Pros and Cons of Franchising
When you purchase a franchise, you are actually paying for the product or service’s proven business track record and the franchisor’s marketing, training, and business support. This explains why putting up a franchise busines generally costs more than putting up a start-up. Despite the added expense, many still consider franchising because of its overall higher success rate vs. non-franchised businesses. Before you sign any franchising agreements, consider consulting with a Canadian Franchise Lawyer, who is an expert in the field and will be able to dispense invaluable legal advise relating to all aspects of the franchising business.
A franchise is actually a legal agreement between a franchisor (seller) and a franchisee (buyer). Through this agreement, the franchisee is granted rights by the franchisor to distribute certain goods or services developed by the latter, in a specific way, a particular location, and a specified period of time. When you enter a franchise agreement, you are not actually buying a business, but only the rights to operate the business under the said agreement for a limited, pre-specified period of time. This agreement may also have the option for renewal.
Buying a franchise has its advantages. First, the franchisor will provide the training necessary for you to run the business successfully. This training encompasses all stages of the business - from establishment, to running, and even expansion. The franchisor will also provide regular supervision and ongoing advice on business operations. In addition, most franchisors also have the buying power to fund regional and national advertising campaigns, as well as provide financing options when needed. Franchise attorneys will be able to assist you by drafting, negotiating, and reviewing the franchise agreement to ensure that these terms are all specified, and will be duly enforced.
On the other hand, franchising also has a few disadvantages. One of them is the fees and the costs involved. Most franchises are expensive to purchase and involve paying ongoing fees or royalties based on sales. Also, most franchisors lay down strict regulations and guidelines in running the business that you, as the franchisee, must adhere to; this means that your ideas on how to run the business will be quite restricted. Most franchised businesses also offer limited expansion possibilities. Your Canadian Franchise Lawyer can help explain important points in the franchise agreement, make you understand your rights, and inform you of any legal restrictions that you need to be aware of.
As with other types of businesses, there also are risks involved in buying a franchise. Make sure you are fully aware of these risks and weigh the pros and cons thoroughly before you decide to sign a franchise agreement. Although more start-ups are prone to fail, franchises are not 100% risk free.