Bargain Hunters In search of the ridiculously inexpensive franchise

You've weighed the pros and cons, looked at all the numbers, and now your mind is made up: You're going into business for yourself and purchasing a franchise to do it. But there's just one tiny hitch: You can't afford to spend a lot of money.

Well, you don't necessarily have to.

In fact, it might surprise you to find out what franchises you can get for a few thousand dollars. Would you be interested in purchasing a rental car franchise for $2,500? How about a 7-Eleven for $3,500? Hard to believe?

That was Gayla Ables' initial reaction as well. The Adrian, Michigan, entrepreneur purchased her 7-Eleven with only $3,500 from her savings. She took over the store in 1998.

Ables, 43, had worked with 7-Eleven for almost eight years-first as a sales associate and then for two-and-a-half years as a corporate store manager-before the franchise began offering its work-to-own program. "It sounded interesting, and with the low down payment, [a franchise] was something I could afford," says Ables. 7-Eleven helped by financing the $52,500 franchise fee and the $41,000 inventory cost.

Jack Wilkie, 7-Eleven's national franchise and corporate communications director, explains: "You can come into the [corporate] store as a sales associate, train on the basic 7-Eleven operations and, if you demonstrate proficiency, move into the store manager rank [and eventually into the] work-to-own program." The convenience-store chain also has a turnkey opportunity in which qualified applicants can get into the system for as little as $25,000. Wilkie says this route includes six weeks of intensive training, plus the expenses of business licenses, opening inventory and the cash register fund.

How is Ables doing now? In addition to bringing her husband and three children on board, she employs seven workers. Her 2000 sales were $1.5 million, and she projects a 5 percent increase for 2001. Since she took over, the store's sales have increased overall by 20 percent.

Driving Force

Schel Gardner has also been able to turn big profits on a small investment. The 26-year-old entrepreneur is no novice: By the time he purchased his Rent-A-Wreck territory in 1999, he had a seven-year business track record under his belt.

"I started my wrecking business at age 17. I've just done a lot of things early in life," says Gardner, who graduated from high school at 16. He says his auto wrecker service is the largest in Angier, a suburb of Raleigh, North Carolina.

Branching off into car rental was a natural extension of his existing business. "People kept telling me there was nowhere to rent cars," says Gardner. "They had to go to Raleigh or Fayetteville. It sounded like a feasible idea to me."

So after researching, he plunked down $5,000 for the Rent-A-Wreck franchise fee and put three rental cars into operation.

That small number of vehicles lasted only a week. "The demand was more than we expected, and we started adding one, two and three cars a week to the fleet," says Gardner, who rents cars for insurance replacements and to local residents.

"We sell franchises based on the population within a prospective area," explains Allan Wagner, Rent-A-Wreck director of franchise sales and development. "The least expensive one is $5,000 in a protected area of up to 9,999 people."

"We typically operate in conjunction with other businesses. Franchisees will have a tire store, or an auto body repair shop, that already brings in foot traffic," says Rent-A-Wreck director of public relations Jason Manelli on how the corporation is able to franchise so inexpensively.

Gardner fit that model. His first franchise opened at the same location as his wrecking business and rapidly grew from there. "We doubled inventory in the first three weeks, then doubled again in another three weeks," Gardner says. "We were pulling a lot of business from the neighboring town of Lillington, so I approached a gentleman there with a U-Haul dealership to see if he would be interested in renting cars under me." He was, and a second location was born. Gardner currently owns four locations with seven employees in his territory.

Gardner's goals for his car rental company have changed drastically in the past two years. "I expected to have one location maybe renting five or six units," he says. "I didn't see the community needing all that much more. But now it's grown from just something to supplement business to an entire business on its own."

Flexing Her Muscle

While Ables and Gardner took advantage of low-investment opportunities that many people don't even know exist, Kelly Sweeney went a more traditional route. Eighteen years ago, she purchased a Jazzercise franchise that cost her about $850-$350 for the franchise fee and about $500 for equipment. Today, her Lenexa, Kansas, company encompasses three Jazzercise centers, one employee, 25 instructors under contract and revenue in excess of $400,000 annually, plus a double-digit annual growth rate.

"I was athletic in college and didn't really like the idea of a 9-to-5 job," says Sweeney, who at the time was working as an editor. In an effort to stay fit, she went with a friend to a Jazzercise class. It was love at first sight. "I said, 'I can do this; I want to do this,' " recalls the 42-year-old. So she went through the certification process and, after three months, quit her job to teach Jazzercise full time.

To satisfy the skeptics, Sweeney's initial intention was to just make as much at Jazzercise as she did at her $26,000-per-year job. But that desire quickly changed into the goal of being able to claim the largest clientele in the Jazzercise system, a goal that was eventually realized.

In the beginning, however, Sweeney didn't even teach from her own building. Then, within three years of starting her business, she explored the idea of opening her own center instead of teaching classes in gyms, church basements and schools. "I was paying enough rent in enough locations that it made sense. It wasn't risky, because I had the clientele," says Sweeney. She established her first center in Springfield, Missouri, in 1992 with a $10,000 signature loan.

When Sweeney first bought her franchise, only the franchisees themselves could teach the classes. But when that requirement changed seven years later, she began contracting instructors to work in her center, which helped her shift into high-growth mode. She opened a second location in Lenexa in 1994 and another location last year in Mission, Kansas.

Currently, a Jazzercise franchise costs $650, plus equipment (microphone, music systems, etc.), says franchisee Kenny Harvey, who is also the public relations director for corporate headquarters.

"A lot of our instructors/franchisees were cheerleaders in high school or maybe on the drill team. They're active people," says Harvey, adding that prospective franchisees are encouraged to take a Jazzercise class before purchasing the business.

Applicants undergo a three- to four-week training program where they learn eight dance routines before having to audition. The goal is to see what comfort level an individual has teaching a class. Explains Harvey: "If we feel you're competent enough to go out and teach, you get the franchise. If not, we'll refund the franchise fee."

The Search Is On

Finding low-cost franchises is as easy as looking at our list. Finding low-cost opportunities to get into mid- to high-cost franchises, however, takes more investigation. Look for innovations such as work-to-own programs or companies that allow "silent" partnerships, where one person with know-how and another with the money can form alliances. Or look for franchisors that are teaming up with local government and redevelopment agencies to open stores in nontraditional and/or underserved urban or rural markets.

Whatever solution you find to meet your budget, always keep the bottom line in mind-franchisors want someone who's prepared not only to invest money and sweat equity, but also to demonstrate an intense long-term commitment to building a successful business.