Top Low-Cost Franchises 2015

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SPECIAL REPORT: Top Low-Cost Franchises Left: Kurt and Melissa Godwin get rid of pesky insects with their Mosquito Joe franchise in Baltimore and Annapolis, MD. Photo by Poon Watchara-Amphaiwan. Right: Windows gleam throughout Fort Worth, TX thanks to Window Genie franchisees Patty and Chuck Street, who are seen here with John Lumme, their Lead Tech. (from left to right) It’s a good idea to set business hours at home and to make your family members aware of them and the importance of respecting them. This will help you stay focused and productive. “Although we provide our franchisees with a system, roadmap and lots of training on how to execute, they no longer have someone looking over their shoulder. They are their own boss, which means that at the end of the day, they have to follow through and be relentless if they want their business to get them where they want to go,” says Hopkins of Office Pride. “Results do not magically happen,” says Black of Rhea Lana’s. “You have to be a selfmotivator. The reality of working hard and not seeing a profit for the first two years was difficult at times even though corporate told me it would probably be three years before I saw a profit. It was seeing the success of other Rhea Lana’s franchisees who had persevered that kept me going.” Focus Many franchisees initially can be overwhelmed and find it difficult to focus on what is important at the right time. It can be easy to get sucked into the minute details of the business. “Our Franchise Advisors help our operators stay on task,” says Hutcheson of U.S. Lawns. “They help them set actionable goals and prioritize them so they can hit each one. If you don’t have goals then you are just doing stuff, but most likely not making progress.” Hiring and Managing Others For many franchisees, finding the right staff and training them is one of the most challenging aspects of their business. Doing so is a worthwhile investment since it will prevent you from having to consistently spend precious time hiring and training new employees due to turnover. “One of the biggest frustrations for our franchisees is hiring and keeping good staff,” says Bunchman of JumpBunch. “We offer them tools to manage their employees, as well as universal background checks and online programs that help them to train their coaches.” “When interviewing, you have to have a good instinctual feeling for a candidate and understand what their expectations are,” says ShelfGenie franchisee Ric Trahan. “I look for people with a solid values system, who are team players, good at customer service, and able to effectively communicate.” HOW TO BEGIN YOUR QUEST FOR A LOW-COST FRANCHISE By reading this report, you are already off to a great start in your search for a proven franchise that suits your personal and financial goals. Doing the following may help clarify the direction you should take. Identify Your Interests For every interest, there is a low-cost opportunity available such as cleaning, business services, recreation, art, health and travel. While some franchisees invest in a concept they have had prior experience with, many do not. “Our top five performers were tired of the rat race and joined us in order to have more time to be with their families,” says Bunchman of JumpBunch. “Two have an IT background, one was a lobbyist, one was an ad executive and the other managed a large sales team.” Assess Your Skills Understand your strengths and your weaknesses and how they relate to what the business requires to be successful. In some cases you can hire for your weaknesses, (bookkeepers, etc.) as mentioned earlier. Even so, you will most likely have to do the bulk of the hands-on work while getting started, so it’s a good idea to invest in a concept you are very comfortable with. Set a Budget How much can you afford to invest in the business and still be able to live the way you are accustomed to until it is profitable? Be sure to ask if the franchise you are interested in offers any discounts for minorities or veterans if you qualify. Continued on page 12. 6 | For more information on this report, visit: www.FranchiseBusinessReview.com
SPECIAL REPORT: Top Low-Cost Franchises Additional Considerations Before Investing There are many variables to consider when analyzing a low-cost franchise opportunity. 1 Franchisee Satisfaction If the brand has been around for a while, but you can’t find any franchisees to speak with who have been with the company for five or more years, this is a big red flag. If the franchise you are considering has been featured on one of our top franchises lists, look to see if it opted to provide its satisfaction report within the Franchise Reviews section of www.FranchiseBusinessReview.com. It is interesting to note that of the franchisees we surveyed, 40% have owned their business for five years or less and 60% have owned it for more than five years. 6 2 Number of Successful Franchises Find out what the number of franchise closings or nonrenewal rates have been over the past few years. The lower the percentage, the better. If it’s high, find out why. Scrutinize Item 20 of the Franchise Disclosure Document (FDD), which contains all unit growth and turnover info. Multiple resales and/or transfers can indicate a troubled system. Profitability There is no connection between the amount you invest in a franchise and how much money you’ll earn. The FDD, however, may provide you with examples of average franchisee financial performance. Even if these examples are available, there is no guarantee that you will earn the same revenue since so many variables are involved including how long the franchisee has been in business and location. The best way to obtain an idea of how much money you might make is to ask franchisees about their experience. “Our franchisees each enjoy the same level of support and tools, but it is their individual drive that ultimately determines the success they achieve. Our Huntsville, AL franchisee did over $1.7 million in sales as outlined in our item 19, but not all our franchisees grow that big,” says Hopkins of Office Pride Commercial Cleaning Services. Item 19 is where financial performance information is disclosed by franchisors in their FDD, but the level of detail varies. 3 4 Training & Support Find out what kind of human and virtual support you will receive initially and on an ongoing basis. Ask the franchisees you speak with if their business needs are met by the franchisor. “In addition to having permanent training materials and helpful information available online 24/7, we send new information every day to our franchisees. They also receive a video essay about a different topic, and a Q&A each week,” says Meigs of Visiting Angels. “To ensure our franchisees have the right gross profit margin, are properly staffed and efficiently marketing themselves on the local level, we conduct in-person one-on-one consultations.” Equipment & Supplies How much equipment and supplies will you need? Does the franchisor offer any financing assistance or have pricing arrangements with vendors? Don’t forget future equipment and supply needs when crunching your numbers. Equipment doesn’t last forever and supplies run out. “We have financing programs for a variety of things including equipment, vehicles and business services,” says U.S. Lawns’ Hutcheson. “We also have preferential pricing with suppliers of fertilizer, grass seed etc. and pass the savings on to our owners.” 7 8 Growth Can you add additional units or territories? This factor ties into profitability, since most multi-unit operators make more than single unit operators. To learn more about multiunit ownership, read our Top Multi-Unit Franchises report at www.FranchiseBusinessReview.com. Want vs. Need Since there are typically fewer costs associated with low-cost franchises, this can make it easier to survive an economic downturn. A key consideration is whether or not customers will need what you are offering if the economy tanks. Are the products or services you’ll be providing nice-to-have or need-to-have? “The cost of having a child participate in one of our programs ranges from $8-$15 per week,” says Bunchman of JumpBunch. “The pricing, coupled with parents’ understanding that their kids are happier and healthier when they are active, means our business has experienced a steady upward curve throughout bad and good financial times.” “The healthcare sector always grows in revenue and employment even during recessions,” says Meigs. “As baby boomers age, their significant needs will only get greater, which equates to an ongoing revenue stream for our franchisees.” 5 Fees Although royalty fees are not included in startup costs, it is essential that you consider them when analyzing the franchise investment. Although most franchises charge a percentage of revenues, some charge a flat monthly fee. In addition, most have some form of marketing fund contribution. Find out how much everything will cost and how it could impact cash flow. Our Franchise Buyer’s Toolkit provides all the resources you need to make an informed investment. You only have one chance to make the right franchise choice. www.FranchiseBusinessReview.com/Toolkit For more information on this report, visit: www.FranchiseBusinessReview.com | 7
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Top Low-Cost Franchises 2015

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