Top Low-Cost Franchises 2015

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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
SPECIAL REPORT: Top Low-Cost Franchises Top Low-Cost Franchises with the Highest Average Income* 1. Sandler Training 2. Critter Control 3. Visiting Angels 4. Right at Home 5. Murphy Business & Financial 6. MaidPro * The brands listed above each have an average annual pre-tax income of over $100,000, as reported by franchisees who have been in operation for a minimum of two years. The average annual income reported across this group was $116,525. Dan and Lisa Nausley, who own a Sandler Training franchise in Chattanooga, TN, inspiring a group to succeed. Low-cost franchises also offer many benefits that higher cost franchises do, but that starting your own business from scratch does not. Plug & Play A franchise provides you with an out-of-thebox business model that is ready to be implemented as soon as you have gone through your training. All you have to do is to adhere to the established guidelines. “When we had our own landscaping company, we were on an island on our own and made a lot of mistakes,” says Kirk. “By buying a U.S. Lawns franchise, we bought a business that already had all the kinks worked out of it.” You’re Not Flying Solo You’ll receive your franchisor’s support in a variety of crucial areas including training and operating procedures as well as marketing. “We provide a full week of classroom training for new franchisees followed by in-market sales and operations training,” says Hopkins of Office Pride. “After their initial training is completed, our new franchisees are placed into peer groups, which allows them to get to know other owners, share best practices and more.” In addition, you have a network of fellow franchisees to learn from and work with. “Our Franchise Advisors spend quality time with owners. We’re also big fans of group and regional franchisee meetings which provide a forum for franchisees to seek advice from and share best practices with each other,” says Ken Hutcheson, President of U.S. Lawns. “We hold a best practices competition at our annual conference,” says CEO & Founder of Visiting Angels, Larry Meigs. “Franchisees compete to win one of three categories such as Palliative Care, Caregiver Retention and Converting Leads into Clients. The categories change each year. The winners present their best practices at the conference, which benefits all who attend.” Brand Recognition Since the franchise brand is already recognized by customers they know that it offers consistency and appreciate the comfort its familiarity provides. Minimized Risk If you have done extensive due diligence including reviewing the FDD and talking to franchisees in order to identify a strong franchise brand with a proven business model, your chances of building a successful business are greater than if you were starting one from scratch. Resale Value Prospective investors tend to favor known brands. Franchises typically fetch a higher resale price than a mom and pop business, and most franchisors will assist you in finding a buyer. CHALLENGES Like all businesses, low-cost franchises come with risk. Here are some things to keep in mind prior to taking the franchise plunge. Managing a Business If you are like many franchisees, you may have no prior business ownership experience. Ask the franchisor what business skills you’ll need to be successful, and what they will train you to do. You should seek outside assistance from accountants, attorneys, and other business professionals that have expertise in your areas of weakness. “We spend three days teaching our franchisees the basics they need to run their business including how to read and strategically act upon Profit & Loss statements,” says Jump- Bunch CEO, Thomas Bunchman. Self-Discipline Although the idea of working from home is appealing and a benefit many low-cost franchise opportunities offer, it can be challenging for some since it requires a lot of self-discipline. Home-based business owners have to learn to set limits not only for themselves, but also for family members who may feel inclined to interrupt them or expect them to take care of non-work related tasks during working hours. For more information on this report, visit: www.FranchiseBusinessReview.com | 5
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Top Low-Cost Franchises 2015

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