Self-employment
Is franchising right for you?Take a look around any city or town and you're sure to see one franchise after another. For those eager to spread their entrepreneurial wings, buying a franchise might seem like a surefire recipe for success. But it's not for everyone. |
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 [ 2005-02-09 ] |
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CFA president
"This is the type of business where you're not in business for yourself," says Richard Cunningham, president of the Canadian Franchise Association (CFA). "You should be independent but not too independent ... If you're very independent or extremely creative, you'll be happy working with the system for a short time and then will want to change things."
Proper alignment
Because franchising is a proven system, it reduces the obstacles for franchise owners. Still, strong business skills and an interest in the business are a huge plus. "A key area to consider is the alignment of personal interest and the franchise system," says Annie Wong, senior manager of the national franchise market with RBC Royal Bank in Toronto.
"A potential franchisee should carefully examine his/her personal interests, hobbies and take stock of what really motivates (them)," she says. "Proper alignment will promote greater success."
Franchising continues to grow consistently. "Canada has more franchises per capita than any other country, including the United States. Franchising has been successful here," Cunningham says. "About 65 to 70% (of franchises) were American concepts sold to someone in Canada, which means they got the kinks out before they made it across the border. Of course, some franchises are homegrown, such as Tim Hortons, M&M (Meat Shops) and Mister Transmission."
That growth means you have more choice than ever before. "Most people think of food when they think of franchises, but it goes way beyond that," Cunningham says. "Narrow down your interests to two or three and compare them. Spend some time at those franchises. Watch what happens in the business. Have a discussion with franchisees and clientele."
Consider how the franchise you're interested in meets current and future trends. "As baby boomers are getting older, we're seeing an interest in travel and health," Cunningham says. "People in general seem to have less time and are looking for services to support them, from cleaning their home to delivering food to their home."
Once you've narrowed down your interests, it's time to request a franchise information package. "In this province, legislation requires franchisors to give franchisees disclosure information," Cunningham says. "You should call franchisees currently in the system. You should also call franchisees who left the system and ask them why they left."
Reputable franchisors will want to investigate you as much as you want to investigate them. Getting to know one another is an important part of your homework. "I highly encourage the potential franchisee to complete some level of due diligence in order to minimize business risk and maximize the chance for success in the franchise marketplace," Wong says.
She points to resources like the CFA, franchise magazines and franchise shows. Talk to your bank's franchise specialist and visit their website for reference material. (The Royal Bank, for example, publishes a Guidebook on Buying a Franchise and a five-point Guide to Buying a Franchise.)
The cost of purchasing a franchise can vary dramatically. If it's a major investment of more than $100,000, consider hiring an accountant and lawyer before signing on the dotted line.
"A lawyer who specializes in franchising will be absolutely helpful by helping you review your copy of the franchise agreement, which is usually quite complicated and extensive," Cunningham says.
Remember, operating a successful franchise takes dedication.
"If you decide to buy a franchise, you're also buying a lifestyle. It can take up a great deal of your time in the first few years," Cunningham says. "You want to be in a business you're excited about."
ASK QUESTIONS
Thinking about buying a franchise? The Canadian Franchise Association (CFA) recommends you ask the following:
The Franchise Show, produced by the CFA, is held Feb. 26-27 at the Toronto Congress Centre, 650 Dixon Rd. at Hwy. 27. Visit www.cfa.ca to learn more.
How many hours a week do you work?