When you start out looking for franchise deals, it’s a good idea to start by checking out the best budget franchise ideas in 2022. The adjective “budget” does not imply cheap products and slim markups. On the contrary, budget franchises can offer highly profitable returns when run well, and they are available for below £10,000. You may even snag some at £2,000!
Read on to learn more about the best budget franchise ideas in 2022.
Why are they called budget franchises?
When a franchise is categorised as a budget franchise, this usually indicates that the capital investment required is below ten thousand pounds. In addition, their lower financial entry level is facilitated by them not needing premises or a special location in order to operate. For example, a swimming school needs a pool, but an online transcription service only needs Wi-Fi connection.
The venue flexibility is usually due to the franchise selling services or being solely online. Tutors, consultants and dropshipping retailers can function fully online, and the full list is extensive. There is a wide selection of budget franchises that you can choose from.
Even though the financial barrier to entry is low, these franchises can deliver impressive financial results, so they deserve a significant investment of your time and the guiding eye of an accountant from day one.
You can choose to operate these businesses from home as you juggle running a home and family or while you keep your main job or another business.
Are franchise investments a good idea?
The immediate benefit you get from choosing a franchise route is that the business comes with:
More lease options (because landlords like established brands)
The UK franchise industry refers to franchised business owners as being ‘in business for yourself” as opposed to defining them as being “in business BY YOURSELF”. A good franchise usually comes with the support of the franchisor team, as your success is their success.
The United Kingdom benefits from over 1,000 successful franchises with an estimated value of eighteen billion pounds. This highly profitable industry supplies jobs to over seven hundred and ten thousand people in the UK. That’s over twenty-four thousand pounds of turnover per headcount!
Here is a selection of different interesting franchisee demographics:
Franchisees below thirty years of age: 18%
Female franchisees: 37%
Extracting high-value from a budget franchise idea in 2022
Choosing a budget franchise instead of starting your own business from scratch places you into an industry with an immediate track record behind you. As a franchisee, you can be your own boss and potentially get a faster return on investment.
When you eventually want to find a buyer for the business, the brand adds significant commercial value to the business price tag. Franchised businesses are much easier to sell.
A huge benefit is that you are not buying an employment deal; you are buying an ownership deal. You are fully in control of all the business tasks, ranging from customer service to H.R. management and administration.
There is a definite correlation between what you put in to what you get out. There is also a correlation between how well you follow the franchisor’s tried and tested processes and products.
You do benefit from the mentoring, guidance and advice from the franchise head office, but the buck stops with you. You are responsible for the stability and growth of the business and upholding the brand’s values.
Finding the best budget franchise ideas in 2022
To find budget franchises to launch in 2022, you can find options in online franchise databases. You can also peruse business newspapers and trade papers for news on trending franchises, exceeding financial expectations or brands that are popular and have expanded into a franchise structure.
Business brokers are also a source of information on franchise options, and they can guide you on what type of franchise might suit you and your needs.
After all this research, it is vital to do your own research about your shortlist. Read up about the market segment you are interested in; look up historical news on the franchise brands; speak to investment companies to get their opinion on the companies, and visit different branches and discreetly find out what the staff and management think about ‘head office’.
Understand what you will be getting for your investment and, more importantly, what you will not get for your investment. Ascertain if you have some leeway to do independent purchasing or if it’s all via head office stock. Find out about insurance deals, bookkeeping deals and so on. The more existing franchise outlets you speak to, and franchisees, the lower your decision-making risk will be.
Collate as much turnover and profit info you can as well as other pertinent data relating to finances, then go through it in detail with your accountant. Project your businesses feasibility from these figures and draw up a business plan.
Next (or simultaneously), have the franchise agreement carefully looked over by a commercial lawyer that is franchise savvy. The British Franchise Association lists relevant lawyers that you could approach for assistance. It would be prudent to make sure they are not representing the franchisor.
Being a franchisee
Have you assessed yourself? Do you know the characteristics needed to be a successful franchisee? These are examples of beneficial characteristics:
Able to cope with big challenges
Willing to follow proven processes
Willing to learn
From the diverse, best budget franchises you have shortlisted, you now need to choose the franchise that:
Will deliver the most profits
Fits with your personal parameters, goals and values
Is headed by a franchisor with a good reputation so a long-term partnership is feasible
Interviewing the franchisor
Before you put down your first payment to the selected franchisor, you need to go through a thorough question session (or two) with them and probe them as much as possible.
Don’t hold back because your livelihood is dependent on the thoroughness of your research and preparation. Your business plan is also highly dependent on the accuracy of the data that it was founded on.
Your many questions are also a show of interest and the seriousness with which you are considering their franchise. This is what a franchisor wants and expects.
We have collated some example questions that you could include in your meeting and to inspire you to think of others:
How long has the brand been in business?
How long has it been a franchised business?
What drove the decision to start franchising?
What are the franchise group’s short, medium and long-term plans?
How many franchisees have been successful? (Because you have done thorough research, you can verify this information against yours.)
What is the brand’s USP or USPs?
What are the absolute total costs of the franchise? Flat fees, initial fees, ongoing fees, other costs?
What is the minimum working capital required?
Are there restricted regions of trade per franchise?
Does the franchisor offer training?
Are business support and mentoring offered to the franchisee? How much and via what methodology?
What scalability has been built into the franchise model? Does the franchisor assist the franchisee when an established business wants to go to the next level?
What is the contract duration, and what are the requirements to be eligible for renewal?
Best budget franchises
The market segments that have shown the best growth over the past years include:
Mobile franchises, e.g. food van
Food and catering
Health and fitness
We could provide a comprehensive list, but the point of any business, franchise or not, is to choose something that you care about and are deeply interested in.
With a franchise, you must choose a brand that you respect and share similar values with. You should also be certain you can develop a workable partnership with the franchisor and the group head office team.
A NatWest industry survey pegs the average franchise setup cost to be nearly sixty thousand pounds, and over 50% have a total income of more than a quarter of a million pounds. In addition, over 90% are profitable.
The survey also reported that the franchisees’ business size did not affect profit percentages, which is great news.