May/June 2017 Ultimate Guide to Buying a Franchise

Franchising 101

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Franchising is an attractive and powerful way for Canadians to achieve success as small business owners.

Through the proven business concept and support provided by the franchisor, franchisees are able to be in business for themselves, but with the support and assistance of the franchisor, the advantage of the franchise system’s past success, and access to the knowledge and experience of a network of franchisee peers.

Franchising is about sharing success. The success of a franchisee leads to the further success of the franchisor and the franchise system as a whole. When you invest in a franchise, you align yourself with a brand that may already enjoy established consumer awareness and loyalty in the Canadian marketplace. This instant brand recognition can bring many advantages, including a stronger position when applying for a business loan. As a franchisee, you will benefit from the license to use the franchise system’s proven branding, trademarks, and proprietary products and/or services.

A franchise also provides you with the advantage of a tried-and-true system and an operations manual that fully explains how you are to replicate the franchise’s system at your location. While it’s impossible to eliminate all risk, if you work and follow that system, you can reduce the risk of business failure and increase your likelihood of success.

As a franchisee, you are considered a small business owner, and it’s important for you to assume a leadership role in your business. By joining an already established system, you don’t have to invent the business from the ground up like you would as an independent business.

The franchise system can save you time and money by keeping you up to date on your market. Through the franchisor, you can stay on top of business trends, research and development, new marketing initiatives, and changes in consumer tastes or behaviours.

Being a franchisee also means there is strength in numbers. Many franchise systems have an established supply chain and strong relationships with suppliers. By ordering your stock, supplies, and equipment through approved suppliers as a member of your franchise system, you may receive the benefit of preferential pricing or special delivery.

Joining a franchise system gives you a network of peers upon whose knowledge and experience you can draw. If you encounter an issue or have a question, your franchise system colleagues are just a phone call or email away.

What are the key responsibilities of the franchisee?

While system-specific responsibilities required of the franchisee will be outlined in the franchise agreement, there are a few key responsibilities that are generally required of the majority of franchisees.

The franchisee should:

  • follow the franchisor’s standards, methods, procedures, techniques, and specifications to ensure consistency;
  • pay a fee (typically an initial franchisee fee and ongoing royalties) to the franchisor for the right to use the franchisor’s trademarks (brand) and business system;
  • take care of accounting, local marketing, staffing, and the other administrative aspects of operating a business;
  • invest their time, particularly during the start-up phase, by working hands-on in their business to fully understand the operational side of the franchise; and
  • work in partnership with the franchisor, allowing for effective two-way communication between the two parties and a mutually-beneficial relationship.

What are the key responsibilities of the franchisor?

While the franchise agreement will outline the specific responsibilities and obligations of the franchisor, there are a few key responsibilities of the franchisor that generally apply in most scenarios.

The franchisor should:

  • undertake to provide franchisees with operating systems and support services to help their businesses grow in ways that are effective, efficient, and profitable;
  • continue to evolve the franchise system through research and development of new products and services;
  • handle all brand advertising and (usually) provide franchisees with assistance for their local marketing activities;
  • protect and manage the brand and its trademarks, while ensuring consistency and quality standards are maintained by all franchisees in the system; and
  • provide initial and ongoing training and support.

If you’re interested in embarking on a career in franchising, we’ve assembled the resources you need to make an informed investment decision. This Ultimate Guide to Buying a Franchise takes you on a tour of the whole path to making a franchise purchase, hitting the highlights of finding your franchise fit, navigating due diligence and disclosure, and working with a support team of franchise professionals, and also offers some top tips to help you as you launch your franchise business.


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