How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
Rising inflation rates are causing a huge knock-on impact in many areas of consumer spending, including non-discretionary areas such as the weekly food bill. With everyday products increasing rapidly in price, fewer Canadians have the spare funds for eating out, leading many potential franchisees to wonder whether now is a safe time to invest in a food service franchise.
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The Risks
It isn't only the cost of buying the food to sell to customers but also the ongoing costs of renting and maintaining appropriate premises and hiring, training and paying staff. Even if no customers set foot through the door, these costs still need to be outlaid.
Adding to this, there is the complication of needing to adhere to many regulations that are specific to the food service industry. The legal regulations binding this industry are complex. Depending on the type of business that you are operating and the location that you are operating out of, you may need to consider the various ways in which provincial, federal and municipal laws could affect you.
These include the need to meet or exceed the requirements and standards published in the Ontario Food Premises Regulation 562 in the Health Protection and Promotion Act if you are based in Toronto, in addition to complying with all requirements listed in Toronto's Municipal Code 545-Licencing. These standards relate to a number of key areas, including minimum food temperatures, safe food handling, the need to maintain adequate sanitization, and correct processes for washing dishes and maintaining high standards of personal hygiene.
The penalties for failure to comply with the relevant legislation are deliberately harsh, with individual penalties of up to $1000 a day, as well as corporate penalties of up to $10,000 a day for non-compliance.
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How Franchising Eases The Risk
A regulation that particularly affects franchises is the need to publish the number of calories in each dish, along with the flavor and size of the items on the menu, on at least one sign, on every menu and on the item's label, if it has one. This is mandated under the Making Healthier Choices Act. As the dishes served across a food service franchise are standardized, complying with the labeling requirements is easier than it would be in a business that did not have the support and oversight that franchising offers.
Franchises in Ontario are also required to account for the waste packaging generated by all chains within their province, easing the reporting burden on individual franchisees. This can involve a fee for provision of the service, but it will be outlined in the Franchise Agreement signed at the outset, where it is applicable.
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Summary
The food service industry is stringently regulated, with high costs and considerable risk. It has the potential to generate impressive profits, but individuals should assure themselves that they have sufficient personal funds to handle a fallow period before investing in such a business.
