It’s common for prospective franchise owners to consider the cheapest franchise to open when researching the business model. Many entrepreneurs would rather dip their toes in the water rather than land a cannonball into the deep end of the pool.
Taking that first step can feel daunting, but a smaller investment can still return a healthy profit.
“Just because a franchise costs $2 million doesn’t mean you’ll make more money,” said FranChoice franchise consultant Andy Banker, who has over 20 years of experience in franchising and advises potential owners across the US. “A $100,000–$150,000 startup, including three months’ operating funds, may be even better.”
How to find the cheapest franchise to open in today’s market
There are over 4,000 franchise brands in the US, according to FRANdata, an independent research and advisory firm. One of the fastest ways to narrow the search is by establishing a budget.
Entrepreneurs looking to invest on the low end will find service-related companies, including senior care, pet care, landscaping, and home improvement, Banker said. Expect brick-and-mortar franchises, such as food and retail establishments, to start at $400,000. A fast-food franchise easily costs over $1 million.
Understanding franchise startup costs before choosing the cheapest option
The total startup costs for the cheapest franchises to open are provided in the Franchise Disclosure Document (FDD), which all franchisors must provide at least 14 days before a contract is signed. Mandated by the Federal Trade Commission (FTC), Item 7 of the FDD provides an estimate of all expenses to launch the franchise.
The total startup costs for the cheapest franchises to open usually include:
- Franchise fee
- Training expenses
- Equipment and vehicles
- Advertising
- Payroll
- Business licenses
Most low-cost franchises avoid pricey physical locations and rent to reduce overhead. Mobile services like pet waste removal or window cleaning often operate out of a vehicle. Banker said startup costs also vary by region, with the coasts costing more than Midwest markets.
How much money do you realistically need to open one of the cheapest franchises?
The majority of service-based franchises fall in the $100,000 to $150,000 range, which covers the costs in Item 7 and provides at least three months of operating capital. One of Banker’s favorite low-cost options is a senior companion care franchise. With no storefront required, owners focus on helping elderly clients with daily check-ins, transportation to doctor appointments, and grocery trips.
Consulting franchises can range from $60,000 to $80,000 because the owner is selling expertise rather than managing staff or maintaining physical space. However, these models are often less scalable, Banker said.
The most common mistake he sees is being undercapitalized.
“If (Item 7) says $100,000 to $150,000, I tell clients to plan for $150,000 and err on the high end,” Banker said. “If you need $150,000 and you only have $130,000, you’re starting on fumes. You should have at least three months of operating capital in reserve.”
Independent vs. franchise costs compared
| Cost Factor | Independent Business | Franchise Business |
|---|---|---|
| Brand recognition | Built from scratch | Established brand |
| Systems & training | Self-developed | Provided |
| Marketing support | Self-funded | Often included |
| Upfront franchise fee | None | Yes |
| On-going fees | None | Royalty and marketing fees |
Independent businesses avoid franchise and continuing royalty fees, but they lack the built-in systems and support for areas like brand recognition and training.
What are some of the cheapest franchises to open by industry?
For entrepreneurs looking for the cheapest franchises to open in the US, the best options are in industries that don’t require expensive retail space, such as home-based travel agencies and cleaning services.
If prospective buyers are searching for the cheapest food franchises to open or trying to identify the cheapest fast food franchise to open, they should eye mobile and kiosk-style franchises.
Below is a snapshot of franchise opportunities across several industries, based on figures disclosed in each brand’s FDD (Item 7).
| Franchise | Estimated initial startup cost | Industry |
|---|---|---|
| Fit4Mom | $8,245 to $28,685 | Fitness & Wellness |
| Cruise Planners | $1,900 to $20,465 | Travel |
| 360Clean | $22,000 to $36,500 | Cleaning |
| Chester’s Chicken | $27,000-$300,000 | Fast food |
| Kona Ice | $173,000-$222,000 | Mobile food |
How to finance a low-cost franchise opportunity
There are a handful of options to finance your low-cost franchise, including:
- SBA loans
- Traditional bank loans
- Franchisor financial programs
- Home equity loans
Banker’s a fan of Rollovers as Business Startups (ROBS), which allow owners to use retirement funds for startup costs.
Tips for reducing initial expenses
Entrepreneurs can shave costs by bringing on a partner, taking out a business loan, and leasing equipment or vehicles. However, Banker recommends owners to stick close to the franchise system outlined in the FDD.
“You’re going to have these startup costs, and they’re gonna be spot-on,” Banker said. “Buy what they say to buy. But as far as cutting costs, don’t deviate too much because it will cost you time and money.”
Is choosing the cheapest franchise always the smartest move?
While cost ultimately matters, Banker urges prospective franchise buyers to look beyond the price tag and choose a company that they can afford and will be successful in running based on their skills and personality.
This may mean a low-cost franchise is the best route. However, someone with more capital might be better suited for a mid-range franchise or to invest in opening a low-cost franchise in multiple territories.
Instead of focusing solely on price, Banker strongly recommends that entrepreneurs also assess their personal fit to the franchise.
“I think the number one thing in the whole deal is the cultural fit,” he says. “I equate it to dating. You have to match who you are as a person with the franchise system to be successful.”
This content is provided for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations vary by state and individual circumstances and may change over time. Readers should consult a qualified attorney, tax professional, or other licensed professional regarding their specific situation. Nothing herein creates an attorney-client relationship.
