Low costs mean low rewards, right?

Wrong.

According to a 2015 study from the Franchise Business Review, prospective franchise owners looking to invest in a low-cost franchise opportunity––one that costs less than $100,000––can make just as much in earnings as the higher price options.

Earnings aren’t the only advantage, though. The study also found that those making smart low-cost franchise investments often have a “more flexible lifestyle,” and are often given the same high level of support from their corporate offices as more expensive franchise opportunities.

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Franchising is a great way for first-time business owners to hit the ground running with an effective business model. And with recent tax reforms, deregulation, and a steadily growing economy, the franchise industry is set to build on its momentum and grow for the eighth year in a row. But with thousands of franchisors to choose from, finding the right one for you takes research and due diligence.

Thankfully, it’s not hard to find the information you need. Franchisors reveal a lot about their business through the Franchise Disclosure Document (FDD), but there’s another piece of the research puzzle just as important for you to dig into: the existing and former franchisees themselves. After all, these are the people who run the business day in and day out.

Speaking with current and former franchisees is a great way to get a more personal perspective into the business. 

Once you’ve narrowed your options to a handful of potential businesses, make a list of people to reach out to along with the questions you’ll be asking them. This guide will show you where to look inside your FDD (which you’ll receive from the franchisor) to find the names of current franchisees as well as ten important questions you should be sure to ask.

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No matter what kind of franchise opportunity you’re considering, all franchisors are required by law to hand out a Franchise Disclosure Document (FDD) at least two weeks ahead of signing time.

In short, the FDD is a master guidebook to the business. Inside, you’ll find a wealth of information about the franchisor and the franchise organization along with the finer details of the opportunity itself.

While these documents are packed with info, it can be a dense read. To the first-time franchise buyer, flipping through page after page of lengthy text and legalese can be daunting.

This guide will help you step through each of the 23 sections or “Items” you’ll find inside. We’ll highlight the key sections to pay close attention to and point out potential FDD red flags to watch out for as well.

Let’s start at the very beginning:

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Completely new to franchising and struggling to understand the lingo?

It helps to have a good idea of the terms and phrases you’ll be discussing with potential franchisors.

To give you a quick-and-easy reference to the world of franchising, we’ve created this go-to cheat sheet. Keep this guide handy when investigating potential opportunities you may be interested in pursuing, as you’ll mostly likely come across a few things you may not be familiar with. Read more

Thinking about buying a low cost franchise? Worried about the earning potential? Don’t worry –– it’s healthy to be skeptical. Many people looking to become business owners with a franchise assume that if an opportunity doesn’t cost much to start, it must mean there isn’t as much to make for one reason or another.

The truth is, many franchise owners turn a little into a lot every year. One of our very own franchise owners plans to do $1 million in sales in 2018 owning and managing his grout and tile franchise, The Groutsmith. Learn more about Mike Ketzner and his low cost high profit franchise here.

In general, turning a low cost franchise into a high profit business boils down to three essentials: doing your homework, learning and using the systems the franchisor lays out for you, and making smart investments in growth.

Mark Laughlin, a former owner of three low cost franchises (that he grew and sold for six-digit figures) says the key to low-cost franchise profitability is more about the franchise’s business model than the business itself. Specifically, he recommends new franchisees “find a business model that fits your life and your personality, not just your business goals.” Read more