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Considering a Franchise to Succeed in a Small Business in Canada

Starting a small business might be a good idea in Canada but just like in any other business forms, there will be numerous obstacles to run it properly. Some people bow down to these obstacles and move away from their business. If you want to run a business but do not want to face the problems of starting one and other risks associated with it, then franchising might be a good option for you. Franchising has grown rapidly in Canada in recent years, particularly in the small business sector. This article explains what a business franchising means and why you should consider it to succeed in owning a small business in Canada.

  • What is Business Franchise and How Does it Work?

The first thing you need to remember is that a franchise is not an independent business. It’s the way of structuring a business based on the models, aspirations and brand of another established company. Usually, there are two parties involved in this type of business, franchisor or franchisee. Franchisor is the owner of a business while franchise is the one who has received rights from the Franchisor to run its business (using its name and systems) in another location. The franchisee runs the business for an agreed period of time and provides a return fee called franchise fee. The mode of payment of franchise fee, be it a profit-based or investment-based, depends on the contract between the parties in a franchise agreement.

When you buy a franchise, you buy the right to run a business under a proven brand but you have to uphold the franchisor’s way of doing business. This way, you’ll not have to spend your time making strategic plans for your business, instead you can use that time for making other developments in business. All these strategies from creating business logistics, marketing and accounting to hiring employees, training and product assembly are already set by the franchisor. As a franchisee, you only need to follow on these plans and run your operation.

  • Advantages of franchising a small business
  • Recognition: When you franchise a small business, you will be using the name and marketing systems of a well-known and established company. So, the product or the service that you provide is most probably already familiar to the people.
  • Support: Franchisors support their franchisees in various ways. The foremost is marketing, computer systems, processes, accounting, supplies and training for employees.
  • Shared Success: In franchising, both parties are interconnected. So, when you share the name, you also share the successes. When the reputation of parent company grows, the news spreads which helps to improve the franchisee’s business. Similarly, if the revenue of the parent company grows, the partner company can access various resources from it.
  • Minimize the risk: Starting a small business from scratch can have various risks. However, franchising a small business reduces these risks to a minimal level as you are taking name and systems of an established business. Likewise, if the parent company has a good business model then chances are that your return on investment will be greater than opening an independent company.
  • Employees and investors: When you are running a small business as a franchise, it provides some kind of incentive to allure quality and talented employee. Similarly, lenders and investors generally prefer an established franchise to a local business to invest in.
  • Suppliers: When you start a new business, you have to search for reliable suppliers and quality products. It takes a lot of effort, time and money to get the best deals for your business. However, when you sign up as a franchisee, it could be relatively easier to get good deals. Similarly, your franchisor can also give access to their own suppliers. The franchisor will also assist you with outlet design and equipment purchasing.
  • Things To be Considered Before investing in a Franchise

A good research before going into franchising, will help you determine whether or not, it is good fit for your business. The benefits will vary from one company to another and only a few might fit the market scenario of your area and interest. Similarly, it is also very important for you to consult an accountant and a lawyer who knows the franchise business and can provide opinion on the franchise agreement. Remember, before signing an agreement; do discuss initial investment, franchise fee, royalties, territory restriction, operational assistance, licensing details and other benefits.

You can learn about franchise opportunities through online sources, industry publications, and franchise shows in major cities across Canada. Or contact us at info@brontebay.com for more information.

SubhashSharma

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Mr. Sharma is a management accountant with over 33 years of experience in small business. He has been engaged in independent accounting practice since 2003. With MBA degree in IT Management and CPA, CMA designation he believes in creating value for the clients. Mr. Sharma has been actively involved in imports, exports, retail, construction and IT consulting. He has written articles in the “Canadian Immigrant” magazine on taxation and accounting for small business. He has served as director on the boards of York Regional Community Foundation, Community Living of York South and Surrey Foundation. He is a member of CAPS (Canadian Association of Professional Speakers), Rotary Club of Richmond Hill, Markham Board of Trade and Richmond Hill Chamber of Commerce.

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