Is a franchise the answer to your independence?
By Adam
August 30, 2010
Small Business & Entrepreneurship
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Buying a franchise can be a smart way to open your own business without many of the pitfalls that come with starting from scratch. Successful franchises – Tim Hortons and Canadian Tire are two of the most well-known – offer you the independence of running your own business day-to-day while benefitting from:
· The franchisor’s recognized brand
· The franchisor’s established business system
· The power that comes from the franchisor being able to buy for a large group of franchisees.
Of course, there is a price tag associated with these benefits, including an initial franchise fee – which can sometimes be pricey – as well as regular contributions for advertising and media buying.
Vancouver-based franchise lawyer, Tony Wilson offers some tips if you’re considering buying a franchise as a way to start a business:
1. It’s not your brand: You’re not really buying but rather renting or leasing the franchisor’s name and know-how for the period of the agreement. If you walk away from the business in the future, all rights revert to the franchisor.
2. Due diligence: Just as you might speak to the neighbours before you buy a house, contact other franchisees in the system you’re considering buying into and ask if they’re satisfied, if they’re making money and if they would do it again.
3. Check the numbers: Carefully read all financial and other information from the franchisor and be sure to speak to your lawyer. Remember, these documents, even if they’re completely legitimate, are written for the franchisor’s benefit.
4. Don’t keep it in the family: Limit your exposure by avoiding entering an agreement where both you and your spouse have to guarantee the contract. It will only mean both of you can be sued if the business fails.
5. Follow your passion: Find a franchise that’s challenging, exciting and that you think you’ll enjoy being a part of.
You’ll find some fantastic franchising resources at inc.com, click here for a useful checklist of questions you should ask before buying a franchise and remember to visit the Canadian Franchise Association too.
· The franchisor’s recognized brand
· The franchisor’s established business system
· The power that comes from the franchisor being able to buy for a large group of franchisees.
Of course, there is a price tag associated with these benefits, including an initial franchise fee – which can sometimes be pricey – as well as regular contributions for advertising and media buying.
Vancouver-based franchise lawyer, Tony Wilson offers some tips if you’re considering buying a franchise as a way to start a business:
1. It’s not your brand: You’re not really buying but rather renting or leasing the franchisor’s name and know-how for the period of the agreement. If you walk away from the business in the future, all rights revert to the franchisor.
2. Due diligence: Just as you might speak to the neighbours before you buy a house, contact other franchisees in the system you’re considering buying into and ask if they’re satisfied, if they’re making money and if they would do it again.
3. Check the numbers: Carefully read all financial and other information from the franchisor and be sure to speak to your lawyer. Remember, these documents, even if they’re completely legitimate, are written for the franchisor’s benefit.
4. Don’t keep it in the family: Limit your exposure by avoiding entering an agreement where both you and your spouse have to guarantee the contract. It will only mean both of you can be sued if the business fails.
5. Follow your passion: Find a franchise that’s challenging, exciting and that you think you’ll enjoy being a part of.
You’ll find some fantastic franchising resources at inc.com, click here for a useful checklist of questions you should ask before buying a franchise and remember to visit the Canadian Franchise Association too.