If you want to start your own business, you don't have to do it entirely from scratch. When you open a franchise location, you rid yourself of some of the difficult tasks of starting a business, such as coming up with a name, building your brand and developing a business plan.
However, franchises vary greatly in many aspects, especially startup costs. Even though opening a franchise is generally cheaper than establishing a new brand and business from the bottom up, some franchises are much more profitable than others. Read on to learn which franchises are the cheapest to open and how much to expect in startup costs and fees for both household-name and lesser-known brands.
What are the cheapest franchises to buy in 2020?
If you are basing your decision on which franchise to open mainly on costs, it is important to have an idea of which ones have the cheapest point of entry. Keep in mind that, even after you open your business, you may have to pay an advertising fee, royalty fee or other recurring costs. Here are some of the cheapest franchises to start:
1. Cruise Planners
- Franchise fee: $10,995
- Initial investment: $2,095 to $22,867
- Royalty fee: 1% to 3%
- Type of franchise: Travel
Cruise Planners may have less brand recognition than other franchises, but it certainly costs less to open. You'll pay between $2,095 and $22,867 – significantly less than a McDonald's or Dunkin' franchise – to start your own Cruise Planners location.
2. Jazzercise
- Franchise fee: $1,250
- Initial investment: $2,500 to $38,000
- Royalty fee: 20%
- Type of franchise: Fitness
The fitness brand Jazzercise – which has somewhat faded into cult status from its 1980s mainstream prominence – made $2 billion in gross sales in 2019. And with franchise location startup costs of between $2,500 and $38,000, according to HubSpot, you don't have to spend much to get in on the brand's massive revenue.
3. Help-U-Sell Real Estate
- Franchise fee: $15,000
- Initial investment: $29,650 to $67,650
- Royalty fee: 6% of all commissions, according to CNBC
- Type of franchise: Real estate
Help-U-Sell has been helping homeowners list, market and sell their homes for over four decades. The brand is well known in the real estate world, and you can start your own franchise location for between $29,650 and $67,650.
Help-U-Sell did not disclose its sales figures for 2019, which means you won't be able to compare startup costs to potential profits for this franchise.
4. United Country Real Estate
- Franchise fee: $8,000 to $20,000
- Initial investment: $8,855 to $50,260
- Royalty fee: 6% to 12%
- Type of franchise: Real estate
United Country Real Estate has an esteemed reputation in the real estate world. Like Help-U-Sell, United Country Real Estate does not disclose its gross sales, giving you less information to consider when deciding whether this brand is the right franchise for you. However, because it requires a total startup cost of between $8,855 and $50,260, you don't have to spend much to join the United Country Real Estate family and enjoy a slice of its revenue.
5. Stratus Building Solutions
- Franchise fee: $2,700 to $39,600
- Initial investment: $3,450 to $50,350
- Royalty fee: 5%
- Type of franchise: Commercial cleaning
Opening a commercial cleaning company tends to involve an especially large number of equipment purchases. When you open a Stratus Building Solutions franchise, you eliminate most of this burden, and you can open your location fairly inexpensively. Expect to spend between $3,450 and $50,350 to open a Stratus Building Solutions location.
6. Anago Cleaning Systems
- Franchise fee: $10,440 to $68,548
- Initial investment: $4,590 to $32,348
- Royalty fee: 10%
- Type of franchise: Office and commercial cleaning
Like Stratus Building Solutions, Anago Cleaning Systems offers cleaning services. However, Anago focuses more on regularly scheduled office cleanings, whereas Stratus tends to perform one-off commercial cleaning jobs. Both franchises allow affordable entry into the cleaning industry.
To open an Anago Cleaning Systems location, you'll need to spend between $4,590 and $32,348. While the low end of this range may be slightly higher than the low end of Stratus Building Solutions' range, both brands are still quite affordable – and given each franchise's cost variability, there are some cases for which Anago will wind up being the cheaper option.
7. JAN-PRO
- Franchise fee: $2,520 to $44,000
- Initial investment: $3,985 to $51,605
- Royalty fee: 10%
- Type of franchise: Commercial cleaning
Opening a JAN-PRO location costs between $3,985 and $51,605, and for this sum, you'll get to choose from three levels of franchising: home-based, executive or international master franchise.
8. Dream Vacations
- Franchise fee: $495 to $9,800
- Initial investment: $3,245 to $21,850
- Royalty fee: 5% to 3%
- Type of franchise: Travel
Because Dream Vacations is a home-based franchise, it requires minimal overhead and inventory, making it an especially cheap option for starting a franchise location. You'll spend between $3,245 and $21,850 to launch your franchise and get an affordable start on your entry into the travel industry.
What about household name brands?
You may have wondered why none of the eight cheap franchise options above were the household-name brands that often come to mind when you think of franchises – namely, fast food restaurants and cafés. The primary reason is that the lesser-known brands tend to require less overhead, inventory and maintenance.
Dream Vacations, for example, is entirely home-based, so neither you nor the company has to spend much to open a new location. A franchise like McDonald's, on the other hand, has to manufacture and transport machines, seating, food products, work outfits for new employees, and branded, outdoor-facing placards for every new location it opens.
Here are two examples of name-brand franchises that demonstrate the difference in costs between lesser-known and well-known franchise brands:
1. McDonald's
- Franchise fee: $45,000
- Initial investment: $1.01 million to $2.21 million
- Royalty fee: 4% of gross sales
- Type of franchise: Restaurant
- 2019 net income: Over $6 billion, according to Statista
When you think of franchises, fast-food locations probably come to mind – and McDonald's is arguably the most famous restaurant franchise in the world. You'll pay between $1.01 million and $2.21 million to start a McDonald's franchise location.
2. Dunkin'
- Franchise fee: $40,000 to $90,000
- Initial investment: $109,700 to $1.64 million
- Royalty fee: 95% of gross sales
- Type of franchise: Restaurant
- 2019 net income: $242.02 million
Dunkin', which sells more than just doughnuts and coffee, is another brand people often associate with franchises. Opening a Dunkin' location costs between $109,700 and $1.64 million.
What is the cheapest franchise to open?
Based purely on startup costs, the cheapest franchise to open is Cruise Planners, with startup costs as low as $2,095. Jazzercise isn't far behind, with startup costs beginning at $2,500.
However, when you also consider the potential for long-term profits, it becomes more complicated. Is it better to make a small upfront investment to launch a franchise location with modest profits, or should you invest more to make a bigger profit over the long term?
What is the most profitable franchise to open?
Of the options mentioned, McDonald's would probably allow you to bring in the most money – with the average restaurant bringing in around $2.7 million in sales – but that doesn't mean it will be the most profitable for you, the franchisee, considering the high upfront investment required.
Of course, chances are, you don't have millions of dollars lying around to make your initial investment. You also likely don't want to search high and low for business loans and financing options that you'll eventually have to pay back – what if your new franchise location fails to turn a profit?
By this logic, the most profitable franchise to open may be Jazzercise. The company makes $2 billion annually, and you'd pay between $2,500 and $38,000 in startup costs. Additionally, the boutique fitness sector to which Jazzercise belongs remains the fastest-growing sector of the modern fitness industry, which is worth $26 billion.
Of course, Jazzercise also has an especially high royalty fee of 20% (that’s compared to just 1% for some of the other franchises listed here). That said, since Jazzercise is highly popular, part of a fast-growing fitness sector and makes billions of dollars in annual sales, you can likely still make a serious profit by opening a Jazzercise franchise. If you have the skills and the passion to succeed in the fitness industry, Jazzercise may be your best option for opening a franchise location without breaking the bank.
What are the benefits of opening a business franchise?
Here are some of the benefits of opening a new location for a franchise business rather than building a new company:
Capital
Any small business owner will lament the startup costs and time burden of acquiring capital when launching a company. When you start your small business as part of a franchise, the franchise directs you toward certain types of machinery and equipment, so you won't spend time comparing options. Some franchises can connect you with lenders for easier funding options too, so you won't have to search high and low for business financing to cover your startup costs.
Branding
As a business owner, you have to develop logos, slogans and other marketing materials that make your company stand out to consumers. Not all business owners are thrilled at the prospect of the more creative side of business ownership, not to mention the expenses. When you open a franchise, you get to use the company's established branding.
Low risk
Worried that your new company won't turn a profit? If your business has the logo and familiar layout, aesthetic and equipment of a widely recognized franchise, you should have significantly less trouble finding and retaining customers, because they already know and trust the brand. And, of course, with more customers comes more revenue and, hopefully, profit.
Extra management and marketing help
In addition to its many storefronts, a franchise likely has a corporate office. This office houses employees who oversee marketing, management and training for all franchise locations, so when you need help on any of these fronts, you have built-in assistance.
Extra purchasing power
The cost of new inventory and supplies is often lower for a franchise. A franchisor may have larger collective buying power than an individual business, which can result in cost savings when buying large quantities of equipment or other materials. The money saved by using that purchasing power is often passed on to franchisees.