Top Low-Cost Franchises 2015

SPECIAL REPORT: Top Low-Cost Franchises
A few of the franchises featured in
this report hold the honor of making our
Low-Cost List each year since Franchise Business
Review launched a decade ago. They are
Heaven’s Best Carpet Cleaning, Our Town
America, Miracle Method, ActionCOACH
and JumpBunch. Each has shown consistently
superior performance. Making an appearance
on our List for the first time are ImageOne,
S.T.O.P., and Mosquito Authority.
One of the most unique concepts that
caught our attention is The Traveling Photo
Booth. By giving clients the instant gratification
of being able to take and share photos, it is
benefitting from the “selfie” and social media
trend. In addition to letting people instantly
share their photos via its mobile app, clients
are given a printed photograph, which is an
appreciated rarity in our digital world.
BENEFITS
Low-cost franchises offer a variety of benefits
over more costly franchise opportunities. This
is reflected by the satisfaction of low-cost
franchisees being 11% more than higher cost
opportunities.
Faster Potential Profitability
If you’ve already started researching franchises,
you know that many can cost hundreds of
thousands or even millions of dollars. Lowcost
franchises, however, are a financially viable
way for you to own your own business. Less
debt, combined with lower start up costs,
can result in faster profitability. When we
compared the average annual pre-tax income
of Low-Cost Franchises vs. All Franchises, we
found it was $75,217 for Low-Cost Franchises 1
and $86,940 2 for All Franchises.
Even though profitability may occur faster
with low-cost franchises, all businesses take
time to be profitable. It is important that you
have adequate funds to carry you until your
business is generating enough revenue to be
self-sustaining. Do your due diligence in order
to figure out the amount of money you should
set aside since every franchise opportunity is
different and your personal financial situation
unique.
“When I converted my three-year-old landscaping
business, which focused on design
and installation, to a U.S. Lawns franchise in
January 2002 I was doing $250,000 in sales,”
says New Albany, MS franchisee, Mike Kirk.
Number of Units*
Low-cost Franchisees Own
Unit
Percent
1 70%
2 16%
3 5%
4 2%
5+ 6%
* includes units and territories
“We saw an immediate financial benefit from
U.S. Lawns’ full service maintenance model.
We are budgeting $2.4 million in sales this
year.” Kirk holds a degree in accounting and
entered the green industry, which he always
had a passion for, in 1998 after having worked
in manufacturing for 13 years and being
downsized when the company he worked for
was acquired.
“We suggest that new franchisees have 12
months of living expenses in the bank,” says
Todd Hopkins, founder and CEO of Office
Pride Commercial Cleaning Services.
Often Home-Office/Mobile Based
Since most low-cost franchises take their
products and services directly to customers,
many can be run out of your home or a small
rented office or trailer. Some, such as those
in the green space, may need to expand to a
larger location as business grows in order to
accommodate equipment and vehicles.
“I work out of my home,” says Stacey Black,
who owns Rhea Lana’s Frisco/McKinney, TX
territory. “When holding events I, like most
Rhea Lana’s franchisees, either rent an empty
retail location or event location for them.”
Flexibility
Since many low-cost franchise concepts do
not necessitate owners being present at a
particular location for a set period of time,
they offer more flexible schedules than a retail
outlet or restaurant. Many can even be operated
part-time.
“Traveling is in our name and being able
to work remotely has always been a priority.
From any smart phone, franchisees can manage
leads and clients, change online pricing,
personalize automated emails, and even
answer questions in real-time from leads
using the ‘live chat’ feature on our website,”
says Founder of The Traveling Photo Booth,
Jacob Stewart. Most of The Traveling Photo
Booth’s franchisees have other jobs in addition
to running their franchise, although Stewart
says this can and does change based on franchisees’
personal goals, the market they serve,
how long they’ve been a franchisee, and their
skills as an operator.
“I purchased a Rhea Lana’s franchise
because I wanted to be able to work around
my children’s schedules for most of the year,”
says Black. “I work hard for two months
prior to my event, although still around my
kids’ schedules, and then two weeks straight
during my events. Essentially during my
events it’s as though I am away on a business
trip. Since I only have two events a year, I have
a great work-life balance.” She notes that if she
had to rely on her business, which had sales
of $300,000 last year, 10X more than her first
year (2009) sales, that it would be challenging
to support her family in the lifestyle they’ve
become accustomed to with a dual income.
“We could make it work if we had to though,”
says Black. “I know of one woman who is
doing so.” That’s impressive for a business
that requires working on average five months
a year.
1
Based on independent surveys of 9,214 franchise operators representing over 130 low-cost franchise brands
(defined as franchise businesses with an average startup investment under $100K) conducted by Franchise
Business Review between January 2014 and April 2015. Franchise operators were asked to report their
annual pre-tax income provided by their franchise business. Franchise operators that were in the “startup
period” of their business (defined as the first two years of a new franchise business) were excluded. Only
low-cost franchise brands with a minimum of 50 operating units were considered in this research.
2
Based on independent surveys of 26,140 franchise operators representing 364 franchise brands, across all
sectors and investment levels, completed by Franchise Business Review between January 2014 and April
2015. Franchise operators were asked to report their annual pre-tax income provided by their franchise
business. Franchise operators that were in the “startup period” of their business (defined as the first two
years of a new franchise business) were not included.
4 | For more information on this report, visit: www.FranchiseBusinessReview.com