When you buy a franchise, you get a proven business model and guidance on implementing the business plan. When you take this approach to starting a business of your own, part of the money you invest goes into the franchise company's coffers, and you often continue to pay the company every month to stay in the network. Franchises can be bought by anyone with the means: Some cost very little to buy into, while others are beyond the range of anyone of moderate means.
Franchises include a wide variety of products or services. The business categories range from tax preparation and maid services to retail stores, car dealerships, locksmiths, tutoring and fast food restaurants. Home-based business franchises, such as interior decorating businesses, don't require a physical location outside your home, but you usually need some space for inventory and business supplies. Mobile franchises, such as food trucks, pest control and mobile car washes, contain the bulk of your business on the vehicle that you buy or press into service.
All franchises require an investment, but you don't always have to sell the farm to get one. Low-cost franchises range from a few hundred dollars to a few thousand in purchase costs. The Corporate America pageant franchise price starts at $500 and goes up to $2,000, depending on the size of the state you select. Other low-cost franchise purchases include fitness and commercial cleaning operations. A Jazzercise franchise has a purchase price of $2,000. The Jani-King franchise costs $2,000, while a West Sanitation franchise costs $3,500. Sports teams and hotels occupy the high end of the franchise price scale. You need billions to buy sports teams, such as the New York Yankees or Dallas Cowboys. Partly due to real estate costs, chains such as Hampton Hotels and Choice Hotels require investments that range from $90,000 to $13 million or more, according to the Entrepreneur website.
Monthly franchise fees are common in the franchise industry. Depending on the franchise type and other financial considerations, you can expect to pay a percentage of your monthly earnings to the franchisor. This fee, spelled out in your agreement, applies even when you don't have any profit. It's up to you to cover the monthly operating costs, such as payroll and inventory, for the franchise that you buy.
In all but a few franchise categories, you don't need prior experience in the industry to own a franchise. The franchise seller gives you the appropriate training when you buy the business. This training could be little more than a three-ring binder that contains a business plan and some branding materials or a two-week classroom and hands-on franchise boot camp. The smaller your investment, the less support you receive from the franchisor. People who plop down six or seven figures for a franchise frequently get training that includes a visit to franchisor headquarters, in-person support at the franchisee's location and software or equipment training, as needed. Few franchisors provide basic business management training. Having or getting schooling in fundamental business skills -- such as preparing financial statements, estimating cash flow and balancing your budget -- is your responsibility. Community colleges and the Small Business Administration are good places to get free or low-cost business training before you buy a franchise.