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Choosing a Low-Cost, High-Profit Franchise: 7 Critical Tips

Choosing a low-cost, high-profit franchise requires careful research. While there are several lower-cost franchises to buy into, it’s your money and time that you’re investing. Here are the top seven things to research to find a cheap franchise with high earning potential.

Choosing an Industry

As a potential franchise owner, you want to ensure growth potential. The pandemic had a significant impact on our lives, including where we spend money. As a result, several industries lagging before 2020 are now booming.
Franchise Insights reported in December 2020 that the franchise categories showing the highest growth are computer and internet, home services and remodeling, pet services, education, retail, real estate, child-related, health and fitness, and senior and health care. Pent-up demand, increased household savings, and vaccine deployment are behind the growth.

Behind the Boom in Home Improvement

In March 2020, everyone began spending all their time at home, leading them to want to upgrade their spaces. With people unable to travel, they started putting that money towards home renovations. Home Advisors reported in 2020 that the average household spending on home services increased by $4,000 to $13,138. That spending continued to grow, with the 2021 Angi Report showing a 20% increase last year. Home improvement specifically saw a 25% increase, with the average amount being $10,341. A 2021 survey by Axiom found that 56% of people will hire professionals for their home remodeling, making home improvement franchises appealing.

Understanding Startup Costs

Startup costs for a franchise include the franchise fee, initial investment, and ongoing costs. The franchise fee is a one-time, upfront cost. Initial investment costs cover the franchisee’s materials and resources or training programs to launch. Lastly, ongoing costs can include rent, labor, insurance, marketing, and royalty fees. Minimizing these expenses is critical for low-cost, high-profit franchises.
Marketing experts and agencies recommend small businesses spend between 7%-8% of their gross revenue on marketing. For home improvement companies, completed work is proof of quality. Your work will act as an advertisement when customers have guests over. Word of mouth saves valuable advertising dollars. Workers will also drive branded vehicles around town with all the supplies and equipment. These vehicles can act as a mobile marketing platform.

Storefront vs. Mobile or Home-based Franchises

When looking to start a low-cost, high-profit franchise, you must consider whether you want a storefront or mobility. Having a storefront or retail space comes with extra costs. Those expenses include rent and employees to staff the store.

In contrast, a mobile franchise takes the business to the client, allowing for time flexibility. Franchisees are not tied to office hours. If they can’t work one day, they don’t have to shut down a whole store. Mobile franchises also have an easier route to expansion. There are no additional costs for office space, vehicles, computers, and employees.

Home-based Franchises

Another option that can be a cheap franchise is home-based. Again, this business model has lower investment costs because you’re not paying for a building or facility. It allows minimal time between signing on the dotted lines and generating revenue. On top of the quick startup, there are lower and fixed operating costs. This translates to speedier cash flow, allowing you to hit and surpass the break-even point of your investment quicker. Home-based and mobile businesses are relationship driven. This feature helps create word-of-mouth referrals, which is free marketing.

No Inventory Business Model

Along with mobile or home-based franchises come non-inventory businesses. Not keeping inventory in stock helps reduce costs and frees up your capital. However, relying on efficient and effective supply chain management can be a downfall. In today’s world of shipping delays, many companies keep some products on hand to help meet deadlines.

Risk v. Reward

Buying into a newer franchise can mean lower initial costs but a higher chance of risk. As a potential franchise owner, you will need to determine if the risk has enough reward. Newer, cutting-edge companies could potentially be low-cost, high-profit franchises but will take more work on the franchisee’s part to get their name out there.

You will also want to consider your skillset here. If you have no background in home improvement, consider a franchise like N-Hance that has a reputable onboarding process. Also, with your skillset, review what your strengths are. This will allow you to be the most successful.

With N-Hance, there is little risk. It ranks among the top franchises, including making Franchise Gator’s Top 100 Franchises for 2021. We have a team continuously researching the newest technology and products to use, pushing their franchisees to provide the highest quality in wood refinishing.

How Much Can You Invest?

Buying into a franchise means spending tens of thousands of dollars. As a potential owner, you want to make sure it’s a worthwhile investment. To narrow down your franchise search, determine how much money you have to invest. This will then set your parameters.

Along with how much to invest, you will want to ask other franchisees for gross revenue numbers and how closely they follow the guidance of the franchisor. Make sure you find out how long it took them to reach that level. Also, find out what franchisees believe are key performance indicators of the businesses. For example, N-Hance franchisees performing in the top 25% had sales of $1,178,420 and an average job revenue over $6,000 in 2021.

Franchisor’s History

When talking to current franchisees, ask them how supportive the franchisor is in helping increase sales. Do the research into how long the franchisor has been in business. Any history of bankruptcy or litigation is a red flag.

Before signing on, find out what kind of training the franchisor provides to its franchisees. As a potential owner, make sure they can equip you with top-of-the-industry skills to make you the best of the best. N-Hance has created a quick-start program that guides you through your first year in business. You will also receive a nine-day, hands-on training course at our headquarters in Logan, Utah. Plus, N-Hance provides franchisees with webinars to learn about the business model, products, and brand.

Saturation of the Market

Consumer trends are ever-changing. As a potential owner, you are possibly putting your life savings into this business; you want to ensure there will still be interest in it in five years. For example, Global Market Insights reports the home improvement industry will see a compound annual growth rate of 4.3% through 2027.

At the same time, consider the community you are marketing to. Do several well-established businesses already offer this service? You want to try to find your niche in the market.

Along with the saturation of the market comes scalability. Does the franchisor allow you to purchase more territories to expand? Are surrounding areas available? These answers will give you an idea of how much you can grow your business. N-Hance offers a scalable business model and most franchisees own multiple territories.

Finding Financial Success

Research shows home improvement franchise owners are busier than ever. As a result, remodeling franchises are in constant demand and allow franchisees to enter at a fraction of the cost compared to other industries. Learn more about becoming a part of the No. 1 wood refinishing franchise in the U.S. by requesting franchise information today.

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