Many people have the dream of owning and operating their own business. With that comes a lot of risks, and massive rewards. Some entrepreneurs may decide to start a business from scratch in a field that they are already experienced and educated in. But for others, they may want to go in a direction with a franchise that has already proved its value, comes with training, and carries brand recognition, that they can operate as a turn-key operation. This is what we call buying into a franchise.
Why Buy A Franchise?
For many, the question is not why buy into a franchise, but is what franchise I should buy? A franchise operation should have a proven track record of sales, growth, and brand awareness. We know specific restaurants and coffee shop names known worldwide. This type of brand awareness can make a starting out entrepreneur surer of his or her decision to start their own business since the company will already be known to people with no further explanation needed. This can create automatic trust with the consumer. In saying that, a franchise can still fail if the franchise owner does not have a passion or work hard to see the success of the business. A franchise can put you in a position of immediate sales from day one but there are no guarantees. Franchise law provides many requirements in terms of information that you are owed before you purchase a franchise: information that you can review with your lawyer to make sure that you understand the risks, the history of past franchise owners, and more.
What Does a Franchise Cost?
I want to own a well-known restaurant, but what is the cost? The answer to this question is, it all depends on what franchise you are looking to buy. You see, every franchise, whether it is fast food, dine-in restaurants, coffee shops, retail, or pet stores, all have a franchise model that works for their company. A company will charge you what they call a franchise fee. This is a fee that the franchisor will charge the franchisee up-front to allow them to use the brand name of the franchise, as well as the training and business practices that they believe will lead to success.
In most cases, the franchisee must also be worth or have a certain amount of unencumbered cash to be approved. In addition to the upfront fees, the franchisee must also pay a monthly royalty to the head office. It is always highly advised to speak to a business lawyer to review all terms and conditions of purchasing into a franchise as attorneys have extensive training and experience in reviewing contracts and documents in legal business matters.
Can I Start A Franchise with No Money?
Would it not be a dream to own a well-established brand without any money down? Imagine, someone handed you the keys to your brand-new establishment and said, the place is yours have fun and make lots of money for yourself. Unfortunately, that will not happen. There are no franchise models that offer this type of ownership to franchisees.
You must give an upfront fee to the franchisor and there are always other costs, such as a lease, equipment, supplies, etc. If you have skin in the game, it is not so easy to throw down your cards and walk away because you grew tired of running the business. Your initial investment will help to keep you placed in the company as you do not want to lose those funds and will do whatever it takes to make your location grow in terms of profits. Remember, it is imperative to speak to a franchise lawyer when deciding if buying a franchise is right for you as your attorney will be able to explain to you in terms that you will understand what your financial and daily responsibilities will be.
What Type of Franchise Makes the Most Money?
Many franchises have the potential to make you an excellent income. It will come down to your dedication, daily management & operations, passion you bring to your establishment, and the success of the franchisor itself. You see, just because one brand is more known than another does not mean more profits will be made. Throughout history, many well-known franchise locations have gone out of business due to the lack of proper management and other variables. As the owner of an independent franchise, it is your responsibility with the guidance of your franchisor to see the success of your establishment.
Contact a Franchise Attorney Now
There is no faster way to get the direct answers to your questions of what is involved in buying a franchise location other than speaking an Attorney. The best option is to hire a lawyer that is experienced with the franchise model, can review the often lengthy franchise agreement and disclosure, and can easily explain everything to you in terms you will understand, so that you understand the type of situation you would be getting yourself into. Before jumping headfirst into things and putting down the initial investment that the franchisor will want upfront and then later finding out you made a mistake getting involved, take the ten minutes out of your day, call a business lawyer, and set up a free consultation.
Jonathan Kleiman Attorney at Law
My name is Jonathan Kleiman. I am a business lawyer in the city of Toronto. My experience involves all business and contract laws in Ontario.
My goal is to help and guide you in fulfilling your dream of becoming a business owner. I am a business attorney that crosses all the t’s and dots all the i’s as my attention to detail is impeccable.
If you are looking into owning a franchise or even starting your own business from the ground up, I invite you to call me today, and we can set a free consultation on your matter.