For many Canadians, buying a franchise seems like the ideal way to start a business. The business model and branding have already been developed so all you have to do is invest and then follow the playbook. But like any type of business, investing in a franchise can have its pitfalls if you are not careful. The following are seven mistakes that you need to avoid and be weary of when purchasing a franchise.
1.Putting profits before enjoyment.
Many people purchasing a franchise try to find something in a sector they think will be especially lucrative – and they may do this at the expense of finding something that they will really enjoy. It is important to have an interest in the project that you are investing in because in order to operate a successful business, it is important that you have the mental will power to proceed. This will increase the amount of time and productivity you put into the business, increasing more positive outcomes.
2. Underestimating how much you will need to invest.
The franchise fee is only a portion of what you will need to invest when you are purchasing a franchise. There will be an array of other costs as well such as legal fees, working capital, etc. Before you invest, it’s important to get a thorough breakdown of the costs involved.
3. Not doing enough research.
Remember that when a franchisor is seeking your investment they may overplay the pros of the franchise and underplay the cons. You need to do your own personal research to see if a particular franchise is right for you. Visit online forums and look for reviews from both franchisees and customers to get a good sense of the business you are considering buying into.
4. Not speaking to existing franchisees.
If you want to know what the franchise experience is like, there are no better people to speak with than existing franchisees. They will tell you the good, the bad, and the ugly – not just the sales pitch that you may be getting from the franchisor. Speaking to existing franchisees can really help you determine if a particular franchise is right for you.
5. Thinking you’ll have complete autonomy.
One of the appeals of starting a business is that you get to “be your own boss.” But this isn’t quite the case when you start a franchise. Most franchises have a pretty strict playbook that you have to abide by – the trade off is that you don’t have to spend time building a brand or doing things by trial and error. You have to adhere to the guidelines that are provided to you.
But if you don’t want anyone telling you what to do and then owning a franchise may not be right you. Because if you fail to follow franchise guidelines, you may end up having your franchise revoked.
6. Not getting your own legal advice.
Before you sign a contract with a franchisor it is really important to seek out your own legal advice so that you understand all the terms and conditions of the contract. A franchise can be a big investment so you want to make sure that your interests are protected.
Trying to scale up too quickly.
Maybe you are really excited about growing your franchise quickly or even having multiple locations. But any business is going to have a learning curve to it, and it’s important that you learn to walk before you run. Make sure you take the time you need to learn the business model and set yourself up for success.
Contact Minhas Lawyers today
If you are considering investing in a franchise, make sure you understand all the contracts, terms, and conditions. Call us today to set up an appointment with one of our business lawyers to discuss all aspects of your business!
Minhas Lawyers LLP is a multi-practice law firm based in Mississauga. We advise and represent clients across various segments and practice areas.
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