Low-cost franchises are the future

Low-Cost Franchises are the future.

Here’s why.

By Ryan Combe

I've worked with almost every type of franchise concept imaginable: Yoga, burgers, tanning, carpet cleaning, even divorce mediation. Every couple years I see “hot” new franchise concepts emerge. Soon dozens of similar brands are right there next to them.

I got into franchising during the second frozenyogurt craze. Since then, I’ve seen other concepts take off: the better-burger boom, education, dozens of fitness concepts, build-your-own pizza, eyelash extensions, home health, and everything else in between. (If only someone would start a poke concept!) Many have come and gone while others have stuck around, but if I’m betting on the future of franchising, I’d lay heavy on low-cost brands. Here are five reasons why.

Less Risk: Let’s start with the obvious. The risk in starting a business for $50,000 versus $500,000 is significant. It’s more than just the additional $450,000. Most pricier concepts require physical locations, and good retail locations require personal guarantees. This means you’re committing to pay the rent on a space for the entire term of the lease, which is typically five or 10 years. The majority of low-cost brands don’t require storefronts, which means no personal guarantees and much less risk.

Easier Access to Funds: It’s hard to come up with $300,000. Most franchises encourage you to get an SBA loan, roll over a retirement account, or wait for an inheritance, but all of those options can take a long time and carry a lot of risk. Unless a brand offers inhouse financing, be prepared for a bumpy ride getting funds together.

Fewer Employees: Have you walked into a restaurant lately? If you have, you’ve probably noticed the “Help Wanted” sign on the door. Finding and retaining employees is becoming increasingly difficult. Last year, restaurant employee turnover was 133 percent, according to research firm TDn2K. Dealing with dozens of employees is hard. Most lowcost franchise concepts require only a handful of employees and thus eliminate one of the top obstacles of business owners today.

Shorter Day-to-First-Dollar: How long it takes between signing a franchise agreement and making your first dollar should be at the top of every potential franchisee’s checklist. Low-cost brands on average have a significantly shorter ramp-up period, meaning people start making money faster, which helps to increase their chances of success.

Millennials Want to be Business Owners: Almost every brand I see is heading for a major problem within the next 10 years. Business models do not attract millennials. Products might attract millennial consumers, but business models do not. About 62 percent of millennials want to start their own businesses, but their average student-loan debt is $30,000. This is a problem. They want and need a low-cost opportunity.

Ryan Combe has spent his entire career in franchising. Launching his first concept in 2007, in 18 months he grew the brand to more than 20 units open and more than 80 units sold. Since then, Combe has worked with dozens of franchise brands in all industries and sold thousands of franchises. Contact Ryan at (801) 831-8521, ryan@betterwayfranchise.com or visit https://www.betterwayfranchise.com