Q: I have worked for the same company for almost 15 years, since coming to Canada. My wife and I have decided to buy a franchise and work for ourselves. Our mortgage is paid off and our kids are grown. Is buying a franchise a good decision?
A: Before purchasing any business, franchise or not, potential purchasers should retain a good lawyer and an independent accountant. Owning a business can be a dream come true or a living nightmare that has entered into the Twilight zone. If financing is necessary, speak to the institution that you do business.
Franchises are not for everyone. Not unlike work and shoes, this must be a good fit for you.
Statistically, franchise operations are more likely to be successful than starting a business as an independent. Canada has more than 1,000 franchises, from auto shops to restaurants to large food chains. We all know the fast food chain with a clown and the hockey player that sells coffee. However, purchasing a franchise does not necessarily guarantee success.
The Canadian Franchise Association (CFA) represents more than 350 franchises in Canada. Check out their website at www.cfa.ca. This might be a good place to start for information.
In 2000, Ontario’s new franchise legislation, the Arthur Wishart Act (franchise disclosure) was developed to help and protect potential buyers of franchises to make informed investment decisions by encouraging franchisors to provide complete business information. The new act sets out certain rights and obligations for franchises. Many smaller franchises are obligated to provide complete financial information about the financial health of the franchise.
Buying a franchise offers many advantages.
- Instant name recognition of the business or service.
- A proven track record.
- Ready-made sales and marketing plans.
- Methods of business operations.
And there are disadvantages, too.
- Start up cost are higher.
- You must conform to the rules and procedures set out by the franchisor.
- You are not totally independent and much of the success depends on the franchisor.
- Franchise fees reduce your take-home profits.
Potential buyers must ultimately make the final decision, but put together a good team of experts to help you.
Henry Choo Chong, CGA provides accounting and tax services to individuals and businesses in the GTA. He can be reached at 416-590-1728, ext. 304. Any questions to Money Matters should be E-mailed to email@example.com.