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The best low-cost franchise businesses in 2022
Low cost doesn’t mean low profits. In fact, a lot of the businesses in this article offer a profitable franchise opportunity and can cost from as little as an initial investment of £2,000
Best Low Cost Franchises
Concept Claims Solutions
Not all businesses come with a six-figure franchise fee. Many a low cost franchise opportunity has the potential to make significant returns for individuals looking for a low-cost cleaning franchise opportunity, a low-cost mobile franchise, a low-cost food franchise or a low-cost recruitment franchise.
A lot of these tried-and-tested franchises can be run from home on a part-time basis, allowing the franchise owner to have a low startup cost and be their own boss around other commitments, such as a young family or other business investments.
The benefits of investing in a franchise
Franchisees run a business under the umbrella of a recognised brand that has proven systems in place to deliver a product or service to an already established customer base, whether that is in the commercial or residential sectors.
And in the vast majority of instances, you don’t need experience of the franchise business you wish to become part of, as a franchisor will provide full initial and ongoing training in all aspects of the business.
In addition, as part of the initial franchise fee package you will receive a comprehensive operations manual (a reference guide to running the business), plus assistance with, among other things, launching your business, marketing and promoting the franchise, retaining customers, business development, sales, invoicing and collecting payments.
This is why the UK franchise industry frequently uses the term ‘in business for yourself, but not by yourself’, as while franchisees run their own businesses, they have the backing of an experienced franchisor that has stress-tested the business over, in many cases, a number of years in various locations.
In the UK, it is estimated that somewhere in the region of 1,000 franchises operate successfully in almost every sector imaginable. The franchise industry is worth £17.3 billion and employs 710,000 people in total.
An increasing number of younger people and women are choosing to become franchisees. According to the British Franchise Association, 18 per cent of franchisees are under 30, while 37 per cent of new franchisees are women, an increase of 20 per cent since 2015.
Buying a small business franchise low cost instead of starting on your own, means you’ll become part of an industry that has a track record of providing people from many different backgrounds with a way to be their own boss and reap the rewards of their own hard work.
It is also worth noting that once the time comes to sell, you will have a highly attractive business opportunity that can be purchased by someone who also has the ambition to take control of their future by becoming a franchisee.
You’re not buying a job
While most low-cost UK franchise opportunities are hands-on businesses, where the franchisee completes all the tasks necessary to run the franchise, from marketing and
delivering the product or service, to admin and making the tea, buying a franchise is not the same as buying a job.
As the owner of a low-cost franchise business, its success very much depends on how much time you invest in it and how well you follow the system you have invested in. Yes, the franchisor is there for you in terms of support, assistance and advice, but ultimately the responsibility of establishing and growing the franchise by providing customers with the products and services they need is yours.
Researching low cost and cheap franchises in the UK
How do you research franchise businesses with low startup costs? The best place to begin is What Franchise’s comprehensive and regularly updated directory section, where you will find some of the best low-cost franchises to own and low-cost business opportunities.
Other useful resources provided by What Franchise are the Business Advice section, where you’ll find articles on many different topics written by franchise industry experts, and the Frequently Asked Questions section, where you’ll find answers to hundreds of questions about franchising.
When considering buying a franchise, it is important you conduct independent research into the business you wish to invest in. This includes researching the market in which the business operates, the history of the franchise and the people behind it, what you get for your money and the competitors in the sector.
It is also advisable that you speak to as many established franchisees as possible about the business to get a first-hand account of how the franchise runs and whether their expectations have been met.
Another crucial part of your research is having any information about earnings potential scrutinised by a suitably qualified accountant.
As well as taking advice from a financial expert, it is vital that you have the franchise agreement, which is a legally binding document, reviewed by a lawyer who is familiar with the franchise industry. There are several law firms in the UK that specialise in franchising and are members of the British Franchise Association.
You also need to ask yourself whether you are suitable to become a franchisee. Are you self motivated, determined, ambitious, resilient and do you have the ability to follow a proven system of doing business? If you answered yes to all of these, you have what it takes to become a successful franchisee.
There are many low cost franchises that make money. The trick is to choose the right one that suits your personal circumstances and interests and partner with a franchisor with whom you can build a successful, long-term business relationship.
Questions to ask a franchisor before your initial investment
It is crucial that you have as much information as possible about the franchise you want to buy before making a commitment.
A franchisor will want you to ask questions about its business, as it shows that you are a serious investor. These are just some of the questions we recommend you ask a franchisor before you make your decision:
• How long have you been in business?
• Why did you decide to franchise your business?
• What plans do you have for the business in the short, medium and long term?
• What is the success rate of the franchise?
• What is the franchise’s unique selling proposition?
• What’s the total cost of the franchise, including franchise fee, ongoing fees and any working capital requirements?
• Will I be trading from an exclusive territory?
• What training and support will I receive during my time as a franchisee and how will this be delivered, ie online, face-to-face, one-to-one, in group sessions, etc?
• How will you help me to develop the business once it has become established?
• How long is the franchise agreement and what are the rights of renewal?
Best franchises with low startup costs
Low-cost UK franchises offer a myriad of investment opportunities, with affordable franchises available in a number of sectors.
Growth markets in the UK in recent years include personal services, mobile franchises, food and catering, health and fitness and elderly care.
However, in order to become a successful business owner you should invest in a business you’re passionate about. You must believe in the brand’s products and services and also be able to forge a good working relationship with the franchisor and the head office teams who are tasked with supporting you during your time as a franchisee.
Low cost franchises and above-average returns
According to the 2018 British Franchise Association NatWest industry survey, the mean total start-up cost for a new franchise unit was £56,500, 60 per cent of franchisees turnover over more than £250,000 and 93 per cent are profitable.
However, the survey also revealed that there are no significant differences between smaller and larger businesses in terms of profitability, meaning investing in a low-cost restaurant franchise or a low-cost locksmith franchise, for example, offers a viable opportunity for someone with limited funds who wants to start small, minimise the risk element and build a business at their own pace that can, in time, provide a healthy return on their investment.
Low-cost franchises under £2,000
Additional Resources offers a home-based recruitment franchise that deals with employees in a range of sectors, while Coensus-hr franchisees provide clients with a proven job FIT process to help get the right person in the right job.
Mail and parcel delivery specialist DPD is a leading name among the low cost mobile franchises that have established themselves in the UK in recent years and Fantastic Services has a diverse offering that encompasses home services such as cleaning, gardening and pest and waste control with a minimum investment of £1,500.
These companies are recruiting for franchisees now, were among the best low cost franchises in 2020 and remain part of a group of best cheap franchises. Brands such as Additional Resources even offers a low cost franchise opportunity in the UK for under £1,000.
Low cost home-based franchise opportunities
The 2018 British Franchise Association NatWest industry survey revealed that around 38 per cent of franchises in the UK can be run from home. So if you are considering one of the many low-cost franchise opportunities available, there are plenty to choose from.
If you want to run a low-cost franchise from your home, ideally you will have a separate workspace from which to administer the business and make and take calls.
Depending on the type of franchise you buy, you may require storage space for samples, marketing materials or stock.
You’ll also have to take a disciplined approach to being your own boss and not have your focus taken away from the business by the numerous distractions that can occur.
If you want to run a business from home, you may need to notify your mortgage lender or landlord before you do so, your local planning office if you need to make significant alterations to your home and your local council if you’re going to have lots of customers or deliveries that may disturb your neighbours or if the franchise requires a licence to run it.
There are certain tax breaks you can take advantage of if you base your franchise at home. You can claim use of your office space and a proportion of the cost of your internet connection and telephone expenses. An accountant will be able to advise you on this.
Low cash outlay with financial assistance
If you want to invest in a low-cost burger franchise, a low-cost gym franchise or a low cost travel franchise, for instance, you may not need all the required start-ups cost available in liquid funds.
This is because banks such as Lloyds, HSBC and NatWest will consider lending prospective franchisees up to 70 per cent of the start-up cost of an established franchise or around 50 per cent if the franchise has only been recently launched.
This is a result of the franchise industry’s record of success in the UK, which is much higher than independent start-ups, around half of whom fail within their first five years, meaning banks see franchisees as a safer bet when it comes to lending.
Irrespective of the cost of starting a franchise, make sure you don’t start your journey as a franchisee undercapitalised, as this is one of the main reasons new businesses fail.
Other costs to consider when investing in a franchise
It is not just the start-up cost you need to factor in when you’re buying cheap UK franchises. For example, the franchisor of a low cost franchise with high return, such as a low cost vending machine franchise, will typically charge a monthly management fee, which covers the cost of the ongoing support provided, and a marketing fee, which pays for the promotional activity organised by the franchisor to maintain brand awareness and drive customers to the franchisee network.
Each fee is charged as either a percentage of the franchisee’s turnover or as a fixed sum. It is important to find out how a franchisor structures these fees and what you get for each one before you make any commitment.
The importance of an effective business plan
You will not only need to produce a business plan if you wish to borrow money from a bank, you will also need it as a working road map to guide you to where you want to be as a franchisee.
It should be concise, divided into sections and full of pertinent details such as:
• Information about yourself, the franchise, the franchisor and the market in which it operates.
• An analysis of the strengths, weaknesses, opportunities and threats associated with the business and industry sector.
• Details of your short, medium and long-term goals for the business.
• Financial information such as profit and loss and cash flow forecasts, plus a balance sheet.
• A marketing plan.
• A summary of all the information included in your business plan.
A franchisor may offer to help you compile a business plan, but you must be able to interpret the information and understand the numbers contained within it.
How does a franchisor recruit franchisees?
Low-cost successful franchises are owned by franchisors who have meticulous recruitment processes, as they only want to recruit the best franchisees into their networks. So beware of any franchisors that pressure you into making an investment decision once it’s been established you have sufficient funds available without ensuring you are also a suitable fit for the franchise.
Many franchisors, upon receiving an initial enquiry about their franchise, will call a prospective franchisee to get some more information about them, such as what area of the country they wish to set up in, details of their previous employment or business experience and the reasons why they want to become a franchisee.
This will be followed by, in many cases, an invitation to a discovery day, which usually takes place at a franchisor’s headquarters, where candidates can find out more about the business, meet key members of the franchisor’s management and support teams and ask any questions they may have about the opportunity.
The next stage is a series of one-to-one meetings with the franchisor, where further information (including financial details) will be disclosed to the candidate, who providing they are satisfied with all aspects of the business and it fits with their personal aspirations and the goals of the franchisor will sign a franchise agreement and commence initial training.