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New in Canada? Is a franchise for you?

Many new immigrants find a franchise very attractive. It allows them to invest the funds they have come to Canada with and ‘buys’ them employment, freeing them from the Canadian experience runaround.
From coffee and fast food to cleaning services – franchises are everywhere, offering many benefits including brand recognition, training and support.

“However, franchises are not guaranteed to succeed and they are not for everyone,” says Marvin Martenfeld, a partner with MNP LLP in Markham, Ontario.

Here are Martenfeld’s tips on how to determine whether a franchise is right for you:

Understand the difference between a franchise and a non-franchise

 A franchise is a business already established by someone. That person has developed a brand and a following.
Businesses that work best as franchises are ones that can be easily replicated in other locations and maintain their success.

Be prepared to follow the rules

 There’s an operations manual covering every aspect of the business operation. The franchise agreement spells out that the franchisee must follow the operations manual.
So franchises are not a good fit for entrepreneurs who want to do things their way, sys Martenfeld.

The pros and cons

The pros of a franchise are that the business is already out there, is recognized and is a proven success.
Because the operations manual is in place, you can get up and running immediately, the learning curve is short and you are likely to make fewer mistakes.
The biggest con is the lack of opportunity to be creative.
Another possible con is that some franchisors require you to purchase all your products through their company instead of from local suppliers.


Do your homework

A good starting point is the disclosure statement from the franchisor, which will include the franchise’s financial position, how many franchises have opened and how many have closed.
If some have closed, ask why.
In addition to researching the franchise on the internet, Martenfeld suggests speaking to existing franchisees.
You would be surprised how open they are and how much you can learn by listening to a franchisee, especially an unhappy one. Many franchises also have franchisee councils. If there is one, try to connect with it.


Know what you can afford

A franchisor will expect you to invest some of your own money. Typically, there are three types of payments involved:
The initial franchise fee; a royalty paid to the franchisor, based on revenues; and an allowance paid to the franchisor for local and regional marketing.


Know yourself

“A franchise does not guarantee success,” says Martenfeld. “You need to be sure you are comfortable following the franchise rules. Be prepared for long hours and hard work.”
– THE INSTITUTE OF CHARTERED ACCOUNTANTS OF ONTARIO

Learn more! To learn more about starting a franchise business operation in Canada, log on to the Canadian Franchise Association’s website at www.cfa.ca

Posted: Feb 29, 2012

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