The Complete Guide To Customer Financing For Small Businesses

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How Do Small Business Loans Work & What Is The Business Loan Process Like?

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What Is Vendor Financing & When Should Your Small Business Use It?

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How To Close A Business

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How Inventory Financing Works & When It’s Right (Or Wrong) For Your Small Business Funding Needs

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The Step-By-Step Guide To Registering Your 501(c)(3) Nonprofit Organization

The 8 Steps You Need To Take To Get Started

The process to execute some of these steps varies somewhat from state to state. For example, in some states, you will need to apply for both federal and state tax-exempt status. But wherever you live, you will need to follow all of the below 8 steps.

1. Select A Name

Though you may have a working name for your organization, to make your nonprofit official, you will have to make sure that name is available and hasn’t already been trademarked. After you choose your name, check with your Secretary of State office as well as the U.S. Department of Commerce website to ensure that it is available. You can normally pay a nominal fee to reserve your name until you file your articles of incorporation.

2. Form Your Board Of Directors

Generally, you should form your board of directors before incorporating. Some, but not all states require that you list your board members’ names in the incorporation documents. You’ll also need to list at least three directors when you file for your 501(c)(3) tax-exempt status. These members should ideally be unrelated (by blood or marriage).  

3. File Articles Of Incorporation

This is the documentation that forms an official corporation for your nonprofit and will be filed with your secretary of state. It includes information such as your organization’s name, location, board of directors, and purpose (what your nonprofit is being created to do/provide). Although incorporating your nonprofit does not make it tax-exempt, you will need to include certain language in the articles of incorporation for when you apply for tax-exempt status later—your state’s nonprofit formation packet should include the required information.

Some states also require you to publish a notice of incorporation with your local newspaper.

4. Write Bylaws

After your articles of incorporation have been approved, you can write your bylaws. These are your nonprofit’s internal rules and guidelines for procedures such as holding issues, voting, and electing officers. You will need to include a copy of your bylaws in your 501(c)(3) application.

5. Hold First Board Meeting

At your first board meeting, you will make your articles of incorporation part of the official record, adopt your bylaws, and elect officers. Someone will need to take minutes, which you will keep on file. It’s recommended that you hold this initial board meeting before you file for federal tax-exempt status. In a later meeting, you can record the receipt of federal and state tax exemptions.

6. File For EIN

The final thing you need to do before filing for your 501(c)(3) status is to apply for an Employer Identification Number (EIN). You need to do this even if you don’t have employees yet, as it is required by the IRS to obtain your tax-exempt status. The IRS uses your EIN to track your organization’s financial activities. You’ll also need an EIN later on when you open a business bank account and hire employees.

To obtain an EIN, file Form SS-4 with the IRS.

7. File For Tax-Exempt Status

After you have your directors, incorporated status, bylaws, and EIN, it’s finally time to file for your federal tax-exempt status with the IRS. For nonprofits in most states, you only need to do this at the federal level, but some states require you to file for tax-exempt status at the state level too. For example, nonprofits in California must also apply for tax exemption with the California Franchise Tax Board after obtaining tax-exempt status from the IRS.

To apply for your federal tax-exempt status under section 501(c)(3) of the Internal Revenue Code, you will need to file Form 1023 with the IRS. If your organization has gross receipts of less than $50K and less than $250K in assets, you can file the 3-page 1023-EZ application (vs. the 26-page standard 1023).

Some information you’ll need to include in your 1023 application:

  • Your budget, including any balance sheets or other financial information
  • The names of your directors
  • Copy of your articles of incorporation
  • Copy of your bylaws
  • Dissolution clause (usually included in articles of incorporation or bylaws)
  • Conflict of interest clause (usually included in articles of incorporation or bylaws)
  • Statement of exempt purpose (usually included in articles of incorporation or bylaws)

In order to ensure that your application meets all state and federal requirements, it’s a good idea to consult with a lawyer or someone familiar with tax-exempt law. Including attachments, a 501(c)(3) application package can easily exceed 50 pages.

Note that even after your organization receives its letter of determination from the IRS with its tax-exempt status, each year you will have to submit Form 990 in order to maintain your 501(c)(3) status. This document provides financial information about your organization to both the IRS and to the public.

8. Obtain Business Licenses & Permits

Once you have your tax-exempt status, you’re almost ready to start raising funds. But first, you’ll need to make sure you’re in compliance with all business licenses and permits applicable to your state and your organization’s activities. For example, you may need a sales permit or a zoning permit. Check with your local department of consumer affairs to find out what kind of licenses and permits you need to operate as a charitable organization in your particular state. Some cities may require a city business permit as well.

Registering As A Nonprofit: FAQs

How long does it take to register a nonprofit?

The IRS estimates it will take 100 hours to fill out Form 1023. The application process typically takes between 3-6 months, though it could take as long as a year, depending on whether the IRS has follow-up questions and how quickly you provide the answers.

How much does registering a nonprofit cost?

To file for 501(c)(3) status, you will pay either $600 to file Form 1023, or $275 to file Form 1023-EZ.

The costs of incorporating and obtaining the necessary permits to operate as a nonprofit vary from state to state; however, they usually do not exceed $100-$200.

Is the registration process different in each state?

Yes, somewhat. Check with your state to see if you need to complete any extra steps, such as publishing your nonprofit’s articles of incorporation or filing for state-level tax exemption.

Can any organization register as a nonprofit?

No. Your organization must meet the IRS’s definition of a public charity (the most common type of 501(c)(3) organization), private foundation, or private operating foundation. Be sure to read up on the IRS’ exemption requirements for 501(c)(3) organizations before you apply.

Can I register my business as a nonprofit to dodge taxes or get rich?

No. The IRS has strict regulations in place to make sure that businesses cannot use misuse their 501(c)(3) status for personal gain or to avoid paying taxes. All of your organization’s financial information, including salaries and use of income, will be closely and regularly scrutinized to look out for possible fraud and conflicts of interest. For example, if your nonprofit brings in $500K a year, you will not be able to get away with paying yourself a $200K salary.

Should I hire a lawyer to help with the registration process?

Yes, it is a good idea for first-timers to consult with a legal professional at some point to ensure compliance with all state and federal requirements, particularly when filling out the incorporation paperwork and when preparing the 501(c)(3) forms.

Final Thoughts

Whether they benefit schools, the environment, public safety, or another cause, nonprofit organizations do a lot of good in this world. But if a nonprofit is not officially registered, then it can only make a limited impact. When a charitable organization is incorporated as a nonprofit corporation and obtains a 501(c)(3) status from the IRS, the organization does not have to pay income taxes on the money it brings in, and the organization becomes eligible for other funding opportunities, including government grants and charitable crowdfunding platforms. Additionally, donors are more motivated to donate to IRS-registered nonprofits because any contributions they make to these organizations are tax-deductible.

There is some work involved in registering a nonprofit and maintaining nonprofit status, but your charity and your cause will ultimately benefit from your diligence. If you’re not sure your nonprofit qualifies for 501(c)(3) status, the IRS has information you can review on the various types of tax-exempt/nonprofit organizations, including 501(c)(3) and others. If you think maybe a nonprofit structure is not right for your organization after all, I recommend reading our article on the different types of business structures.

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Should You Form A Business Cooperative? Consider These 9 Advantages And Disadvantages Before Getting Started

Slow Decision-Making

Have you ever tried to make a decision as a large group? It can be pretty challenging! By the time the entire group decides where to eat, you are out of your mind with hunger. The process to make big decisions as a cooperative, where everyone gets an equal vote in all company decisions, can be equally time-consuming and frustrating.

How To Form Your Co-op

The following are the main steps you need to take to form a business co-op. However, the steps to register your business as a co-op vary somewhat from state to state; check with your state’s Secretary of State or State Corporation Commissioner for more information regarding your state’s specific co-op laws.

1. File Articles of Incorporation

The articles of incorporation is a document that makes your co-op an official business. This document includes your company’s name, location, purpose, financial structure, and the names of your charter members (incorporators/founders). Your incorporators must file the articles of incorporation with your state business entity registration office.

2. Obtain Business Permits & Licenses

You will need to obtain all local, state, and federal permits and licenses before you can operate as a legal business. These requirements will vary based on your industry and location.

3. Create Bylaws

Once your articles of incorporation have been approved by the state, you can write your bylaws. These are all of the rules and procedures for your cooperative and include membership requirements and duties, as well as general operational procedures for your co-op. Your bylaws must comply with state law, so you may need to consult with an attorney at this time if you haven’t already.

4. Hold Charter Meeting

During this meeting, charter members will adopt the bylaws and elect a board of directors (if the board wasn’t already established in the articles of incorporation).

5. Recruit More Members

To make your co-op a success, it needs to grow its membership. These are the employees and co-owners of your company who will supply the capital and labor. The application members use to join the company needs to include names and signatures from the board of directors, as well as a description of the member rights and benefits.

6. File With The IRS

Even though you are exempt from certain taxes as a cooperative, you will still need to file with the IRS (before the end of your fiscal tax year) to validate your organization’s tax-exempt status. In particular, most cooperatives will need to file Form 1120-C to report income, gains, losses, deductions, credits, and to determine your income tax liability. Any cooperative with employees needs need an Employer Identification Number (EIN) to file taxes, so be sure to sign up for one before tax-time if you haven’t already.

7. Obtain Additional Financing

Depending on your financial needs, you may need to obtain additional financing at some point, especially if contributions from co-op members are not sufficient to cover all your initial startup expenses. As mentioned, crowdfunding and startup business grants are a couple of potential ways co-op startups get capital, and certain online lenders might be willing to extend you a startup loan as well.

Note that if you are converting an established company to a co-op, this process will look different. In addition to incorporating as a cooperative, writing bylaws, etc., you will also need to buy out the original owners/founders and then redistribute that money to the co-op.

Final Thoughts

A business cooperative can be the perfect business structure for certain organizations, particularly those with a democratic business ethos. A strong corporate culture and reduced costs are just two of the many benefits that cooperative businesses enjoy. However, co-ops are also limited in certain ways, and are not appropriate for every business type.

Don’t think a co-op is right for you? Take a look at our business structures explainer to learn about other business structures and their pros and cons.

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Your Step-By-Step Guide To Starting A Successful House Flipping Business

If you own your own home, you could use a home equity loan or home equity line of credit (HELOC) to fund your flips. If you have equity in your home, a low debt-to-income ratio, and a good personal credit score, you could qualify for one of those options, which come with low rates and favorable terms. If you have a retirement account, you could also consider a Rollovers as Business Startups plan (ROBS), which allows you to leverage your retirement funds without penalties.

For unexpected expenses or operational costs, consider applying for a business credit card. You can also get creative by bringing on a business partner or launching a crowdfunding campaign. Whether you’re new to the game, have some experience, or have credit challenges, there are options available to you. You just have to connect with lenders to find them.

No matter what type of funding you seek for your business, there are a few things to keep in mind. First, understand that borrowers with the highest credit scores typically qualify for more options that are also more affordable. So, one of the first things you want to do prior to submitting your application is pull your free credit score, access your credit report, and dispute any errors. You can also take steps to boost your credit score.

Once you apply for funding, make sure that you fully understand the terms, fees, and interest rates associated with your financial product. Don’t be afraid to shop around your options if you aren’t happy with a lender’s offer.

If you do secure funding, make sure to always pay as agreed and meet all conditions put in place by the lender. By doing so, you can not only raise your credit score, but you can also establish lasting relationships with lenders and investors that will serve you well as you build your business.

Unsure of which funding option to choose? Learn more about the best loan products for your house flipping business.

#4 Connect With Contractors & Other Professionals

In addition to lenders, you’ll also need to establish relationships with contractors and other professionals that will help contribute to the success of your business. Even if you plan to get hands-on with the renovation of your properties, you’ll still need a team of contractors to help with the work, particularly when distressed properties are involved. Not only will a contractor complete the work required to flip a house for profit, but a good contractor will know about licenses, permits, and other local requirements. You can also discuss your timelines and budgets with your contractors so you don’t have extended timelines or unnecessary expenses cutting into your profits.

When seeking contractors, don’t be afraid to ask for references or a portfolio. Also, don’t forget to shop around your options to find a reputable contractor that works with your budget. If you’re new to the industry, developing a working relationship with a reputable contractor can even help you score hard money loans from investors.

Another professional that you need on your team is a real estate agent. If you opt not to get your real estate license, a realtor has access to resources that will be essential for your business. This includes access to properties on the multiple listing service (MLS), as well as prospective homeowners that could be interested in purchasing your properties. A realtor can also help market and sell your renovated properties.

Someone else to keep on your speed dial is an attorney, and not just any attorney — one that specializes in real estate. There are some legalities of flipping houses that you don’t want to overlook, so it’s wise to have a real estate attorney on your team. An attorney is especially critical during your first flip. Overlooking important legal details, errors in contracts, and other issues could not only derail your deal but could also damage your reputation in the industry.

Over time, there may be additional professionals you’d like to have in your corner, such as an accountant and investors. For now, though, focus on finding the right contractors, attorneys, and realtors for your house flipping team.

#5 Understand The Importance Of Market Research

Knowing your market is key to maximizing profits as a house flipper. Buying the wrong property in the wrong neighborhood could result in a low profit that’s not worth the time invested in the property, or worse, a loss.

Working with a realtor can really help when it comes to knowing your market. Realtors have the inside scoop on the hottest neighborhoods, information on recently sold properties, and other data that can help you find the right homes for flipping. You can also take advantage of the vast amount of information you can find on the internet, where you can do a lot of your market research for free.

With market research, you’ll soon learn where buyers are buying, how much they’re paying, and what they’re looking for. While there are some variances depending on where you live, there are a few markets that are always hot, including neighborhoods with great schools, neighborhoods with homes that are at least 20 years old, areas with low crime rates, and houses that are close to amenities. Once you understand the market, you can begin further narrowing down the areas you wish to target and begin preparing for the next step: buying and flipping a property!

#6 Buy, Renovate, & Sell Your First Property

You’ve set up your business. You’ve connected with a team of reputable professionals. You’ve found and secured funding, or are at least aware of a few potential options. You know your market, you’ve researched recent selling prices, and there are properties on your radar. Now, it’s time to pick a property, buy it for the right price, renovate it, and then flip it for a profit.

This is where your team will really come in handy. For instance, your realtor may have information on properties before they hit the market, giving you an early edge over other flippers and buyers. Your attorney can help with the paperwork and walk you through the steps of purchasing and flipping a house — think, walk-throughs, insurance requirements, and negotiating contracts.

Once you’ve purchased the property, it’s time to start your renovations. Work through your budget and timeline with your contractors, and put the research you did earlier to good use. Look at comparable properties when determining what renovations need to be completed. For example, if recently sold houses in the same neighborhood have updated granite counter tops, add granite counter tops to your “to-do” list. Finally, be prepared for the unexpected. Deadlines may be missed, or there may be additional expenses that weren’t accounted for in the budget. It happens to even the most experienced flippers — the key is learning to roll with the punches.

After the renovations are complete, it’s time to put your house on the market. Your realtor will be a valuable asset by listing the property and helping you market it to buyers. Then, once a buyer is interested, work with your attorney to make sure all of the i’s are dotted and t’s are crossed. Once the property is sold, any amount that exceeds what you’ve put into the house is pure profit.

Final Thoughts

Let’s make one thing clear: flipping houses isn’t easy, no matter how simple it looks on TV. But if you’re ready to put in the work, you’ll find that house flipping is extremely rewarding. As you flip your first few houses and begin to find your groove, you’ll find that the process gets easier, just as it does with any other business.

You don’t have to go at it completely alone, though. We have a load of great small business resources right here, so check them out and get ready to build your business. Good luck!

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The 12 Best Low-Cost Franchises You Can Purchase In 2019

Travel Agency Franchises

Starting your own travel agency can be a good idea for organized, self-motivated individuals who love travel and like the idea of helping people score great deals on their own dream getaways. Travel agency franchises are often home-based, meaning there is very low overhead and minimal startup costs.

1. Dream Vacations

  • Initial investment: $3,245–$21,850
  • Franchise description: Home-based travel franchise
  • Awards & distinctions: Entrepreneur Best Home-Based Franchise (2018), USA Today Top 50 Franchises for Minorities (2017), IFA 5-Star Franchise (2018–2019), #101 in Entrepreneur Franchise 500 (2019)

If you’ve ever dreamed of starting your own travel agency, Dream Vacations can allow you to do that for a 4-figure initial investment– and from the comfort of your own home. Dream Vacations has collected a lot of accolades over the years (see Awards & distinctions above) and current franchisees rate it highly on sites like Glassdoor and Indeed.com. DV lets you market your business under Dream Vacations or its sister company CruiseOne, and is currently looking for new franchisees throughout the U.S.

A major benefit of owning a home-based travel agency franchise like Dream Vacations is its low overhead. DV is also a veteran-friendly business in that it gives a 20% discount on the franchise fee to veterans. The company offers in-house financing if you can’t afford the franchise fee, or you could also get a franchise loan from a bank or online lender.

2. Cruise Planners

  • Initial investment:$2,295–$23,367
  • Franchise description: Home-based travel franchise
  • Awards & distinctions: #60 in Entrepreneur Franchise 500 and #1 in Travel Agencies category (2019), American Express Travel Representative Excellence Award (2018), Inc. 5000 List (since 2012)

Cruise Planners, an American Express Travel Representative, is another low-cost, work-from-home travel agent opportunity. Don’t let the name fool you; as a Cruise Planners travel agent, you can book a lot more more than just cruises—you can also connect your customers with great deals on airfare, car rentals tours, hotels, etc. Cruise Planners claims they offer the highest commissions in the industry, and they do not require any travel experience.

When evaluating this franchise, I found their website to be very friendly and informative, though I couldn’t find a figure for the initial investment, apart from the $10,995 franchise fee (with no discounts). However, as with other work-from-home, service-based franchises, I expect a home-based business like Cruise Planners would require few startup expenses apart from the franchise fee (according to the official franchise disclosure document, the total initial investment to open a Cruise Planners franchise can range from $2,295 to $23,367). Cruise Planners offers in-house financing if you can’t afford the franchise fee, as well as a deep discount for veterans, first responders, and travel industry professionals. While Cruise Planners has a larger initial franchise fee than some other home-based travel agency franchises, a big perk you get with Cruise Planners is the American Express network affiliation.

3. Travel Leaders

  • Initial investment: $2,270–$16,910
  • Franchise description: Travel agency franchise (storefront preferred)
  • Awards & distinctions: Largest network of travel agencies in North America, highest-ranked travel management company in Business Travel News’ annual survey (2016), Top North American travel companies in Travel Weekly 2016 Power List

Travel Leaders is a quality, yet inexpensive franchise ownership opportunity if you’re an experienced travel agent who is interested in running a storefront travel agency. According to information in their FDD (Franchise Disclosure Document), it requires upwards of 10 employees to run a Travel Leaders agency. To be honest, I couldn’t find that much information online about what it’s like to work for Travel Leaders, but the brand has accumulated a number of industry accolades over the years—to be specific, over the past 131 years the company has been in business (Travel Leaders has been franchising for 35 years). Travel Leaders offers several different tiers of franchise ownership, with no long-term commitment.

Travel Leaders is currently seeking experienced travel agents worldwide.

Commercial Cleaning Franchises

If you are a dedicated hard worker but don’t necessarily have a specific skill-set, starting your own cleaning business can really pay off. Commercial cleaning is a fast-growing industry, and most of the top commercial cleaning franchises are flexible and scaleable, with a low initial investment and part-time options.

4. BuildingStars

  • Initial investment: $2,245–$53,200
  • Franchise description: Commercial cleaning for office buildings with part-time option
  • Awards & distinctions: #199 in Entrepreneur Franchise 500, Inc. 5000 List (2017)

BuildingStars is one of the largest, fastest-growing franchises in the commercial cleaning industry, with a sole focus on solutions for office buildings. Services include nightly cleaning, green cleaning and consulting, and carpet and floor care. According to BuildingStars, this franchise offers the highest average gross revenue of any cleaning franchise. BuildingStars also has the benefit of allowing you to start small, working part-time to start your cleaning business while you keep the income and security of your current job. The franchise offers three levels of franchise ownership: part-time technician, full-time onsite manager, and corporate manager. Depending on your goals, you can start as a part-time technician, then work your way up to onsite manager, and then corporate manager as you build experience managing larger-tenant office buildings.

BuildingStars has mostly positive reviews on sites like Glassdoor and Indeed (average of 3.5/5 stars on both sites). The company is currently looking for new franchisees worldwide, and can offer in-house financing to cover not only the franchise fee, but also equipment and other startup costs.

5. JAN-PRO

  • Initial investment: $4,170–$54,700
  • Franchise description: Commercial cleaning franchise with multiple tiers of ownership
  • Awards & distinctions: #1 Commercial Cleaning Franchise and Top Franchise For Veterans in Entrepreneur Magazine (2019), Top 200 Franchise in Franchise Business Review (2018), Top 50 Franchise for Minorities in USA Today (since 2012)

JAN-PRO is another fast-growing commercial cleaning franchises with multiple tiers of investment, including a home-based option. This company’s network of 10,000+ franchisees focuses on business cleaning, healthcare cleaning, and green cleaning. JAN-PRO franchisees offer cleaning services to businesses such as car dealerships, restaurants, banks, gyms, schools, churches, medical centers, and offices. JAN-PRO’s VetConnectionSM program was the first franchise commercial cleaning program created exclusively for veterans—veterans receive a 15–20% discount on the franchise fee.

JAN-PRO can be a good place to start out with commercial cleaning, as no prior experience is required and they provide you with your own accounts so you don’t have to find customers. You can start a JAN-PRO franchise for less than $5,000, which includes initial cleaning equipment, cleaning accounts, education on JAN-PRO cleaning standards, and ongoing support. The franchisee testimonials I found online say JAN-PRO has flexible hours and good compensation, and like the fact that franchise owners can transfer ownership; however, they report that JAN-PRO can be demanding work until you have well-trained employees.

6. Stratus Building Solutions

  • Initial investment: $3,450–$64,550
  • Franchise description: Commercial cleaning franchise with multiple tiers of ownership
  • Awards & distinctions: #42 in Entrepreneur Franchise 500 (overall) and #2 by Entrepreneur – Top Budget-Friendly (2019), “Franchise Rankings” Winner – Janitorial (2015), Franchise Direct Top 100 Global Franchises Award (2016)

Stratus Building Solutions is a general commercial cleaning franchise that specializes in environmentally friendly cleaning solutions, with branded Green Seal Certified chemicals and equipment. From schools and malls to gyms and warehouses, Stratus’s 1,400+ janitorial franchises have customers in just about every industry. This flexible cleaning franchise boasts 16 different levels of ownership, from home-based to master franchise.

You do not need any prior janitorial experience to open a Stratus franchise. In fact, all you need is $1,000. While the total buy-in for a home-based janitorial franchise starts at $3,450, with the help in-house financing, Stratus says you can buy in with as little as $1,000 down (plus another 10% off the franchise fee if you’re a veteran).

Sports & Fitness Franchises

fitness instructor franchises

Fitness and sports coach franchises are another low-cost franchise idea if you are an aspiring fitness instructor who wants to benefit from the recognition of a name-brand sports/fitness franchise. In some cases, you can also use the facilities and gym equipment of a master franchise, while working as an independent instructor.

7. Jazzercise

  • Initial investment: $2,500–$17,155
  • Franchise description: Global aerobics class brand with instructor and center owner options
  • Awards & distinctions: #94 in Entrepreneur Franchise 500, #6 on Franchise Chatter’s 25 Best Gym and Fitness Franchises of 2019

Jazzercise might scream “80s party ideas” to the uninitiated, but the franchise has actually experienced a revival in demand in recent years (I think once people just realized it’s an easier version of Zumba), and in fact, Jazzercise never even went out of style in certain circles. In any case, demand for Jazzercise aerobics classes is going strong in 2019.

Jazzercise offers several different tiers of ownership. If you just want to teach, it costs around $2,500. If you want to own your own Jazzercise center, it can range from $9,000 to $38,000. Every instructor is technically a franchise owner, however (not an employee of Jazzercise). All new instructors are trained and certified by Jazzercise before they start teaching, and the training cost is included in the initial fee.

Generally, Jazzercise franchise owners rate the franchise approvingly on sites like Indeed.com. But as for the cons, they say the job can be physically demanding and the pay isn’t great. However, if you want to get paid to exercise and can get by on a part-time income, Jazzercise could be a good investment of your time and money, especially if you already enjoy Jazzercise-ing.

8. Baby Boot Camp

  • Initial investment: $6,050–$13,179
  • Franchise description: Stroller-fitness classes for new moms, taught by “mompreneurs”
  • Awards & distinctions: Franchise Business Review Franchise Satisfaction Awards (2016), Entrepreneur Franchise 500 (2015)

Baby Boot Camp offers several different types of fitness classes for moms, including popular outdoor fitness classes designed for new moms to bring their stroller-age kids to. The main idea is for new mothers to get back into shape postpartum, though the franchise also offers fitness and nutrition classes for expectant mothers as well. Baby Boot Camp participants cite the community aspect as the main reason they like these classes; they provide an atmosphere for new moms to make friends with similar-age children in their area. As for the instructors, most of them are franchisees. The very reasonable franchise fee includes everything you need to get started, including your own territory. The company website also lists existing franchise territories for sale, which you might be able to buy at a lower rate. You do not need any fitness instructor experience to own your own Baby Boot Camp franchise.

There aren’t too many franchisee reviews online, but the ones I could find were positive and noted the company is extremely family-friendly and allows you to bring your kids with you to work. There are fewer than 150 Baby Boot Camp franchisees in the country, so this franchise could represent an opportunity to enter a market that hasn’t become oversaturated yet.

9. Soccer Shots

  • Initial investment: $41,034–$53,950
  • Franchise description: Youth soccer franchise for children aged 2–8
  • Awards & distinctions: #245 in Entrepreneur Franchise 500 (2019), Forbes “Best Franchises to Buy” (2019)

Soccer is a sport that many of today’s parents want to get their children involved in, not always because they want their kids to embark on a serious soccer career, but more often to simply teach their kids the fundamentals of sportsmanship and teamwork at a young age. And if your preschooler has experience with soccer, there is a good chance that they participated in Soccer Shots, as it is the most popular soccer franchise in the U.S. aimed at young children. Soccer Shots instructors/franchisees teach children basic soccer skills, via 30–40 min weekly classes that take place at their preschool, elementary school, or local community park.

While this isn’t the cheapest franchise opportunity you’ll find, it is still possible to start a franchise for under $50K, and the pay is better than many other franchises—according to the Soccer Shots website, the brand’s franchise-wide top earner makes $3,093,392 in annual revenue, while the top first-year owner made $248,240. Soccer Shots Franchising LLC offers in-house financing to cover the franchise fee, and veterans receive a 15% discount on the fee.

Soccer Shots owners also report a high level of satisfaction: 93.5% of Soccer Shots franchisees would recommend the franchise, according to the Franchisee Satisfaction Index by Franchise Business Review.

Fast Food Franchises

cheap fast food franchises

Fast food franchises are typically big earners and as such, they often carry large initial investment. However, it is sometimes possible to start a fast food franchise for under $100K, particularly if it has a non-traditional setup.

10. Chester’s Chicken

  • Initial investment: $12,385–$286,817
  • Franchise description: Fried chicken QSR (quick-service restaurant)
  • Awards & distinctions: #110 in Entrepreneur’s Franchise 500 (2019), Forbes’ “The 10 Best Food Franchises For Your Buck” (2014), largest Alabama-based franchise

Chester’s Chicken is a low-cost fast food franchise, and is, in fact, one of the most affordable fast food franchises out there. Depending on your setup, you can start your own Chester’s for an initial investment of less than $15K. The franchise fee itself is amazingly low, only $3,500. For the right person and location, becoming a Chester’s franchisee could be the perfect opportunity.

A popular southern fried chicken franchise, Chester’s is unique in that it offers flexible franchise options, including store-in-store options. For example, if you already own a grocery store or convenience store, you can become a Chester’s franchisee to start selling Chester’s Chicken in your existing store. In addition to store-in-store locations, many Chester’s locations are located inside of malls, food courts, airports, college campuses, and truck stops. Chester’s was founded in 1965, but only started franchising in 2004.

11. Checkers & Rally’s

  • Initial investment:$96,414–$1,501,265
  • Franchise description: Double drive-through burger chain
  • Awards & distinctions: Best Franchise Deal by QSR Magazine (2018), Franchise Satisfaction Awards Top 50 Franchises (2019), #88 in Entrepreneur Franchise 500 (2019), Franchise Times Top 200 (2019)

Another Alabama-based fast food chain, Checkers Drive-In Restaurants merged with Rally’s Drive-In in 1999 to form a double drive-thru fast food chain, Checkers & Rally’s. Besides burgers, the chain’s varied offering also includes hot dogs, chicken, fish, and desserts. The initial investment is the highest one on this list, but is still quite low compared with most competing fast food franchises.

Versatile and eye-catching modular buildings, multiple financing options, and high ROI (28.7% according to the FDD) make Checkers & Rally’s a good bet for an aspiring fast-food franchisee on a budget. This franchise is an especially good deal for veterans, as the company will waive the $30,000 franchise fee entirely for those who have served in the military.

12. Baskin Robbins

  • Initial investment: $93,550–$401,800
  • Franchise description: Global ice cream brand
  • Awards & distinctions: Largest ice cream chain in the world, QSR Top 50 (2018), Entrepreneur Franchise 500 (2019), Franchise Times Top 200 (2017)

Becoming a Baskin Robbins franchisee means joining the world’s largest chain of ice cream stores, for potentially under $100K. With over 8,000 locations across 54 countries, Baskin’s offering includes not only its beloved rotating 31-flavors of ice cream, but also its popular ice cream cakes and frozen drinks. Though Baskin has been around since 1945, the brand is still growing and changing with the times to stay ahead of competitors. Baskin has rolled out dairy-free and gluten-free options in recent years, as well as a mobile app that allows customers to order online and collect points. In 2017, Baskin teamed up with DoorDash to offer home deliveries.

Baskin offers franchise financing for the development of new units, as well as a waiver of the franchise fee and reduced royalty rates for vets. Conveniently, Baskin lists opportunities to purchase existing Baskin Robbins locations on its website. In addition to traditional establishments, Baskin is also currently interested in non-traditional locations, such as airports, college campuses, transit terminals, and other places with a captive audience and high foot-traffic.

In case you were wondering, yes, Baskin Robbins’s sister franchise Dunkin’ Donuts is arguably an even hotter commodity right now. However, it’s also a lot pricier, with an initial investment that ranges from $228,621–$1,717,103.

Buying A Franchise: What You Need To Know

Even though it typically requires less leg-work than starting your own business from scratch, buying a franchise is still a large endeavor. There are several important things you need to understand before purchasing a franchise:

  • Opening a new franchise is different from buying an existing franchise (a franchise re-sale) and there are different steps associated with each type of transaction. You’ll probably need to hire an attorney to help you perform pre-purchase due diligence tasks like reviewing the FDD (Franchise Disclosure Document).
  • Territory is everything in the franchise business. Before buying into a franchise, you need to know how large your territory is and how many franchisees are nearby to make sure you’re not entering an oversaturated market. You can find territory information in the FDD.
  • Franchises do not run themselves. Most franchisees must be actively involved in managing their franchise in order for it to succeed. That said, once you are running a successful franchise, the franchise company will often give you the opportunity to start additional locations in your territory.
  • Pay attention to the estimated initial investment (as disclosed in the FDD), not just the franchise fee. Oftentimes on a franchise’s promotional materials (including the company’s website), only the franchise fee is listed front and center, as if to imply this figure is how much it costs to open a franchise. This is, of course, misleading, as the franchise fee doesn’t include the cost of things like inventory, labor, real estate, equipment, working capital, etc.
  • Is it a franchise or a pyramid scheme? Lots of multi-level marketing companies may sound like a franchise at the outset, promising to let you “own your own company.” But if the “opportunity” focuses mostly on recruiting other people to the company (rather than selling the actual product/service), then you’d probably be wise to run for the hills.
  • Find out what other franchisees have to say. Check reviews on Indeed.com, Glassdoor.com, online forums, and anywhere else you can find information on a franchise you’re interested in. This way you’ll know whether the franchise is worth investing your time and money, and you will be prepared for the potential negatives associated with owning that particular franchise.

Read my Step-By-Step Guide To Buying A Franchise for more need-to-knows about how to buy a franchise.

How To Finance Your Franchise Startup Costs

There are various ways to finance a new franchise. Which one you choose depends on the franchise’s policies regarding financing, and the types of financing available to you. Here are a few ways franchisees finance their startup costs.

  • In-House Franchisor Financing: Many franchises have in-house financing programs that allow you to finance startup costs such as the franchise fee, equipment, inventory, etc. It’s also common for franchises to partner with third-party financing sources to offer financing for their franchisees.
  • Personal Or Business Loan: If your franchise doesn’t offer financing or you prefer not to use their financing program, you can also obtain a loan on your own (depending on if your franchise allows this). It can be difficult for new businesses to get a business loan from a bank, but you might be able to get a startup business loan or a personal loan online. To find out about some good online loan options for new franchisees, be sure to read my post on the best loans for franchises.
  • SBA Loan: If your franchise is listed in the SBA Franchise Directory, then you may be eligible for a low-interest SBA franchise loan. Read our guide to SBA franchise financing to learn how to get an SBA loan to finance your franchise startup.

There are also alternative financing options you might consider to fund part or all of your franchise startup costs, such as crowdfunding, ROBS, or even a business credit card.

It’s also important to note that most franchises have specific requirements as to franchisees’ personal net worth and liquid cash. Some franchises will not even let you buy into the franchise if you don’t have deep enough pockets to cover your startup costs yourself (in other words, they don’t allow any kind of financing). Most of the franchises on this list do allow you to finance your franchise startup costs via a loan or other means.

Final Thoughts

Buying a franchise is not cheap. In addition to the franchise fee, you have to pay for inventory, labor, a business space, and other costs. You’ll also need to have enough working capital to run your business and support yourself before your franchise makes a profit. However, there are a lot of low-overhead franchises which you can start without breaking the bank. Particularly, home-based franchises such as travel agencies, commercial cleaning companies, and sports/fitness instructor franchises can be very inexpensive to get started with. There are even low-cost fast food franchises out there if you know where to look. As long as you do your due diligence before buying into a franchise and secure adequate financing, you will be well-positioned for success as a franchisee.

The post The 12 Best Low-Cost Franchises You Can Purchase In 2019 appeared first on Merchant Maverick.

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The 3 Types Of Franchises You Could Own

Quick Guide: Types Of Franchises

Business Format Franchises

A business format franchise is the most common type of franchise. A business format franchise produces and delivers not only a product or service, but also a customer experience, all in accordance with the franchisor’s specific standards. In exchange for a one-time franchise fee and ongoing royalty fees, the franchisee also receives assistance from the franchisor in terms of training, marketing, quality control systems, and other aspects of running the business. Business format franchises dominate many industries, from fast food, to retail, to hospitality, along with many others.  Some popular examples include McDonald’s, H&R Block, Starbucks, Jamba Juice, Hilton Hotels, and 7-Eleven.

Usually, it is not obvious to the consumer whether a chain establishment is company-owned or franchised because the consumer experience varies minimally or not-at-all from one location to the next, nor does it vary significantly depending on whether you’re at a company-owned vs. franchised establishment. For example, fast-casual eatery Smashburger has some corporate-owned locations and some franchise-owned locations, but they all operate pretty much the same.

Business format franchises vary significantly in how much they cost to open and operate. It may be possible to open a home-based franchise such as a travel agent franchise for just a few thousand dollars; at the other end of the spectrum, opening a popular restaurant franchise can set you back several million dollars. Business format franchisees become franchise owners either by developing a new franchise location from scratch, or sometimes by purchasing an existing franchise location. Some franchisors require prospective franchisees to agree to develop multiple franchise locations within a certain timeframe.

Pros & Cons Of Business Format Franchise

The Pros:

The Cons:

Is A Business Format Franchise Right For You?

The ideal candidate for a business format franchise has the following characteristics:

Manufacturing Franchises

A manufacturing franchise is a manufacturing company that produces the raw or finished product that a franchisor ultimately sells. Sometimes, these operations are also called “suppliers” or “partners.” They are often located in countries outside the U.S. where the cost of production is cheaper. Some examples include automobile and automotive parts manufacturers, computer manufacturers, clothing manufacturers, and food and beverage manufacturers. Not all consumer product use manufacturing franchises; some trademarked products are manufactured by company-owned facilities.

Coca Cola is an example of a company that partners with manufacturing franchises to manufacture the syrup that goes into their soft drinks. The syrup is then sold to a bottling company that adds water and carbonation, and then bottles and distributes the drinks.

Manufacturing franchises must pay the franchisor a fee in for the license to produce the raw materials or finished product with the company’s trademarked name. The product must be manufactured within strict specifications so that it meets the franchisor’s quality standards and is indistinguishable from the products produced by the company’s other manufacturers. These are significant operations and require not only owning the means to production, but also experience, expertise, and a lot of legal help to ensure that all relevant laws and policies are being adhered to.

Pros & Cons Of A Manufacturing Franchise

The Pros:

The Cons:

Is A Manufacturing Franchise Right For You?

You might consider a manufacturing franchise if you fit the following profile:

Product Franchises

A product franchise, also sometimes called a “product distributor” franchise, is a business model in which a company agrees to sell a trademarked product, either exclusively or not. Some examples include car dealerships, auto parts suppliers, tire stores, and convenience store inventory. The car dealership may sell a franchisor’s product exclusively, while a convenience store may agree to purchase a certain number of units, or agree to sell the franchisor’s products to the exclusion of certain competing products. Vending machines can also be considered a type of product franchise. Many gas stations, including Exxon, follow a product franchise model as well.

Depending on the agreement, the franchisee may or may not have to pay fees to the franchisor to buy the license to sell the trademarked product.

With a product franchise, the product itself is the only aspect of the business distributed per the franchisor’s terms. The consumer experience can vary a lot from one business to the next, as the distributor (franchisee) maintains control over most aspects of their business, and the franchisor does not offer any assistance in terms of sales processes, employee training, etc.

Pros & Cons Of A Product Franchise

The Pros:

The Cons:

Is A Product Franchise Right For You?

You could be the ideal candidate for a product franchise if you have the following attributes:

Final Thoughts

There are three main types of franchising relationships, each of which represents a different segment of a franchised company’s supply chain. Depending on factors such as the level of control you want over your business, your business experience/skill-set, and the amount of capital you can access, you might decide to open a business format franchise, product franchise, or a manufacturing franchise. Or, you might just decide to go into business for yourself! For more information on franchise ownership, check out some more franchise resources we’ve put together for you:

The post The 3 Types Of Franchises You Could Own appeared first on Merchant Maverick.

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