So you want to be a franchise owner? Many have found great success opening a franchise or several franchises so if you’re considering taking the plunge, we want to help with this quick guide to becoming a franchise owner.
Learn The Language of Franchisee
Often times learning the language of the business is one of the most important steps to quickly learning the business itself. Do you know what an FDD is and how it differs from a Franchise Agreement? If not, be sure you’re prepared to speak the common language of franchisee before you get started.
Find the Right Franchise Opportunity
With so many opportunities to own a franchise, there is sure to be one that will meet your unique needs. But rather than typing “Franchises in Canada” into your search engine, you’ll want to list out your unique skills sets and qualifications, do a financial assessment of your net worth and understand what you can and cannot accept in your new venture. Then look for resources like the International Franchise Association or the Canadian Franchise Association for specific investment opportunities.
Grading the Options
In your search for the right franchise opportunity, you’ll likely start wondering what key considerations to account for when weighing your options. Things like territories, trademarks, and FDDs are going to be key to if you can succeed. Tony Wilson of The Globe and Mail put together a comprehensive list of key considerations before signing agreements. Some important ones that didn’t make his list include:
- Does the franchise have a long history of cash flow?
- What level of support do I need to be successful? Does the franchise deliver this level?
- Is the franchisor a member of any franchise associations?
- Are the margins enough to cover the monthly royalty?
Finance Your Investment
If you don’t have the capital to finance your new franchise yourself, you’ll want to do your research on the financing options that are available for your needs, and the requirements for each. Commercial banks will grant you a small business loan, but will require you to put down a specific amount in cash, and require a business plan and collateral to secure the loan. This may not be the best option, however, if you’re looking to open multiple locations. Either way don’t enter into a situation where your spouse is required to be on the loan. While franchising is a lower risk than starting your own business from scratch, there’s still risk associated with it.
If you expect revenue of $5 million or less, consider the Canadian Small Business Financing Program (CSBFP) to finance up to 90% of your loan. Finally, you may also find that the franchisor will finance your new operation directly.
Franchising is not easy but with the right preparation laid out in this quick guide to becoming a franchise owner, you can increase your success rate and set yourself for financial stability. To learn more, be sure to watch our webinar on franchising, recorded earlier this month.