Bargain business

There’s more to a low cost franchise than the price tag, as Vesna Siljanovska investigates

 

 

 

Investing a smaller amount of money to start a business is a huge benefit from the start as less of your cash is tied up.

One of the reasons that low cost franchises remain so is they do not require permanent premises. Ian Smith invested £9,995 plus VAT in his Autosheen franchise and says: “It is a van operation where you lease the vehicle so the overheads are low. The franchisor makes very little money from the sale of the franchise, and all of the equipment is covered by the initial investment.”
With Razzamataz, after the £8,000 plus VAT investment, premises are rented for a few hours per week. Franchisor Denise Hutton explains: “Franchisees only use premises for at least three hours per week, so maintenance and rent is low. The rest of the work can be done from home, so premises are not required for the day-to-day running of the business.”
Furthermore, without premises the business model is likely to offer more flexibility. Cathy Birchall, one of the directors at Blazes – a fireplace and heating franchise – explains how they introduced a home-based franchise that specialises in boilers. She says: “One of the key advantages of this business is that franchisees do not need to enter into a long-term agreement purely because there are no premises involved; whereas with the fireplace business, which requires a showroom, franchisees have a 15-year agreement with the landlord.”

With flexibility comes the ability for franchisees to build the business to a size that suit their needs. For Razzamataz franchisee Kate Hayden, as well as running her franchise she works for the Royal Navy Monday to Friday, has three children under the age of seven, one Border collie and three chinchillas to contend with! The business is such that “once it is up and running it really runs itself – you then just need to get in the staff,” she explains.

For Ovenclean franchisee Andrew Parris and ChariSnack franchisee Steve Chipperfield, such flexibility and a good work-life balance has been essential for very different reasons. Six weeks after starting his business, Andrew’s wife became seriously ill, so he needed his business to be flexible. For Steve, he left his career in immigration following the tragic loss of his daughter. ChariSnack enabled him to get back to work gradually, he says: “When I came across ChariSnack, it felt like a nice, comfortable business. There is no pressure with this franchise. There are no targets to reach – you literally do as much as you are comfortable with. You pay your monthly fee and that is it.”

The added beauty of many low cost franchises is that you start earning almost immediately. Many have much simpler business formulas so the training carried out can take less time as there is often less to learn and everything is generally more straightforward, which also means it’s often easier and faster to get the business up and running. Andrew’s key motivation for buying his Ovenclean franchise seven years ago was the need to earn quickly. After investing £14,995 plus VAT he says: “I needed to train quickly so I could earn quickly. I had a mortgage to pay, a wife and two children – I needed to get up and running fast.”

Poor cash flow is one of the biggest causes of business failure, so a business that starts making money quickly is a great benefit. ChariSnack’s Steve, who invested £9,950 plus VAT for a part-time franchise, explains: “Low cost franchises can be better for cash flow, too. With ChariSnack, you buy your stock from head office, you deliver it and you take the money – it’s instant.”

Expanding a low cost franchise can be easier, too, primarily because setting up is cheaper and “you have more control over a simple and smaller business – you are dealing with fewer components that can go wrong,” says Steve. Kate, for example, already has three Razzamataz schools in operation. She explains: “Razzamataz is an easy business to set up – within 12 weeks of set up you can be in a position to open another one.”

Another aspect of a low investment that appeals is that it can be bolted on to an existing business, which Harpi and Hardip Singh decided to do with FunkyDiva Music. Hardip was running a bathroom enamelling business when the property market crashed and business began to slow. As a result, the couple needed to find something to supplement their income. Harpi says: “I came across FunkyDiva and found I could work from home, set-up costs were low, and I could do it on the weekends. Hardip could then deliver the jukeboxes to customers.”

FunkyDiva franchisor Jan Tovarys adds: “Businesses are suffering and people are looking for ways to improve their bottom line.”

What was also of great benefit to the couple was many of Hardip’s previous clients were hoteliers: also the perfect clients for a FunkyDiva jukebox. As a result, success just snowballed: “Since buying the business in April 2009 for less than £10,000, it took about a month before things got started. Since May, we haven’t had a single weekend without a job. In June we bought our second machine and now we have three,” says Harpi.

The challenge is being able to fit both businesses together, Harpi adds: “Sometimes it is hectic. FunkyDiva is more of a weekend/evening job, and with Christmas coming up we have had more bookings, too.”

Low cost franchises are also a winning formula for franchisors, as Jan adds: “It certainly helps to have a business model that is easy to understand, run and promote. Not all businesses can be done simply, but those that can have a better chance to thrive.”