Finding futures in franchises

Today, he’s embroiled in battle over “exclusivity” that was supposed to protect him from another franchise locating too close. Last year, two new stores popped up less than a kilometer away. “I’m being forced to shut down, and I fear I’m going to lose my house,” he sighed.

The Toronto Sun
March 15, 1996

Finding futures in franchises
Consider the benefits and hazards of buying yourself a job
Linda Leatherdale

With fear growing that property tax madness will force thousands of Toronto small business into bankruptcy, who’d ever want to take the plunge and buy a business?

But many do, as an entrepreneurial revolution on Main Street is giving Bay Street a run for its money.

The numbers are explosive. Some 2.5 million Canadians have taken the plunge and become self-employed, despite the steep odds they won’t survive the first five years after start-up.

In the early 1990s, these were the only guys creating jobs in this country, as corporate Canada downsized mid-managers into unemployment and our jobless rate soared to double digits.

“There are lots of life-long company men and women who needed to find employment so they bought themselves a job,” says Larry Weinberg, a small business lawyer with Cassels, Brock & Blackwell.

Trend is slowing
Latest jobless numbers how the trend of self-employment has slowed a bit, but it’s still explosive with private sector jobs the driving force behind a plummeting jobless rate, now at 8.6%.

Hot sectors are manufacturing, business and personal services, and wholesale trade, and the hot province is Ontario, where some 260,000 new jobs have been created in the past year.

So, if the Bachman Turner Overdrive bug bites, and you find yourself singing the band’s hit song Taking Care of Business, here are your choices:

  • Buy an existing business.
  • Start a new one.
  • Or get into the franchise game.

“The decision whether to start up, buy an existing business, or buy a franchise, is a personal one,” says Weinberg. But all require loads of homework, a solid business plan, start-up capital and a love for the product or service one decides to sell.

Even more important, “before you sign on the dotted line, get advice from an accountant and a lawyer,” advises Weinberg.

In Canada, the franchise industry is explosive, but it’s also unregulated, except in Alberta. And without the watchful eye of legislation, there have been horror stories and lawsuits, in which franchisees claimed the franchisor squeezed them out of business.

PERSONAL DECISION…Small business lawyer Larry Weinberg says wannabe franchisees must carefully weigh the pros and cons before getting that donut shop. While a good franchise offers brand recognition, independent types may not like following strict operation guidelines.

Joe Monteiro is one. In 1990, he bought into a well-established Canadian food franchise, which he had hoped would provide a comfortable life for his family of two young children.

Today, he’s embroiled in battle over “exclusivity” that was supposed to protect him from another franchise locating too close. Last year, two new stores popped up less than a kilometer away.

“I’m being forced to shut down, and I fear I’m going to lose my house,” he sighed.

But for every horror story, there are many more of great success, says Weinberg, who adds the beauty of franchises is the homework and marketing is already done. Plus, “you’re getting the right to use a recognized name.”

In a nutshell, other benefits can include:

  • Getting expertise on the new business in a short time.
  • Volume purchasing power for equipment, inventory and supplies.
  • Group advertising.
  • System-wide innovation.
  • Assistance in getting a good location.

But there is a cost: “You’ll pay a royalty to the franchisor, which is usually based on a percentage of gross sales.”

Weinberg adds you’ll also have to follow the rules.

“So, if you’re independent and like to do your own thing, you may not make a good franchisee.”

Weinberg points out some people who make the plunge and start their own business can become so successful, they’ll end up franchising their idea.

Next month, it’s expected Ontario will announce plans for franchise legislation, to protect those who want to take the plunge.

If you have questions about owning a business, Weinberg will be my guest on my live Moneyline TV show Monday night from 7 to 8 p.m., on Rogers Community TV. Call us with your questions.


Brought to you by WikidFranchise.org

Risks: I loved the product so much, so as a fool I bought a franchise, Siren song, Necessary illusions, Encroachment (too many outlets in area), Buying a job, Lost homes, Entrepreneurs flee away, Canada, 19960315 Finding futures

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License