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.
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