Franchising in Canada
Investigate Before You Invest
Every year, thousands of Canadians from all walks of life respond to the call of entrepreneuralism. Many people are attracted to franchising as a method of doing business because of what they perceive to be a greater chance of success than going it alone as an independent operator.
Unfortunately, a large number of people view franchising as some sort of magic wand or guarantee of success. Franchising is usually a safer investment than opening a similar independent business, if the franchise is part of a solid franchise system. In fact, studies show that 86% of franchises that opened in Canada within the last 5 years were still under the same ownership and 97% of them were still in business; whereas, a large percentage of independent businesses that started during the same period have gone out of business. It is generally accepted that 40% of all non-franchised businesses don't make it to the end of their first year of operation, and 80% fail within their first 5 years. Even the 20% that survive are not safe, as 90% of them will fail within their next 5 years.
When considering a franchise it is essential that you carry out proper due diligence. Success in franchising is based on mutual dependence, so it naturally follows that the search for a franchise is a mutual investigation process. It is important to evaluate both the franchisor and the franchise. Reputable franchisors go to great lengths to select a franchisee. If a franchisor fails to investigate you as thoroughly as you investigate them, be cautious. If a franchise is awarded to a franchisee that is unable to operate it successfully, the franchisor will suffer almost as much as the franchisee that fails. Not only does the franchise unit fail to produce an ongoing revenue stream for the franchisor, but it can also take up a tremendous amount of the franchisor's time and effort to either salvage or resell the franchise.
A franchisor is obviously not gambling its entire reputation on you; however, you are probably betting a good deal of your future on the franchisor, so don't hesitate to ask a lot of questions. A franchisor that is offering a legitimate opportunity and has nothing to hide should have no hesitation in providing the necessary information to a qualified franchise prospect and should respect the fact that you are investigating them in much the same manner as you are being investigated.