Cheap Sheet

Stumped by the task of finding the perfect budget-friendly franchise? We've got all the answers you need to do your homework right--and spend your money wisely.

Low-cost franchises have become hot commodities. Prospective franchisees know that if they can choose wisely and start businesses without the heavy front-end investment of a retail location, they can increase the potential return on their money. It's a well-known numbers game. For example, the typical new restaurant build-out, including franchise fees, can run you $400,000 or more. That means some serious lender financing for most people, as in signing a 30-year personal note and putting your house on the line. You'll find similarly sobering numbers when building out a franchised muffler shop or a convenience store. These businesses ratchet up the franchise investment to a level that puts it out of reach for mere mortals trying to make the jump into business ownership.

That's where low-investment franchises come in. This category includes perfectly robust businesses that can be run from inexpensive office spaces or executive suite arrangements, or even from home offices. Maid services, in-home care services, magazine publishing, trademarked product distribution, interior decorating, auto-mechanic tool distribution and a variety of mobile, van-based repair services are just a few of the categories. If you can get into the business for a total investment in five figures, consider it a lower-end franchise investment.

As with all franchises, however, it pays to assess the stability of the program and the financial risks you're undertaking. Just because the level of investment is manageable doesn't make it low-risk; being able to swing a $45,000 investment doesn't mean you can afford to lose it all. So here is a nugget of franchise advice that's worth its weight in pink slips: in a word, research.

With a modest amount of diligent research, you can lower many of the risks inherent in a franchise business investment. Don't let the idea discourage you--this is rather enjoyable research, gathering information that will make you better at running your franchise. It's asking people the right questions-and it's an organized way to investigate a serious investment.

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This article was originally published in the February 2005 print edition of Entrepreneur's StartUps with the headline: Cheap Sheet.

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