How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
Franchising in Canada and around the world has been around for years. Despite the innovation and creation of jobs and prosperity that franchising has brought to many places across Canada, there are still some persistent myths out there that people have about franchises. If you are thinking about franchising but are holding off for some reason, check out the common franchising misconceptions below to see if you're hesitating for the wrong reasons.
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Franchising is just too expensive
Sometimes, people won't consider a franchise because they view it as being too expensive. They've heard that franchise investments run into millions of dollars, which they can't secure or just aren't comfortable spending. However, this is not always true. While some large franchises that require a lot of equipment or a physical location, for example, can have a very high investment attached, many other types of franchises do not. Some home-based brands can have investment levels as low as $10,000.
Before you decide a franchise is too costly, research the brand options in the industries that interest you. You may be surprised to find there are, in fact, affordable options.
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Franchises will sell to anyone
While this may have been true back when franchising was in its infancy, franchisors these days are far more selective about who joins their brand. This is because the franchisor is dedicating time and resources into the brand, and the addition of the wrong franchisee can damage those efforts. Now, franchisees normally go through a process so the franchisor can determine whether they are a good fit for the system.
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Bigger franchise investments mean bigger returns
This is the "investor" mentality. It's normal to assume, in an investment scenario, that you'll get a better return investing a million dollars than someone who invests just $10,000. However, a franchise is a different type of investment, and this isn't necessarily true here. A franchisee can turn a franchise with a lower investment into a large, successful business, receiving far more back than they invested over time. The return on a franchise largely depends on the business itself, how it is run and other factors, such as the market the business is in.
As you try to determine what type of return you can expect should you invest in a particular franchise, dig deeper than the projections provided by the franchisor. Speak to current franchisees in that system about the type of return they receive. The information from the franchisor is going to be more along the lines of the best-case scenario, and you want to underestimate your return to be on the safe side.
