There are many reasons why a franchise is a safer option for most aspiring entrepreneurs. A proven business model, initial and on-going training and support, and a well-recognized brand name are just a few of the reasons that come to mind. But one potential hurdle is the higher initial investment required to purchase a franchise. The franchise fee alone can sometimes be too much money for a first-time entrepreneur to put together.
This is why I’ve made a conscious decision to explore good low cost franchise opportunities with excellent growth prospects. I want to prove that every would-be entrepreneur, no matter the budget, can find a good franchise that fits his or her goals, interests, skills, and financial ability to invest.
And a low cost franchise does not have to mean that the profit potential is limited. It simply means that you can start small and build your business gradually, one step at a time. One of my favorite sectors for a low cost franchise is the carpet cleaning sector. I like it because you can start without hiring any employees and you can do work that is relatively easy to perform and master.
One of the most well-recognized names in this category is Chem-Dry. There are 6 reasons why I think Chem-Dry is a very good option for someone interested in buying a low cost franchise.
1. Chem-Dry offers a proprietary and green carpet cleaning system that is more effective and gentler on the carpet compared to steam cleaning and other dry cleaning options available in the marketplace. Chem-Dry’s Hot Carbonating Extraction Process uses the power of carbonation to extract more dirt from the carpet and requires a fraction of the moisture used by the competition.
Its carbonating cleaner called The Natural is a green certified product that penetrates deep into the carpet’s surface and the hot extraction process lifts the dirt and grime to the surface where it is whisked away.
The right to use this highly effective proprietary carpet cleaning system alone is worth the price of the franchise. I’ve used their service in the past and I can personally vouch for its effectiveness.
2. The total initial investment for a Chem-Dry franchise ranges from $25,600 to $121,450, depending on the type of equipment and van chosen.
The least expensive equipment package is the PowerBase Portable Unit. The total cost of this unit is$29,050, of which $20,555 can be financed through Chem-Dry. With a low interest rate of 3%, the monthly payment comes to $393.80, payable starting the 4th month of business.
The royalty is a fixed amount of $350 per month, starting the 4th month of business. So as the business grows, the percentage that goes to the payment of royalties decreases.
There are 2 other options which are more expensive and require the machine to be mounted in a van. The total cost of these 2 equipment packages are $42,250 and $49,450, which can also be financed at 3% with a down payment of a little over half the total cost. The royalties for these 2 options are also fixed at $350 per month.
3. A new Chem-Dry franchisee will be assigned a special business coach who will guide the franchisee throughout the pre-opening and opening process. The personal coaching continues well into the first few months of business. As the business grows and matures, the franchisee will have access to other experienced business coaches and an extensive network of franchisees (over 2,000 franchisees in the U.S. in 2011).
Prior to opening, a Chem-Dry franchisee undergoes 5-days of hands-on and classroom training at the corporate headquarters in Logan, Utah.
4. The Chem-Dry franchise offers its franchisees multiple revenue streams over and above the primary carpet cleaning business. The franchisee can offer ancillary services like upholstery cleaning, area rug cleaning, pet urine removal, and specialty stain removal. With additional training and supplies, a franchisee can also offer tile and grout cleaning, leather cleaning, and basic water damage cleaning.
5. There are still many territories available for franchising. Each territory can accommodate 1 Chem-Dry franchisee for every 60,000 people, and multiple franchisees can exist successfully within the same territory. Although there are advantages to having an exclusive territory, it also helps increase brand awareness if there are several franchisees promoting their respective franchises within the territory.
In effect, each franchisee benefits from the advertising efforts of their neighboring franchisees. And since Chem-Dry does not require franchisees to contribute to a national or regional marketing fund, all advertising dollars are spent at the local level at the discretion of the franchisee.
6. Chem-Dry was purchased by Home Depot in 2006 and became a subsidiary of the nation’s largest carpet retailer. This benefits the franchisee because the partnership of these 2 giants in the carpet business drives new customers to them. Chem-Dry franchisees support Home Depot’s customers in conjunction with the retailer’s Carpet Maintenance Plan and warranty services.
In addition, Chem-Dry’s national accounts program called Chem-Dry Corporate Services (CDCS) leverages the company’s relationships with large corporations to provide an additional source of revenues for franchisees.
The one negative statistic I found concerning is the steady erosion in the number of Chem-Dry franchisees every year since 2007. The company lost franchisees at a rate of about 100 a year, which is less than 5% of the chain’s size. I suspect that some of these franchisees simply did not renew their franchise agreements at the end of the 5 years, and turned independent. Still, I would rather see the chain growing rather than shrinking.
The silver lining is that a new franchisee will have less competition from neighboring franchisees and still benefit from the residual effects of the advertising efforts of the former franchisees when they were still part of the system.
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