself doing every day,” advises Pete Baldine, president of Moran Family of Brands, one of the largest automotive aftermarket franchisors.

Once you have a list, get the Franchise Disclosure Document (FDD) from the franchisor, from a franchise broker or consultant, of through one of the state databases that maintain these documents:

Read: Best Franchises to Own in 2024

What Causes Franchise Deals To Fall Through

You can find what you think is the perfect franchise opportunity, and belatedly discover you can’t make it work. Here are some common reasons why, and what to watch out for. 

One of the primary reasons deals fall through is insufficient capital. Franchisors typically have strict requirements for net worth and liquid capital. If you can’t meet these financial thresholds, you may be disqualified from purchasing the franchise. 

It’s like finding the perfect house to buy, then discovering you can’t get a mortgage. 

This is why it’s crucial to have a clear understanding of your financial situation—and the franchisor and lender requirements if they apply—before pursuing a franchise opportunity. You may be able to get around this by purchasing a franchise with lower startup costs, and paying with your savings. 

Just don’t underestimate how much capital you’ll need until you develop strong cash flow and reach profitability. You don’t want to run out of funds before you start making money. 

Location issues can also cause deals to collapse. Many prospective franchisees don’t realize how particular franchisors can be about where their units are placed. 

Franchisors often have:

  • Specific areas where they’re willing to open new units
  • Strict rules about the minimum distance between franchise locations (territories)
  • Requirements for the type of property or building that can house the franchise

If you can’t secure a location that meets all of these criteria, your deal may fall through.

Additionally, some deals fail due to issues that arise during the due diligence process. Zoning issues or zoning changes, parking problems, or even planned roadwork can make what seems like a great location turn sour. 

As you investigate the franchise opportunity more deeply, you might discover aspects of the business that don’t align with your goals or expectations.

Company culture is crucial, warns Scott Greenberg, author of The Wealthy Franchisee: Game-Changing Steps to Becoming A Thriving Franchise Superstar. “Find a franchise where the culture resonates with you and adds real value to your daily operations.”

To increase your chances of success, thoroughly research the franchise and its requirements before applying. Be honest about your qualifications and financial situation, and make sure you’re prepared for the commitment of franchise ownership. 

Hidden Costs 

When considering a franchise opportunity, it’s crucial to look beyond the upfront costs. The initial investment and franchise fees are often just part of the equation, and what may look like a cheap franchise may turn out to be more expensive than you anticipated. 

Many potential franchisees are surprised by hidden costs that can significantly affect the total investment required to open the business. Understanding these less obvious expenses can help you make a more informed decision and better prepare for the financial realities of franchise ownership.

Real estate is often one of the most costly aspects of starting a franchise. Unless you are choosing a home-based franchise, you will need to rent or purchase space and build it out to meet the needs of the business. Lots of unexpected fees can come up before your business gets its occupancy permits and can open for business.

Supplier costs can catch franchisees off guard. Many franchisors require you to purchase goods or services from approved suppliers, which may be more expensive than sourcing them independently. While this ensures consistency across the brand, it can eat into your profits.

Training expenses are another area where costs can add up. While initial training is often included in your franchise fee, ongoing training or additional support may come at an extra cost. Some franchisors charge for refresher courses or new product training.

Mandatory upgrades can be a significant hidden expense. Franchisors periodically require franchisees to update their equipment, technology, or store designs to maintain brand standards. These upgrades can be costly and are typically the franchisee’s responsibility.

Advertising fees may not be sufficient to drive business, and the franchisee may need to spend more than anticipated. 

And, don’t forget about potential costs associated with selling your franchise. There may be a time when you want out, and some franchise agreements include transfer fees or require the franchisor’s approval of the new owner, which can complicate and add expense to the selling process.

Given the complexity of these agreements and the potential for hidden costs, it’s highly advisable to have a lawyer review your franchise agreement before you sign. An experienced franchise attorney can help you understand all the financial obligations you’re taking on and potentially negotiate better terms.

Profitability Opportunities

One of the key reasons buyers consider a franchise investment is the ability to estimate costs versus potential earnings more accurately than when starting a business from scratch. 

Franchisors provide some details about financial performance representations in their Franchise Disclosure Document (FDD). This information can give you a general idea of what other franchisees in the system are earning and help you to identify a potentially high profit franchise company. However, it’s important to remember that these figures are averages or ranges, and your actual results may vary—a lot.

Local market conditions will play a significant role in determining your franchise’s profitability. By researching other franchise locations in your area, you can get a more accurate picture of potential revenue and expenses. Factors like population density, local competition, and regional economic conditions can all impact profit margins.

Also, keep in mind that while franchises of the same brand may look identical from the outside, each location is unique. Your individual management style, operational efficiency, staffing, and customer service can significantly influence your profitability. 

High-performing franchisees often exceed the system’s average earnings.

On the other hand, if your location begins to struggle, your franchisors may offer help and training to get you back on track. This support can be invaluable, especially in the early stages of your business when you’re still learning the ropes.

Some franchisors also provide ongoing operational support, marketing materials and marketing assistance, and business coaching to help you maximize your profitability. They have a vested interest in your success, as your achievements contribute to their success too. 

While profitability is never guaranteed, the franchise model offers a level of predictability and support that can be reassuring for new business owners. By leveraging the franchisor’s experience and proven systems, you can focus on executing the business plan and driving profitability in your location.

Finding the Right Franchise

If you’re considering a franchise, it’s critical you read and research to find the right fit. Read the Franchise Disclosure Document very carefully, and then do your research. Even a low-cost franchise opportunity carries risk, so don’t just consider one with low startup costs. 

“An entrepreneur considering purchasing a franchise must talk with as many existing and former franchisees as possible,” says Azrin. “The list of current and former franchisees is contained in Item 20 or an exhibit in the Franchise Disclosure Document, including their names, addresses, and telephone numbers. 

“Entrepreneurs considering purchasing a franchise should review the list and then pick up the phone and call as many of them as possible. They should ask the existing franchisees specific questions about the business and their experience with the franchisor, and they should ask the former franchisees why they left the system,” he says. “Speaking with current and former franchisees is the best and only way to get credible information about what it is really like to be a franchisee in the system.”

FAQs

What if I want to open a franchise but don’t have net worth (or any money)?

If you want to open a franchise but don’t have any money or a net worth, it will be more difficult to open a franchise, but not necessarily impossible. 

You will first need to find a franchise that doesn’t require a certain net worth. Once you have found such a franchise, you will need to either get financing through them or another lender. It may be hard to get financing without having at least good credit, so don’t sign any documents until you are sure you can line up financing. 

Can I buy a franchise with credit?

You may be able to buy your franchise with credit, but it depends on several factors. The cost of the franchise along with your personal assets, credit history, current debt, etc will all determine if you are able to buy a franchise with credit. 

There are several different types of financing available to entrepreneurs who want to buy a franchise. Financing options may include SBA loans, bank loans, franchisor financing. For those with retirement savings, a ROBS plan may be an option. Business credit cards may be used to help fund startup costs, and there are a number of business credit cards with 0% introductory rates

Do I have to have a business degree to open a franchise?

No, you don’t need a business degree to become a franchise owner. While a business degree may be helpful, industry experience will probably be more helpful as it will prepare you for what might come up in your franchise. 

However, even if you don’t have industry experience or a degree, franchisors typically provide comprehensive training so you can manage your franchise effectively.

Do I need a business plan to open a franchise?

Yes, you usually need a business plan to open a franchise. Some franchisors require you to submit a business plan with your application. If you need to secure financing for your franchise, you may need a business plan. 

The good news is that franchisors will usually provide you with information regarding several key factors such as your marketing/advertising strategy, business structure, market trends, and products being offered.

Is a franchise the best way to start a business?

Not necessarily. There are other routes to business ownership, including purchasing an existing business, that may be more attractive. 

“Entrepreneurs should strongly consider alternatives to franchising,” says Azrin. “When you purchase a franchise, you do not fully “own” the business, in the sense that you only have the right to use the system for a limited period. Entrepreneurs should consider opening their own business, or purchasing an existing business that is not a franchised business.”

This article was originally written on October 1, 2024 and updated on November 1, 2024.

Rate This Article

This article does not have any ratings yet.

Have at it! We'd love to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and protect yourself. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers.

Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered.

Leave a Reply

Your email address will not be published. Required fields are marked *