Cheap Franchises to Own in October 2020: The Complete Guide

Cheap Franchises to Own in October 2020: The Complete Guide

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When you buy a franchise, you receive a large benefit in known branding, as well as support and training from the franchiser. In return, you’re expected to provide an initial investment as well as ongoing fees.

How much you pay — and what the franchiser gives in return — depends on the brand and is typically spelled out in the Franchise Disclosure Document (FDD), a legal document required by the Federal Trade Commission. The FDD also describes the franchiser’s financial health, franchisee turnover rate and provides contact information for former and current franchisees. The most successful brands tend to disclose the most information.

By comparing franchise and royalty fees, training and real estate costs, you can decide if a franchise is the best business move for you. We took these factors and more into consideration when narrowing down the 10 best franchises to own right now.

What’s a franchise?

A franchise is a way of starting a business using an established brand and system. The franchiser is the entity that has the model and the franchisee is the person who buys the right to use the name, logo and system to distribute products or services.

The most recognizable franchises are those that focus on providing an entire format. These are businesses like McDonald’s, Chick-fil-A, 7-Eleven and Subway. You typically pay a startup fee and an annual royalty to the franchiser and in return may receive services like site selection, training, product supply, marketing plans, hiring and payroll policies and even help to get funding. Most franchisers will require that potential franchisees have a certain amount in savings to be considered.

On the other hand, if you start your own business, you have more freedom in the way you operate and you can set your own policies and procedures. However, you’re also on your own when it comes to marketing and establishing yourself.

Typical costs of owning a franchise

Starting a franchise can cost anywhere from $20,000 or less to more than $1 million. It all depends on which fees you have to pay, as well as how much it costs to buy equipment and any necessary real estate. Low-cost franchises can be attractive, but you might not get as much support when you choose them. Some of the typical costs you run into include:

  • Initial franchise fee
  • Ongoing franchise royalties
  • Cost to buy or lease real estate
  • Expenses related to purchasing equipment
  • Purchase of fixtures (seats, tables, shelves, etc.)
  • Local marketing costs
  • Contributions to a national advertising fund

Most expensive franchises. Some franchises are much more expensive than others. McDonald’s is known for being among the most expensive to set up, but it’s possible to spend less setting up a satellite location of the fast-food chain. For example, if you set up a satellite McDonald’s on a university campus, with a scaled-down menu, you might be able to get started, including the franchise fee and all the setup costs, for less than $500,000.

However, if you’re setting up a stand-alone store in an expensive city, real estate costs will be higher, as will the costs of outfitting a full-service restaurant location. By the time you pay the franchise fee and all the other equipment and setup costs, you could be in for more than $2 million.

Cheap franchises. Chick-fil-A, on the other hand, is one of the least expensive franchises to open. The startup fee is $10,000, though you have to apply and be accepted for a franchise. It probably helps if you live in one of its emerging markets. Chick-fil-A helps pay for startup costs, from restaurant construction to equipment, depending on your location and might provide you with extended payment terms for the help. At the low end, you could pay more than $340,000.

When considering the cost of owning a franchise, it’s important to take into account whether you’re paying upfront costs and royalties, but get to keep more of the sales and profits. You might pay a lot to get started with McDonald’s, but its ongoing fees may be lower than competitors.

How to afford a franchise

In order to buy a franchise, most people turn to business financing. Term loans, business lines of credit, or equipment financing can all help make the high costs of ownership easier to bear.

Traditional lenders like banks are likely to offer the most competitive rates while online and alternative lenders are likely to have higher rates. However, not everyone qualifies for financing from a bank given their stricter requirements. If you don't qualify, financing from an alternative lender can still be a useful tool in moving closer to franchise ownership.

The 10 best franchises to own

If you decide owning a franchise is the right choice for you, there are some great options out there. Some are low-cost franchises, while others require a bigger investment on your part. Our list takes a look at the following factors:

  • Estimated cost to own
  • Complexity of the business (including whether you need a lot of specialized equipment)
  • Strength of the brand
  • Support offered by the franchiser
Not every franchise is right for every business owner, so do your due diligence before making a decision.

1. SuperGlass Windshield Repair

Estimated initial investment: As low as $9,500

Estimated number of units: 200

If you want to keep startup costs low, you can choose the mobile option for your franchise — SuperGlass technicians go to their customers at their homes or offices. There isn’t a lot of complicated equipment to worry about, and it can be easy to get started, even if you don’t receive a ton of ongoing support. Residents of California are ineligible for SuperGlass franchise opportunities. The company doesn’t disclose its franchise fee on its website, but initial investment may be as high as around $84,000.

2. Cruise Planners

Estimated initial investment: As low as $10,995

Estimated number of units: 2,500

You can operate one of these franchises from home and you don’t need any equipment beyond a reliable phone plan, good internet and a computer. The company offers comprehensive training to help you start in the travel planning business. You won’t have a lot of brand recognition, though, and you’ll need to do some marketing.

3. The UPS Store

Estimated initial investment: As low as $58,248

Estimated number of units: 4,800 The UPS Store and Mail Boxes Etc.

As far as starting a business goes, The UPS Store offers a relatively affordable way, especially if you’re willing to consider a lower-priced “store-in-store,” locations that may be the best fit for existing business owners. Traditional UPS Store franchise costs start at $168,885. There’s long-term financial stability and plenty of support for franchisees. Brand recognition is high, so you have the advantage of potential built-in loyalty.

4. 7-Eleven

Estimated initial investment: As low as $79,000

Estimated number of units: 8,600 stores in the U.S.

7-Eleven is the largest convenience store chain in the country and is well recognized. Not only is 7-Eleven seeing explosive growth, but it’s also a turnkey operation with the company providing fully stocked stores and plenty of support, including ongoing training. However, costs can range with the initial franchise fee ranging from $50,000 to $750,000. Franchisees must also make a down payment on the store’s inventory, supplies and fees, about $29,000 and provide initial cash register funds. It’s also important to remember the 7-Eleven stores stay open 24 hours a day, seven days a week, where allowed by state law.

5. Dunkin’

Estimated initial investment: As low as $109,700

Estimated number of units: 9,419 points of distribution in the U.S.

Because it has strong customer loyalty and brand recognition, Dunkin’ makes an excellent franchise opportunity. Additionally, it’s relatively affordable with startup costs in line with many small businesses, though its initial investment cost doesn’t include real estate. Plus, Dunkin’ aids franchisees with help in site selection, construction, marketing and management operations.

6. Subway

Estimated initial investment: As low as $116,000

Estimated number of units: 24,191 restaurants in the U.S.

While Subway is one of the best low-cost franchises to start, you do have to make an additional outlay. The good news, though, is that the outlay is still relatively affordable in terms of small business startup costs. Subway offers a lot of resources and support. The reason it’s ranked higher than Chick-fil-A, even though its franchise fee is higher at $15,000, is due to its lower ongoing fees. You only end up paying around 12.5% of weekly revenues to corporate. Plus, restrictions like being closed on Sunday don’t apply to Subway as they do to Chick-fil-A.

7. Great Clips

Estimated initial investment: As low as $136,900

Estimated number of units: 4,200 salons in the U.S. and Canada

This is another of the relatively low-cost franchises that comes with reasonable startup costs, including a franchise fee of $20,000. Great Clips has brand recognition and longevity. Additionally, the franchiser offers ongoing technology, training and market research. However, some of the complications of managing cosmetology staff who all need to be state licensed can detract from the ease of running this franchise.

8. Chick-fil-A

Estimated initial investment: As low as $342,390

Estimated number of units: 2,000

Chick-fil-A is one of the cheap franchises that provides franchisees with everything. The franchiser will even pay the costs of real estate, building a store and providing you with everything you need, though you will have to pay for the lease and equipment rental which could drive up prices. The main catch is that its ongoing fees are higher than what most other franchisers charge. You’ll pay 15% of your sales and 50% of your remaining pretax profit. However, because of the brand recognition and popularity of Chick-fil-A, you could make a solid profit, even with all the fees.

9. Taco Bell

Estimated initial investment: As low as $525,525

Estimated number of units: 7,000 in the U.S.

While the franchise fee may be relatively affordable, you’ll have to pay for real estate and equipment to get started, which could drive up costs to more than $2.5 million. Parent company Yum! Brands is well-recognized, though, and has long-term financial stability. Support comes in the form of resources and fellow franchisees. Taco Bell led Yum! Brands in 2018 with 4% growth in same-store sales.

10. McDonald’s

Estimated initial investment: As low as around $1 million

Estimated number of units: 35,085 worldwide

Even though it’s popular and world-renowned, McDonald’s can be a difficult franchise to invest in with an initial fee of $45,000 and startup costs that may run up to $2.2 million. However, if you can afford to get started, you can make quite a lot of money each year, thanks to the widespread popularity and visibility of McDonald’s.

Franchise ownership FAQ

When considering the best franchises to own, it’s important to consider some of the most-asked questions. Here are some of the answers to questions many people ask about the best franchises and franchise ownership.

Do franchise owners make money?

As with any business, how much money you make depends on your approach and the number of sales you make. If you choose a franchise that’s recognizable and popular, you have a better chance of making money without a lot of extra effort. However, you still need to employ good business practices and local marketing efforts to be successful.

How much do you make if you own a McDonald’s?

The McDonald’s franchise is one of the most expensive to start, but it is also one of the most lucrative. The average McDonald’s restaurant has an annual revenue of $2.7 million. Some of that will be taken up by ongoing franchise fees and rental costs, along with overhead costs like hiring staff, but you can still make quite a lot of money.

How much can Chick-fil-A franchise owners make?

Chick-fil-A boasts the highest average per-restaurant revenue average in the country, at about $4.1 million per year. However, the amount you make is limited by the fact that you’ll pay high ongoing franchise fees. Not only do you pay 15% of sales, but you also pay 50% of your pretax profits. So, after you pay your employees and any other costs, you still have to pay a hefty chunk of your profits, even before you pay taxes. You can still be profitable overall, but you have to take these fees into account.

Why are some franchises so expensive and some so cheap?

What you end up paying overall in the startup fee and in ongoing fees depend largely on what you get from the franchiser, as well as how popular a brand is. A brand like McDonald’s is so popular that it can justify charging a bigger fee to franchisees. Other companies are cheap franchises because they may not provide a lot of support or because they aren’t widely recognized, and you would need to do more of the marketing.

Franchises like Chick-fil-A that are affordable to start, end up being more expensive to own in the long run because of the cut the franchiser takes. This cut is justified by the fact that Chick-fil-A bears almost all of the costs associated with building and starting up the restaurant, and provides extensive support and ongoing training.

In the end, it’s up to you to consider your options, your financial situation and decide which franchise is the best opportunity for you.

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.