Aiming for balance, she bought into boilerplate approach

… the franchising sector has seen a growth of 22 per cent since 2008, says Lorraine McLachlan, president and CEO of the Canadian Franchise Association… “Because of the difficult economic times, there are more shysters out there than usual,”..

The Toronto Star
October 13, 2010

Aiming for balance, she bought into boilerplate approach
Common assumptions can cause would-be business owners grief
Paul McLaughlin

Lisa_Swan_The_Lunch_Lady.jpeg

The Lunch Lady franchisee Lisa Swan supplies 2,500 hot lunches per week to students in the 25 Halton region schools, including Milton's Ecole elementaire Catholique Sainte-Nicolas. Glenn Lowson/for the Toronto Star

People looking to buy into a franchise typically search for a product or service for which they have a personal passion. They are missing the point.

“That’s one of the biggest mistakes they can possibly make,” says Gary Prenevost, president of FranNet of Southern Ontario and a consultant in the franchise industry for more than 20 years. “It helps, but it’s not a success factor.”

What they should be looking for, he says, “is a passion for the core rules required to drive a business.”

He cites the example of a senior executive recently laid-off who decides to buy a fast-food franchise. “He’s now in the business of managing part-time, transient teenage employees. But if he’s been dealing with high-level peers all his life, how well will he transition to managing teenagers? A retired teacher might be a much better fit for this.”

Prenevost suggests would-be franchisees research the trends in franchising. “Elder care, health care and other services like education are big right now,” he says.

Toronto-based Tutor Doctor has grown from 12 franchises in 2007 to more than 200, in six countries. “It brings tutors to the home, combining the trend of education with convenience,” he says.

Finding the right type of business is just one of many questions a prospective franchisee needs to consider before entering the growing world of franchising.

Despite the recent economic troubles — and also because of them — the franchising sector has seen a growth of 22 per cent since 2008, says Lorraine McLachlan, president and CEO of the Canadian Franchise Association. The CFA is national association that represents about 450 corporate brands and around 40,000 franchisees.

People of all ages are drawn to franchising, although most are between 35 and 55, McLachlan says. It offers them the chance to run their own business — if they “don’t have that great idea or they want somebody to help show them the ropes.”

Conducting due diligence is essential before deciding what to buy into, she says.

“I’m amazed at how many people don’t do this,” agrees Ned Levitt, a partner at Gowlings law firm in Toronto who specializes in franchising.

Obtaining as much financial information as possible is obviously critical, and is much easier to do in Ontario since the Arthur Wishart Financial Disclosure Act was passed in 2000.

Yet the volume and complexity of the financial information is far too great for the average entrepreneur to decipher.

“You need a lawyer with experience in franchising,” says McLachlan. “But you’d be amazed at how many people balk at this (primarily because of the cost).”

Brian Costello, who owns a Bark & Fitz franchise in Toronto — which sells high-end dogs — says it’s essential to read the franchise agreement inside and out and make sure you understand every clause in it and the future ramifications of those clauses. He and other Bark & Fitz franchisees are in a legal dispute with the franchise’s owner and the wording of their agreement is at the core of the dispute.

Beyond crunching the numbers, visiting locations to see how well they are run is a wise move, says Levitt.

“Are they clean?” he says. “If not, that might mean the franchisor isn’t enforcing a set of rules. If the system isn’t being run properly, the question has to be asked: ‘How well is the franchisor selecting franchisees?’ ”

A prospective franchisee has to accept how much work is involved. Says McLachlan: “Some people mistakenly think a franchise is like a GIC; they don’t understand the commitment it takes.”

Lisa Swan owns The Lunch Lady franchise in Mississauga, delivering hot lunches to elementary schools. She underestimated the time it would take to get her business up and running.

A former corporate financial executive, she bought the franchise in 2003 after the birth of her first child, thinking she’d be able to achieve a better work-home balance than with her previous job.

It didn’t work out that way at first. She had to devote considerable sweat-equity to her new franchise. “It was a bit of a shock,” she says. About four years after she acquired her franchise, she finally achieved the balance she sought.

Levitt sounds a note of caution for those looking to choose a franchise.

“Because of the difficult economic times, there are more shysters out there than usual,” he says. “If you feel you’re being sold to, your antenna should go up.”

http://www.thestar.com/business/smallbusiness/article/874705--aiming-for-balance-she-bought-into-boilerplate-approach


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