How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
According to the Canadian Franchise Association, there are now over 75,000 franchise units across the country, and this business sector generates $96 billion annually. With franchising being such a force in the economy and enjoying strong growth year over year, it's not surprising that the number of multi-unit franchisees has grown as well.
Why multiple units are an appealing option
The increase in multi-unit franchisees in Canada comes largely from the benefits and opportunities that are associated with owning more than one location, including:
• Increased stability: Businesses always see ebbs and flows, and there is a downturn at some point. With one location, such a dip is often hard to handle financially. When a franchisee owns multiple locations, however, downturn at one store may be offset by growth at another one.
• Brand awareness boom: Expansion and brand-building go hand in hand, so owning multiple units gives a franchisee an immediate opportunity to build a unique brand voice and image. It's also more cost-effective to get that message out across multiple locations at the same time.
• Expansion ease: Naturally, owning more than one location makes it easier to scale and expand the entire business quickly.
• Reduced
competition: In some cases, as the brand grows and neighboring
territories become available, owning them eliminates
the possibility if having a third party owner controlling
those territories and competing for overlapping and
neighboring areas of the market.
You may be wondering why franchisees ever go the single-store route. When there are upsides, there are downsides, too, and those include the following for the multi-unit franchisee:
• It’s less hands-on: When you’ve got one location, you will wear a lot of hats on a daily basis and oversee most operations. With more than one unit, you’ll have to start your own mini-corporation within your larger franchise brand and will be less involved in the day-to-day business and operations of a location.
• It’s more expensive: The more units you have, the more expensive it is. Since a franchise is an investment and it will likely take some time to become profitable, you have to be able to handle all the ongoing costs and expenses of multiple locations beyond the capital required for the initial investment.
• Timing is a concern: Your market needs to be ready to handle more than one location. Otherwise, you are setting yourself up for failure from the start.
Franchising is here to stay in Canada, and there are many different brands and ownership styles to chose from. Before you make your final decision, research your industry, market and all your options.
