As we roll into 2021, we remain optimistic that things will soon return to normal. But not everyone is ready or willing to go back to the status quo. Many who were forced to remote work or changed from full time to flex-time out of necessity are considering switching gears rather than heading back to the same daily grind. 

There appears to be a surge in those willing to try their entrepreneurial legs out by becoming a business owner and finding more work stability and freedom. Franchising is an excellent way to realize your dream of business ownership without all the risks associated with going it alone.

If you are ready to take the leap, don’t do it out of faith; do it because there is a proven track record of success. But where do you even begin? Many entrepreneurs worry that franchises are too expensive, and they won’t be able to come up with enough capital on their own. The good news is many franchise opportunities are not only within reach; they are under $100,000, which for the average person, is economically doable.

Cost of Investing in a Franchise Business

Although owning a franchise might not be right for everyone, it does come with considerably less risk than a traditional startup. The main reason is that things like marketing, brand building, and building customer loyalty have already been done. That means you can startup from day one with a well-established business that already has a road map and a proven record of profitability.

There are four main costs that you have to consider that factor in the amount of capital you need to invest.

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” Ayn Rand

Franchise Fees - Every franchise requires that a new business owner pay an upfront, one-time fee for buy-in.

Initial Investment - An initial investment is a combination of things like materials, resources, and labor costs that will be required to launch your new franchise. 

“Only buy something that you’d be perfectly happy to hold if the market shuts down for ten years.” Warren Buffett

“Only buy something that you’d be perfectly happy to hold if the market shuts down for ten years.” Warren Buffett

Ongoing Investment - There will always be ongoing costs that you will have to reinvest to keep the franchise operating.

Personal Finances - New franchises require an owner to have a minimum net worth to be considered. Some have “liquidity” requirements, the amount of non-borrowed funds for capital injection into the business.

Image of hand writing on spreadsheet with calculator

Financing Options for Investing in a Franchise Business

When researching owning a franchise, you will quickly find a wide range of price points. And if you don’t have the available liquidity for a startup, there are many loan options to consider. Unlike traditional business startups, banks and traditional lenders are more apt to approve your loan, mostly because you already have proof that your business can be profitable from day one.

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Franchise Financing
Friend or Family Loan

Although not many people have the option to borrow from friends or family, if you do, it might be one that you want to consider. When you borrow from a personal contact, you will likely get a lower interest rate and possibly a more flexible repayment schedule.

The downside to borrowing from personal contacts is that emotions can get in the way. So it is incredibly critical to have everything in writing and outlined, so there is no miscommunication. You will also need legal documentation if you intend to deduct the loan interest on your taxes.

Franchisor Financing

For a more traditional approach, you may consider purchasing into a franchise directly. Your franchisor won’t be a stranger to how the process works, having gone through it themselves. They may provide in-house financing for the franchise fee and/or equipment leasing. The franchisor will support you and guide you through the startup process and financial complexities.

Traditional Term Loans

You can go the traditional loan route. A conventional term loan involves a borrowing arrangement with a fixed amount down payment, and then you pay the rest over a scheduled time frame. Some loans might restrict the use of funds for a franchise purchase, so make sure to alert the lender of your intentions.

SBA 7(a) Loan

An SBA 7 (a) is a U.S. Small Business Administration loan program. It provides lenders with lower interest rates and other options available to those who are opening a small business. It is an attractive option for many who are looking to buy into a franchise business. But start ahead, program funding loans can have extensive wait times, and they can also have a high level of scrutiny involved.

“Time is more valuable than money. You can get more money, but you cannot get more time.” Jim Rohn


Equipment Financing

If the franchise you want to buy has excessive equipment costs upfront, you might obtain equipment financing. Things like production machinery, computers, and vehicles are all considered equipment. The loans can be more available because there is actual collateral involved for the lender. So they might be easier for you to obtain. 

Types of Franchises Under $100,000

Looking to buy a franchise with a total investment of less than $100,000 upfront: These are just a few of the opportunities available to you:

Home Services - Franchises like Housemaster  Home Inspectors is an excellent way to own your own business. It is projected not just to weather the post-COVID era but to continue to soar well after the pandemic is behind us.

Cleaning Services - Due to the pandemic, there has been a surge in residential and commercial cleaning needs. Window Genie is just one franchise that has projections that well exceed other franchise startups for 2021.

Children’s Sports & Activities - Never before have people been looking for things for their children to do. Franchises like KidoKinetics is just one of the many opportunities that appear to have a stable and lucrative future post-2020.

If you are ready to get back to the world as we knew it but not ready to go back to the daily grind, consider owning a franchise. Become your own boss, and realize excellent profit potential without all the risk of a traditional startup today. 

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