How To Buy A Franchise In Canada

Starting or growing a company of your own makes you part of the bedrock of our entire society. The question is, where is the best place to start? Should you launch your own idea from scratch, or is it better to stick with a tried and proven formula? In this post, we’ll explore the idea of how to buy a franchise in Canada.

The fact that you can go to the grocery store in Canada and buy fruits like oranges and grapefruits and other tropical delights is practically a miracle, one that we owe to local businesses and international enterprises.

Business truly is what makes the modern world go around. It’s also how we enjoy every convenience that we take for granted today. The ability to order food from the comfort of our own homes and have it delivered less than an hour later? The spirit of entrepreneurship and small businesses makes it possible.

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What Is a Franchise?

A franchise is when the franchisor grants a license to use their system in exchange for a fee and adherence to certain rules. The advantage is that you have instant brand recognition, a model that is proven in the current marketplace, as well as a significant amount of support in terms of marketing and operations.

The disadvantages of owning a franchise in Canada are that you have less control over your idea. You are subject to limitations as to what products you can offer, where you can operate, how you can advertise, and your pricing structure.

In addition, you will have to pay royalties or fees on a regular basis to your franchisor. You may also need to attend meetings or training sessions for the privilege of operating your business. A less tangible disadvantage of owning a franchise is that it can often lack the character and uniqueness of an independent shop.

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How Does a Franchise Work?

You have a vision. You just need a way to make it happen. Enter the idea for a franchise. Someone else has already done all of the groundwork. They’ve invested time, money, and effort to build an entire brand into a repeatable system.

You still need to perform the required research and due diligence. However, a franchise comes with training, pre-existing supply chains, and legal documents already in place. If you decide to go ahead with the idea of franchising, here are the steps that you will take:

Decide on an idea and find a franchise that aligns with your goals.
Review the franchise agreement, and hire a franchise lawyer and accountant.
As part of your due diligence, the franchisor will provide you with a Franchise Disclosure Document with essential background information on the company.
Apply for financing to fund your operations. Your franchisor may be willing to help with this step.
If everything checks out, sign the agreement and pay the initial franchise fee.
Partner with a commercial real estate agent to help with site selection. (Location is paramount to your success. And remember, many commercial listings never reach the MLS®).

The franchisor will provide training and help you set up according to the branding guidelines, and then launch a soft opening to test out your operations. From there, you will pay ongoing fees, which could be a set fee or a percentage of your revenue on a regular basis.

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Franchise Financing

Obtaining financing for your franchise is similar (although not exactly the same) as any other business, but with one distinct advantage. Since a franchise tends to be a proven concept, many lenders consider it lower risk.

This could mean that you are more likely to get your loan approved, and you may even get lower interest and better terms. Though the financing could come from several different sources, you still need to put up a certain amount of your own capital.

Some franchisors may have access to approved lenders or even offer in-house financing. Anyway you look at it, the process of funding your dream tends to be more streamlined with a franchise than when building a business from the ground up.

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How Much to Buy a Franchise in Canada?

Buying a franchise in Canada can require a significant investment. The actual investment will vary depending on the type of franchise and your location.

Franchise fees alone can range from $10,000 for a small local brand to over $500,000 for a nationally-recognized name.

In addition, you will need funding for equipment, inventory, rental costs, and initial operating expenses. Restaurants and food franchises can be particularly expensive. Once your business is up and running, you will also have ongoing royalty fees to your franchisor, as well as marketing and daily operational costs.

Some franchises will also require a renewal fee after the end of the initial term.

Owning a franchise in Canada can be a rewarding and richly satisfying experience if you have the capital and business acumen to succeed. If you want to explore franchising opportunities in more detail, a local commercial real estate agent can help you get started.

A commercial real estate Toronto specialist is an essential partner when buying, selling, or investing in industrial properties. Connect with me at OMarjanovic@kw.com or call 647.620.2882 to learn more.