How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
As you look for the right Canadian franchise, you have likely learned more about why owning a franchise makes sense. While some reasons are pretty well-known, such as having the power of an established brand behind you, there are other benefits to franchise ownership that you may not have even considered yet.
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The economy of scale
Whether you are looking at a product-based or service-based franchise, you will need to buy items. Merchandise, tools, equipment or other supplies are necessary for just about every business. If you were to start a business on your own, you would be the only one buying those necessary items, which does not give you much purchasing power. A franchisor, however, usually gets bulk discounts for its franchisees that you would never get on your own. When your expenses are lower, you have an easier path to profitability.
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The easier road to financing
You may need to finance costs associated with starting your dream franchise business. As an independent business owner with an unproven business model, you would represent more risk to a lender than a franchise with a proven system. Therefore, it is usually easier and less expensive over time to finance a new franchise location than a new small business. Your franchisor may even have some relationships in place to make financing easier for franchisees or offer some financing options itself.
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The smoother path to growth
Opening up a second franchise business location is often easier than opening up a new location for an independent business. As noted, financing a franchise is easier to begin with, and when you already have a location up and running, adding another in the same system is usually not a complicated process.
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The saleability factor
One day, you will want to sell your franchise location. Whether this will come sooner or later will depend on your plans, but it will happen. When you sell a franchise, you are selling a product that is recognizable to other investors. In addition, since your franchisor has a real interest in who joins the system, they can help you to find a replacement who is capable and qualified.
There are many reasons people invest in franchises beyond the brand and name recognition. As you consider your next business venture, don't leave franchises off of your possibilities list without considering the benefits.
