Investing in a franchise can be a good business opportunity, but it requires sufficient capital. For those with limited budget, here are 4 tips to invest in franchise with little money. Firstly, look for franchises with low initial investment cost. Some fast food and retail franchises only need tens of thousands to get started. Secondly, find a franchisor that offers financing support. Many franchisors provide loans or payment plans to help franchisees with limited capital. Thirdly, consider fractional franchising that allows multiple investors to share ownership and investment cost. Finally, use crowdfunding platforms to raise funds from a large group of investors. With proper planning and execution, it’s possible to invest in certain franchises even with limited capital.
Search for franchises with low initial capital requirement
The amount of initial investment for a franchise can vary greatly, ranging from tens of thousands to over a million dollars. When funds are limited, it’s important to focus on franchises that require relatively low upfront capital. Many fast food franchises like Subway, ice cream shops, convenience stores, home service franchises fall into this category. For example, a Subway franchise only requires around $100k-$200k to get started. Retail franchises like Dollar Tree and Family Dollar also have very low threshold for investment, usually between $50k-$150k. While profits may be lower, these franchises allow investors with limited budget to gain a foothold in operating a branded business.
Look for franchisors that provide financing options
Many established franchisors understand that insufficient capital prevents many from investing. As a result, they provide financing support to help franchisees who don’t have enough funds. For instance, fast food franchises like McDonald’s and Taco Bell offer thousands of dollars in initial franchise fee reduction for qualified applicants. They also provide equipment financing loans with low interest rates. Meanwhile, franchises like 7-Eleven offer multi-year payment plans that allow franchisees to pay the franchise fee in installments over time. By taking advantage of these franchisor-provided financing options, investors can spread out their payments over time instead of paying a large amount upfront.
Consider fractional franchise ownership model
Fractional franchising allows multiple investors to share ownership and investment responsibilities for a franchise unit. Each investor contributes a portion of the capital needed in exchange for a share of ownership and profit. This approach splits the investment amount and risk, making the franchise investment more accessible for investors with limited funds. For example, 10 investors can each put in $10k to co-own a franchise that requires $100k initial investment. This way, they get to own and operate a franchise by contributing just a fraction of the total capital needed. Fractional franchising opens up franchise investment opportunities to a wider pool of investors.
Use crowdfunding to raise capital from a large group
Crowdfunding platforms like Kickstarter provides an avenue for entrepreneurs and business owners to raise funds from a large group of investors. Franchise investors can create a crowdfunding campaign with details of their intended franchise business and investment amount needed. This allows them to pool money from many small investors to cover the franchise investment cost. While success is not guaranteed, crowdfunding is a viable way for franchise investors to raise capital especially when they don’t have sufficient funds of their own. It’s also a good way to validate the business idea and get investor interest.
For investors with limited capital, it’s possible to invest in certain franchise opportunities through franchises with low investment costs, financing support, fractional ownership, and crowdfunding. With proper planning and execution, lack of sufficient funds does not have to be a deal-breaker.