Many franchises have initial investment levels under £25,000 and allow you to build a business at your own pace
You don’t have to invest large sums of money to start your own business with a franchise.
There are plenty of franchises in all sectors that require an investment of less than £25,000. Many franchise investment figures group around £15,000 and there are a surprising number below £10,000.
You’re not alone if you have a limited amount of money to invest. Figures in the 2018 British Franchise Association NatWest franchise landscape report showed that the franchise fee was the number one financial consideration among 85 per cent of those setting up a franchise, at all levels of investment. With a low-cost franchise, you’re more likely to be able to find start-up capital from savings, a redundancy payout or money pooled by family or friends.
Avoiding the need to borrow means debt repayments do not eat into your profits.
However, be careful not to start your business undercapitalised, as running out of capital is the number one reason that start-ups go bust. Franchisors know this and will want to see that you have enough capital. Insufficient capital is the number one reason franchisors turn down prospective franchisees - accounting for 61 per cent of turn downs.
Take your business seriously
With a low-cost franchise, it can be tempting to think of your business as a ‘pin money’ job requiring low commitment.
It’s true that many franchises in this category are designed to be run part-time, especially at first, but franchisors expect commitment because success for you means success for them.
Starting a business, not buying a job
Hands-on franchises, where you do the work yourself - at least at the start - can look like ‘buying a job’, but franchisors do not see it like this. ‘Seemed to be just buying a job’ is the reason for 38 per cent of prospective franchisees being turned down by franchisors.
Lola, the franchise manager for telephone answering service franchise Call Agents, which requires an investment of £3,750, says: “This franchise can be run from home and you don’t need call centre experience, so we’re seeing a lot of interest at present. “But many applicants don’t realise that it’s not just answering calls, as you would in a call centre job. They’re running a business and we expect them to market their service too.”
Choose your franchise carefully
The economy is a bit unpredictable at present, so look for a business where demand is set to increase or remain steady.
Nigel Toplis, managing director of Techclean, the £19,500 franchise that involves providing office technology cleaning services, is expecting growing customer demand post-lockdown.
He says: “This is a huge and growing market. Our franchisees can work from home, with low fixed overheads, and the franchise can be grown according to the owner’s level of effort.”
Debra Rose, co-owner of the £14,995 mobile foot care franchise Healthy Feet, says: “We’re expecting to see new franchisees who have decided post-COVID-19 that they want to do something to help their local communities.
“This business is largely recession-proof, as most of our clients are retired and foot care is an essential service for them.”
Start small - Grow big
Many low-cost franchises expect you to be committed to growth and will help you expand, take on staff and move into management.
Cathryn Hayes, franchise director at mobile vehicle paint repairs franchise Revive!, says: “We talk to our franchisees about growth right from the outset and now all new franchisees start with two vans, instead of as a single operator, as this speeds up growth.”
Revive!, where the initial personal investment is £10,000-£15,000, has an accelerated growth programme for franchisees that focuses on expansion and profitability, plus changes in mindset and ambition.
Franchisees on the programme are invited to workshops and masterclasses that cover topics such as planning for growth, recruitment and retention, sales and marketing.
“By changing from an owner-operator to a manager, a franchisee can build a substantial asset to sell when they want to retire or move on,” Cathryn says. “Our Luton franchisee sold his 10-van operation in 2019, having built it up from a single van 10 years ago.”
Where to find lower cost options
• Home-based franchises, such as customer services or travel agencies. Nearly four out of 10 franchise systems can be run from home and 16 per cent of franchisees say they run their business from a home office.
• Mobile franchises, such as vehicle services, coffee delivery and garden services. British Franchise Association figures show that seven per cent of franchisees run their franchise from a van.
• Franchises that mean delivering services at hired local venues, such as children’s activities sessions in church halls.
Darlington Mnandi: Call Agents
“I paid for the franchise with part of my savings”
After 20 years in customer services, latterly as a manager, Darlington Mnandi decided to start his own customer services business with Call Agents, the telephone answering franchise.
He explains: “I looked at many franchises, but Call Agents used my skills and the investment did not mean breaking the bank. Working from home also means there are fewer overheads than taking business premises.”
Darlington runs his business from home in east London: “I paid for the franchise with part of my savings because I didn’t want to borrow. Borrowing adds to the hassle and cost of getting started and means you have to service the debt, which reduces your business earnings.”
He launched in December 2019, initially part-time.
“I gained some customers soon after start-up, mainly by joining a face-to-face networking group,” he says. “I think it’s easier to win customers by a referral from someone they already know. We’re now networking on Zoom. I hadn’t done networking before, but I think it’s the best way to market this business.”
Darlington advises: “Some people may be tempted to not take low investment franchises as seriously as more costly ones, but never forget that whatever your investment you need to be fully committed if you are to succeed. “Call Agents is not just about taking calls - you’re running a business and you have to market it.”
Ken Allison: Revive!
“You have to be thoroughly committed to the business” Ken Allison proves that you can start a business in a recession and still succeed.
He launched his Revive! mobile vehicle paint repair franchise in 2009 in the depths of the last big recession as an owner-operator working alone from a van. Now Ken has a team of van-based technicians on the road and mainly devotes his time to management.
“I brought some useful skills with me from my previous logistics jobs, all of which were van-based, and my franchise investment came half from my savings and half from a bank loan,” he says. “It was scary at the time, but I felt fortune favours the brave - and I was right.”
He ran his Revive! franchise for two years before taking on his first employee: “Initially, the transition from being on my own in a van to being a businessman who manages both the business and other people was quite challenging.
“It’s about changing how you think, but it helps that Revive! fosters a growth mindset in its franchisees from the start and provides us with management training.
“If this is something you really want to do, go ahead. But it’s no good doing it just for the money. You have to be thoroughly committed to the business and keep pushing forward if you want it to grow. “Revive! will do all they can to help you, but you have to believe you can do it too.”
Lisa Reddy: Healthy Feet
“I started work in my local area very soon after qualifying”
Lisa Reddy started a Healthy Feet foot care franchise business in May 2019 in order to change her life and now enjoys changing lives for others in her community.
Lisa, a former HR manager in a large corporate, says: “I was tired of the stress, the workload and the inflexibility, especially as I had two small children. I have no regrets about changing career to be a Healthy Feet franchisee, even though we could not work during the lockdown.” Healthy Feet franchisees deliver a local foot care service, mainly to private clients. The franchise training includes a diploma in foot health course, so all franchisees are qualified foot health practitioners. The cost of the course is included in the cost of the franchise. “I enjoyed the training course, which combines online study and practical clinical experience, and two weeks before the end of the course my appointment book was already full, helped by Healthy Feet head office,” Lisa says. “I started work in my local area very soon after qualifying.” She adds: “I like the combination of working directly with the people I visit, doing the admin from home and marketing my services.
“People feel happy and comfortable once you’ve treated their feet and like the fact a qualified practitioner is keeping an eye on their foot health. You also have the extra reward of giving something back to your community.”
Susan Davies: Techclean
“I wanted to grow a business I could run from home”
Office hygiene has shot straight to the top of many companies’ list of priorities in the wake of the COVID-19 pandemic, which means business is thriving for Susan Davies.
A former teacher and mother of four, she set up Techclean South Wales after her youngest child went to university. Susan says: “I was looking for a new challenge and wanted to grow a business I could run from home, but still get out and about to interact with others.”
She started out hands-on, but business has grown steadily and now she employs a team of three.
The Techclean service has never been in greater demand, providing an effective cleaning service for office equipment that comes into regular contact with human hands.
“With Techclean, no two days are the same,” Susan says. “It’s great working with a variety of people in different environments, although coronavirus has meant that during lockdown we have had very little contact with staff. “I call the women I work with my dream team and clients are always genuinely delighted with the results. We are cleaning very valuable and sensitive equipment and the work needs to be done correctly, so we must have the right policies and procedures in place. “Head office is very supportive and we work together to achieve the necessary level of professionalism. We go into an office and in just a few hours make such a big difference to the working environment.”
Susan’s turnover has grown significantly in the last two years: “We rely on our excellent reputation and it takes time to build this up. As with most things, hard work brings rewards.”
Biraj and Sital Nakarja and Raman and Karnvir Bath: Code Ninjas
“With no premises to find and fit out, we can get up and running faster”
Long-term friends, business partners and husband and wife duos Biraj and Sital Nakarja and Raman and Karnvir Bath decided to invest in the £12,000 Code Ninjas Studio franchise after researching coding classes for their own children. Biraj says: “As a team, we’d been looking for an additional enterprise we could operate together. Today coding and programming literacy is crucial for a child’s development and our research showed high market demand and no real competitors in our ideal territory of Slough.
“With our combined expertise in business operations, technology, HR, finance and franchising, we felt well placed to bring Code Ninjas to our area.” Raman adds: “The Code Ninjas Studio model means we can operate out of centrally located community centres such as libraries, schools and universities, keeping overheads low and profit margins high, and with no premises to find and fit out we can get up and running faster.”
Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications