Are you thinking of becoming your own boss but aren't sure what kind of business you want to start? Have you considered becoming a franchise owner? If so, there are a number of things to think about before starting any business, but owning a franchise is quite different from starting your own business from the ground up.
A franchise is a legal agreement between a franchisor (seller) and the franchisee in which the franchisor grants the franchisee the right to distribute certain goods or services developed by the franchisor in a particular way, in a particular location and for a specified period of time. In return, the franchisee pays the franchisor various fees and royalties.
There are several types of franchise arrangements but a business franchise is what most people think of when they hear the term "franchise." A franchisee buys the right to market and sell particular products or services. The franchisee buys those rights for a specific time and a defined area by paying the franchisor a franchise fee for the right to use the franchisor's trademarks and marketing plan. In some cases the franchisee buys an entire system - buildings, equipment, supplies, bookkeeping, uniforms, training, and so on. The franchisee can often walk in off the street, turn the key in the lock and start the business. This ready-made set-up is also known as a turnkey operation. Fast-food chains are good examples of this kind of franchise.
Buying an existing well-established business might reduce the possibility of failure. According to Statistics Canada's Key Small Business Statistics current survival rates for small and medium-sized businesses in Canada decline over time. About 85 percent of businesses that enter the marketplace survive one full year, 70 percent survive for two years and 51 percent survive for five years. Buying a franchise can be more expensive than starting a business "from scratch" because you are actually buying a product/brand name with a proven track record and because the franchisor will generally provide training, marketing, support and other services to the franchisee.
Like any other business, however, franchising is not without risks. Purchasing a franchise is a major investment decision and not every franchise is ideal for every individual. Here are a few questions you should ask yourself before taking the plunge:
- Are you ready to take on the responsibilities of starting and running your own business?
- Does your family accept your choice and are they ready to support you?
- Do you like the activity you are considering enough to make a commitment for 5, 10 or 15 years?
- Do you like dealing with people and are you good at it? - You will have to interact with your customers, your employees, the franchisor and other franchisees.
- Do you like the franchisor's staff / those people with whom you will be working?
- Are you willing to follow the franchisor's rules and system?
- Can you afford the franchise?
- Have you carefully studied the legal documents?
- Does the franchise you are considering have a track record of success?
- Are the other franchisees generally happy and successful?
The Canadian Franchise Association website provides resources, facts, reports and much more for anyone considering becoming a franchise owner or for someone who already owns a franchise and is looking for more information. Or you may also wish to attend one of many franchise trade shows held throughout the year where you can have all your questions answered.
To learn more about the ins and outs of franchising, take a look at what the library has to offer:
Published five times a year, Canadian Business Franchise Magazine is the face of franchising. The magazine’s editorial offers a unique, behind the scenes look at those entrepreneurs who have embraced the franchise lifestyle and have parlayed their passions into a thriving business. Read the success stories and get advice from experts and franchise owners.
Canadian Business Franchise Directory is Canada’s top-selling annual directory of franchises and franchise services. It offers information about more franchises that operate in Canada. The Directory features expert advice on key issues for the would-be franchisee including financing, accounting, and what to expect from the franchise lifestyle.
The Canadian Business Franchise Handbook is the ultimate beginners’ guide for anyone looking to purchase a franchise.This resource details what potential buyers need to help them take the first step.
The handbook also includes advice from franchise professionals, including financing and accounting tips and secrets to long-term success.
The Canadian Franchise Guide is an up-to-date resource that provides commentary, checklists and statutory requirements that you need for your business venture. It contains a complete set of forms and precedents, including franchise applications, disclosure and prospectus documents, franchise agreements and trademark documents for franchise financing.