Franchise finance between $50,000 and $100,000
If your budget is low to mid-range but your business dreams are huge, find out about franchise finance between $50,000 and $100,000.
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The key to purchasing a franchise between $50,000 and $100,000 is recognising that not all franchises require office space or a retail outlet in order to be successful. A franchise in this range will typically provide access to a well-known brand and a proven business model while giving the franchisee the opportunity to run their own business without an enormous initial financial outlay.
For new franchise businesses less than $100,000, franchisees will generally run the business from home, or run a mobile business in which their products and services are brought directly to their customers. Should you wish to expand the business in the future, you may have the opportunity to do so, but many franchisees can open and run successful enterprises without ever opening a storefront or renting office premises.
If purchasing an existing franchise in the $50,000 to $100,000 price range, other considerations must be made. If you see an existing franchise business that would normally cost considerably more to start as a new business come up for sale for under $100,000, this is a good indication that the business may be underperforming financially. There are several reasons why a business could be underperforming, including poor management, lack of business skills on the part of the existing franchisee, or because the business is operated from an unsuitable geographical area.
The real reasons for the lack of performance will become apparent once the franchisee has disclosed their business' financial records to you and you have given your accountant and/or lawyer the opportunity to provide feedback on the reports. Keep in mind that when approaching lenders for franchise finance between $50,000 and $100,000 to purchase an underperforming existing franchise business, you will need to satisfy the lender that you have the appropriate skills, qualifications and business experience to turn the business into a profitable venture.
Compare the following Franchise Finance options between $50,000 and $100,000
Franchises for sale between $50,000 and $100,000
If you're looking to start a new franchise between $50,000 and $100,000, the following opportunities may be available:
- Appliance Tagging Services, which provides a mobile tagging and testing service to satisfy legal workplace safety requirements.
- DogTech, a dog training and behaviour management company that teaches dog owners how to get the best from their pets and which is essentially a mobile business.
- Drug-Safe Communities, which provides mobile drug and alcohol testing services to businesses.
- Gutter-Vac, a mobile gutter cleaning business that uses a proprietary gutter vacuuming machine to make the process safe and efficient.
- Jim's Pool Care, a mobile swimming pool cleaning and maintenance service.
- Little Kickers & Little Rugby, a preschool sports program that can be run from a local school or community oval with low overhead costs.
If you are interested in purchasing an existing franchise for under $100,000, you may be able to find big-name franchise brands such as Bakers Delight, Donut King, Jamaica Blue, Jesters, Salsas and Snap Printing for sale within this price range. You will need to ascertain the current business owner's real reason for selling, and ensure that you are provided with full financial records for the business so you can get your accountant's opinion on the ongoing profitability of it.
Choosing a franchise between $50,000 and $100,000
Questions to ask when choosing a franchise
When choosing a franchise between $50,000 and $100,000, consider the following questions:
- Does the franchise business have proven success in the industry?
- Does the franchise exist in a growth market or a market in decline? Similarly, is the franchise based on a current fad with potentially short-lived demand?
- Does the franchise have a recognised brand name that is held in high regard? How is the brand name perceived by the general community?
- If purchasing an existing franchise business, what are the reasons for sale? Do the financial reports provided by the existing franchisee match the reasons given?
- How competitive is the demand for the goods or services supplied? Are there any well-established competitors in the area?
Understanding the risks of a franchise
Like any financial investment, risks are inherent in any business structure. Before entering into a franchise agreement, remember that there is always the possibility that you will lose your investment. Lenders, particularly big banks, tend to be risk averse and will take necessary precautions to protect themselves against losing their investments. Wise franchisees go into new business opportunities with the same mindset.
Even though franchise business arrangements may appear to be lower risk than starting up a new business outside of a franchise model, all businesses can potentially fail regardless of the intentions of the business owner. It is important to ensure you are choosing a franchise arrangement because of the brand, ongoing support, marketing opportunities or for other franchise-related reasons, but not because you feel that there is less risk attached to a franchise business than another business structure.
Finance options for franchises between $50,000 and $100,000
What types of franchise finance are available?
When considering purchasing a franchise between $50,000 and $100,000, the following business loan options may be available to you:
- Secured business loan. If you have a suitable business or personal asset to offer as security for a loan, you can take advantage of potentially reduced interest rates and overall more favourable loan terms with a secured business loan.
- Unsecured business loan. An unsecured business loan has many of the features of a secured business loan, but typically attracts a higher interest rate because of the lack of security. The big banks are becoming more hesitant to provide unsecured business loans, with smaller or alternative lenders stepping up to fill this gap in the finance market.
Franchise loan features to look out for
When comparing finance options to purchase a franchise, consider the following features:
- Loan term. An unsecured loan, or a secured loan offering the business itself as security, will typically have a loan term that is linked to the initial term of the franchise agreement, usually between 5 and 10 years. If you are looking for a longer loan term, you will likely need to have a suitable asset to offer as security for the loan.
- Early repayment options. While negotiating a longer loan term will help to spread out the initial cost of the business, there are also plenty of advantages of paying out a loan early. When comparing your franchise options, find out whether the loan allows for early repayment, and whether any fees or penalties would apply.
Frequently asked questions
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