Buying into a franchise has always been difficult, but the credit freeze has made it almost impossible for the average would-be small-business owner to get in the game the past three years. Without a fat savings account or 401(k) worth cashing in, the traditional first-time owner-operator who used to define the franchise world has become an endangered species.
But opportunities are still out there for franchisees, and many of them are with strong, time-tested companies. All of the franchisors on our list of $20,000-or-less startups improved their rankings on this year's Franchise 500®, and one, Vanguard Cleaning Systems, even made it in the Top 10 overall.
Running one of these franchises might not be as ambitious as owning a few McDonald's, but they offer flexibility and scalability. Most can be run out of the home or out of a van by a single owner-operator. Or they can have multiple employees and their own offices. It all depends on the franchisee's ambition. "We have one franchisee in a town of 2,800 that runs a 4,000-square-foot store, and another on our board who has been with us six or seven years and runs her business out of her house and never wants to open a store," says Margaret McEntire, founder of Candy Bouquet Int'l in Little Rock, Ark. "The beauty of it is we can take both."
Top Franchise Deals
|Company||Lowest Starting Cost|
|Candy Bouquet Int'l||$10,220|
|Christmas Decor Inc.||$16,650|
|Computer Medics of America Inc.||$10,300|
|Disaster Kleenup Int'l (DKI)||$17,895|
|Fiesta Insurance Franchise Corp.||$3,400|
|SuperGlass Windshield Repair||$9,910|
|TGA Premier Junior Golf||$13,150|
|Vanguard Cleaning Systems||$8,200|
Mark Heisten, vice president for business development for Vanguard Cleaning Systems, agrees that flexible business models allow more people to enter franchising. "A lot of folks get into this as a side business. They are blue collar or have spouses who are working a blue-collar job during the day," he says. "This franchise gives them an opportunity in the evening to pay down debts or to purchase a home or pay for college."
Ken Hollowell, president and CEO of Profran Consultants and a longtime franchise industry veteran, says low-cost franchises also can appeal to people struggling with unemployment. "In many ways, these ultralow-cost franchises are like buying a job," he says. "And that's a positive thing. People do not need to be unemployed. Instead of eating up their cash reserves, they can invest in themselves."
Despite the lower entry barrier for these companies, it doesn't mean everyone makes the cut. Bill Costello, vice president of marketing and one of the founders at Florida-based SuperGlass Windshield Repair, says it takes a special personality to get into low-cost franchises. "We still reject more than we accept," he says, "Not everyone is cut out to be a franchise owner. We give them the correct information, but it's still a huge, emotional decision for them and their family."
McEntire points out that the cost, while providing more opportunities, also makes things riskier for franchisors. "The only real disadvantage to being a low-cost franchise is that our shutdown rate is higher than normal," she says. "It's inexpensive to get into this business, so it's inexpensive to get out of, too."
As long as people are unwilling to wait for the economy to recover before they get into the small-business world, ultralow-cost franchises will continue to fill an important niche for cash-strapped entrepreneurs. "There's a wide variety of people this appeals to," Costello says. "It runs the gamut--male, female; all races, creeds and colors. There are a lot of people interested in controlling their own destiny."
- The Outlook for Franchising in 2011
- More Zoom, Less Gloom -- the Franchise 500 Report
- How I Did It: Three Franchisee Success Stories
- Will I Make Money As a Franchisee?
- More Fast-Food Franchises Go Lean
- 10 Things I Hate About Your Franchise Disclosure Document
- By the Numbers: The Census Report on Franchises
- Social Climbers: How Franchises Are Using Social Networking