Myths and truths of owning a low-cost
Number one point
A point that often is not spoken to would-be franchisees of some of these low-cost franchises, which are generally under $100,000, is there’s not enough profit margin for a day-to-day manager. So as a franchisee of a low-cost franchise, it could be in the service sector, you can expect to work full time for the first 12 to 18 months. You can expect to work full time for the first 12 to 18 months.
Item number two
It takes a long time to build up that initial customer base and pass breakeven, where some franchises, especially in the food sector, might break even after three, six months. For some of the service brands, it can take up to 12 months or more, especially for service concepts like staffing, it can take 18 months to break even. It’s really important to talk to current franchisees of any franchise model that you’re thinking about investing in to see how long it took them to break even, and as well as until what time was there enough profit margin to potentially have a day to day manager in place.
Point number three
I mentioned working full time. Full time has different definitions depending who you are. Many of the service concepts that we’ve looked at in the $40,000, $50,000, $60,000 range require or strongly suggest and that most of the franchisees that are doing this, working 50 to 60 hours a week for the first year. So this essentially requires a full time commitment in the business without earning any money. So make sure that you’re comfortable with that. And perhaps you have a spouse that has a job or another business with steady income coming in because for about 6 to 12 to 18 months, you can expect to make no money at all, or very little money in many of these service-based low franchise cost businesses.