How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
When you're taking a look at all the Canadian franchises that are available, price is always going to be somewhat high on your list. When you're looking at entry cost, you're really considering how well you can manage the risk, how long it will take until you break even, and when you'll be able to start paying yourself. With that in mind, a low-cost franchise may be the way to go, but you do need to evaluate the pros and cons first.
Potential Pros and Cons
When a franchise costs less, there's always the possibility that support and training won't be as comprehensive or ongoing as it would be in a more expensive system. There's also the brand's investment into marketing and their customer acquisition and retention programs, which is an area you will have to evaluate with a close eye. Without customers, success will be pretty elusive, so it's important that a low-cost opportunity still has a franchisor who is investing properly into these areas.
On the other hand, if you're very entrepreneurial-minded, a lower-cost opportunity often comes in systems that give operators more latitude in operation. If you are looking for more freedom and more control over your schedule, a less expensive franchise may be able to deliver more easily in that area than a more costly one.
Financing-wise, lower-cost opportunities can go either way in terms of getting the money you need to get started. Some franchises on the lower end of the price scale offer in-house financing or other payment arrangements, and depending on the cost, you may be able to swing it yourself. If you go through a bank for a small business loan, the track record of the franchisor and the sophistication of their processes and system will be evaluated. A franchise may be lower cost because it is newer, and in that case, it won't have the proven system history the bank will be looking for.
Ultimately, you need to be able to identify the value proposition of an opportunity to make the most informed decision. A system with a proven history and low entry fee could, in fact, offer more support for your money than a more expensive franchise in the same industry would. Weigh everything that comes with your investment before you sign onto a franchise to ensure that you are getting what you need for success.
