Do you want to know how to invest in a franchise without dying in the attempt? Franchises are generally very profitable because they are proven business models with recognized brands. They are part of the privileged 25% of companies that survive more than five years in Mexico, according to a report by the Instituto del Fracaso (2016).
However, large brands are inaccessible, since the initial investment amount is very high: from 2 to 20 million pesos. In addition, the operation is granted to business groups that guarantee operability and growth. For example, Alsea owns the rights to more than 18 franchise brands.
Operating a franchise, such as McDonald’s, Burger King, Domino’s Pizza or Kentucky Fried, requires a large amount of money and a commitment to position the brand in many places at the same time or in a short period of time, according to José Manuel González, leading retail partner of the consulting firm KPMG, in an interview for Forbes magazine.
Despite these obstacles, it is possible to invest in many other franchises; in Mexico alone there are more than 209 franchises, according to the Mexican Franchise Association. So here are some tips to invest with little money in them.
- Identify low-cost franchises
There are franchises that require an initial investment starting at $20,000, but you must make sure they are formal. For this reason, we recommend that you search the Mexican Franchise Association’s catalog, which allows you to filter the results by sector and minimum investment amount.
But, be careful, you must also take into account the franchise fee, which is a one-time payment in advance, which helps to start the franchise operations, which is usually quite expensive. In addition, you must take into account that the franchisee will also collect regular royalty payments.
Some not so expensive examples:
- Agua Inmaculada. Fee from: $12,000. Investment amount from: $52,900.
- MINIDONUTS CO. Fee from: $350,000. Investment amount from: $150,000.
- Fix It. Fee starting at: $200,000. Investment amount starting at: $150,000.
- MATH-KÜ Math and more. Fee starting at: $200,000. Investment amount starting at: $150,000.
- Paphij@s Adventure. Investment amount from: $250,000.
- Look for collective franchises
Nowadays, digital platforms, such as PlayBusiness or Propeler, have allowed a large number of people to invest small amounts in order to raise the large capital needed for a franchise. In this way, you can invest from $7,500 or $15,000 and, thus, own a piece of the company, in addition to receiving royalties.
The advantage is that you do not have to operate the franchise, the disadvantage is that the investment amount is lower and the amount of profits is lower, although with a very competitive return compared to other investment instruments.
- Look for investors
If you do not have enough money to invest in the franchise you are interested in, look for people who are interested in investing in your business, they will receive the royalties or shares.
- Ask for a loan
Some specialists are in favor of debt and others are not. The truth is that you have the last decision. If it is really your dream to have a business, you can ask for a loan. Nowadays, with fintech, it is easier to access credit with a lower interest rate.
You can also borrow from your family, friends, schoolmates or workmates. In short, your acquaintances, so that they can help you fund your project by offering to pay the money.
The last option is, if you have saved voluntarily in your Afore, to withdraw that money to invest it and generate more profitability for your money.
In conclusion, a limited budget does not have to mean postponing or giving up your plans to become an entrepreneur. By finding the right financing options, you can buy a franchise now and secure your financial freedom.