So you want to buy a cheap business, and all your research so far makes it seem like franchises are the way to go.
After all, some might come “cheap” to buy into. And they seem like a tried-and-true business model.
Stop. Do not pass go. Do not collect $200.
Franchises make you invest a lot of money before ever making a dollar. You might begin to feel as if it’s more of a hassle with a lower return than expected.
Franchise businesses might take a lot of the marketing and branding work off the table.
But the hidden costs of owning a franchise just aren’t worth it.
Here’s why you should avoid franchises and 9 business ideas to consider buying into instead.
The Pitfalls of Franchises
Over 780,000 franchises exist in America. The allure of building on an established brand spurs plenty of entrepreneurs to pursue this route, but it’s often harder than most people expect.
Franchises also come with some major downsides which are well worth knowing about first.
And the truth is, you can get all the same benefits that franchises do offer without the drawbacks by buying an established non-franchise business.
The whole business-in-a-box concept isn’t foolproof.
Studying the real failure rates of franchises is hard because there are so many different models out there. Many stats show that a 10%-20% failure rate is the norm, but other chains fail at a higher rate.
It’s even harder to tell what the truth is because most people citing 99% success rates have a vested interest in getting you to buy a franchise. I mean, can you really trust “The Franchise King” or “The Wolf of Franchises” to give you an unbiased look at whether buying a franchise is a good deal?
But the fact that no one can give you a straight answer about longevity, profitability, or market success doesn’t hide the hard facts.
So let’s dig into the real hidden costs of franchising:
- Franchises cost an average of $25,000-50,000 in fees just to launch.
- The fees give you the right to open your franchise location, but you still need a physical space for it that meets any specs handed to you by the main company. You may end up spending more than you thought on your location to stay in-spec.
- Ongoing investments and upgrades may land on you, too. Imagine you take on a food franchise that requires a new oven or blender in all locations. Since it’s a franchise, you must follow their rules.
- Franchises charge 4-12% royalties, which can eat into your profits.
Feeling the pinch yet?
It’s not just about the costs of starting and running a franchise business. Most aspiring entrepreneurs feel the call of self-employment because of their creativity and desire to work as their own boss.
And while it’s true you do work for yourself in a sense as a franchise owner, it’s not entirely accurate.
You’re restricted by the main company’s rules and legalities, so you don’t get much decision-making autonomy.
You also can’t adjust your plan or tactics the way you would if you bought your own business. Why invest in something that has the potential to stifle innovation and growth?
If you really want to buy into a franchise, follow this advice from Codie Sanchez:
Why Buy a Non-Franchised Business Instead
When you buy a business not locked into a franchise, you get more creative control and freedom right away.
You can set up the company wherever you want, including keeping any existing physical space or moving to another location. You can even open another location of this business in a nearby town without waiting for approval from a franchisor.
The potential to scale here is much higher than with a franchise (and you can do so without franchising fees or royalties).
You can score an existing business for little to no money down. Plenty of companies that you can buy into for less than $5,000 will give you a lot of upside potential and allow for more hands-off ownership, too.
Even if you find a business you want to buy for a higher price tag, you can use seller financing to snag the deal, paying off the previous owner over time.
Seller financing is a top choice for buying into existing businesses when compared with franchising because:
- It has lower upfront costs.
- You can negotiate your deal based on terms you and the seller like.
- You can still build on an established reputation but with the freedom to expand that however you want.
Buying an independent business makes more sense for most people. You get more control over your business, you don’t have to kick royalties up the ladder, and you can stay flexible on the purchasing terms.
If that sounds good to you, read on to see the best alternatives to a franchise.
9 Low-Cost Businesses You Can Buy or Start
Enough business ideas allow you to start working with very little upfront investment. These proven business models provide needed services or convenience to customers.
Instead of taking your chances with a franchise, check out these 9 boring businesses. Each of them has a low start-up cost but the potential to bring you big returns as you scale.
1. Lawn Care
Have a lawn mower? Know where you can buy or lease a good one?
That’s all you need to get off to a great start as a professional lawn care service owner. With a trailer and truck to transport the mower and a few hand tools, you could charge $50-200 per lawn and earn back your investment fast.
If you want to build from someone else’s strong reputation in the lawn care business, buy from them and get busy mowing.
2. Pool Cleaning
Balancing pool chemicals, vacuuming out leaves and debris, and keeping everything running make for an easy and recurring service.
It’s not hard to start or buy a pool cleaning business.
Depending on where you live, that service could run year-round. Sunny and temperate locations like California and Florida have the most pools, but you can also do well with a summer season in other states.
3. Window Cleaning
Window cleaners can bank $50-70+/hour to keep glass clear and streak-free. With very few supplies needed to break in, starting a window cleaning business works well for new entrepreneurs.
Combine it with a complementary service like pool cleaning or in-house cleaning to make even more at each worksite.
4. Painting
Do you enjoy working by yourself in a different environment every day? You might love brushing and rolling your way to painting profits.
People tend to hire professional painters for a few reasons:
- They need assistance getting to hard-to-reach places.
- Plenty of homeowners and commercial space owners believe this is a job best left to the experts.
- People don’t have patience for all the prep work required to paint.
- Many just don’t have time to dedicate to painting projects.
It’s an easy business to break into on your own, but buying a painting company with an existing reputation also offers a much faster path to profits.
5. Junk Removal
With just one truck, you can turn other people’s trash into your profitable treasure. Charge people per load or based on what they want to get rid of and run a part-time or full-time business.
You could charge anywhere from $250-500+ for a full truckload. A couple of those per week really add up!
If you buy someone else’s junk removal business, you can get the biggest expense (the truck) dealt with upfront.
6. Pressure Washing
Now that you know about hauling junk, how about making money with gunk?
Blowing gunk off of sidewalks, houses, and sidewalks could bring you fast cash. All you truly need to start a pressure washing business is one machine and some marketing materials. It’s a low-risk and low-cost business.
On average, pressure washers charge $.15-.75 per square foot. Hitting up one neighborhood a week could make you consistent revenue.
7. Vending Machine
Whether it’s cupcakes, candy, soda, or ice, you can cash in with coins by owning one or more vending machines. Or buy someone’s current vending machine setup and route to get started faster.
If you land a great location, you’ll need to show up every so often to reload the machine, or you can hire someone else to do this for you.
You might only make a little money from each candy or ice vending machine you place, but the money you save on labor makes up for it. This hands-off business model can scale with more locations, too.
8. Laundromats
Laundromats top the list for businesses with low failure rates. If you start your own, you need to acquire a physical space and all washers, dryers, and vending machines for soap, but if you buy a laundromat, that all comes with the deal.
Offering a one-stop shop where people can wash all their clothes is convenient for you and your customers. Your customers do all the work hauling the clothes in and out, and you may not need more than one staff member to handle things onsite.
And if you take on multiple locations, the model becomes even more lucrative.
9. Car Washes
An industry worth over $33 billion makes for a great cheap business to buy.
A car wash isn’t just fun to drive through (although it absolutely is, especially with foaming colors), but it’s convenient for customers with busy lives.
Starting your own car wash business takes a massive upfront investment to buy the land and machines. If you buy a car wash business from someone else, though, you can start earning revenue right away.
Break in Without Franchise Burdens
Franchising seems like an easy win, but the reality is anything but. Overhead costs like the initial franchise fees and ongoing royalties get old quickly, especially when you have to comply with the franchisor’s restrictive rules.
If you truly want creative control and the greatest chance to scale a business, you’re far better off buying into an existing non-franchise company. Put your initial investment to work in a way that maximizes your freedom and possible future returns.
You get all the benefits of the previous owner’s reputation and built-up brand and all the opportunity you want to tweak things for the future, too.
