Franchise Purchase Considerations

Quite often an entrepreneur will consider buying into a proven existing business modelFranchise rather than build or start-up a business from the ground up. In some cases the benefits can outweigh the costs of starting from scratch, however we must be cognizant that there are many pros and cons to consider when deciding on which model is most appropriate for the entrepreneur.

The reasons for choosing a franchise model can be compelling.  Some reasons for choosing this model include:

  • Proven success in the marketplace
  • Proven system for operations
  • Proven system for meeting sales/revenue goals
  • Proven system for human resources
  • A system for purchasing/vendor relationships
  • A built-in marketing plan

Remember that in this model and entrepreneur is buying into a “brand” with someone else’s rules for operations. If marketing is a personal weakness then this model can provide benefits as marketing plans and materials are developed and supplied.

Additionally, some training may be included in the agreement as well as district or regional supervision to ensure that organizational standards are being met.  This can be a benefit to someone relatively new to business operations.

The items above can be seen as a streamlined way to get up and running.

That being said, the financial considerations cannot be ignored. Whether the business model is a start-up or franchise model the investment required must be addressed. Understanding the financial requirements for both start-up and working capital are critical elements. The franchise fees, royalty fees, marketing fees or other fees must be considered when comparing business models and to understand the opportunity costs of choosing a particular model.  Both models will need adequate financial resources.

The question you need to ask yourself when considering this model is whether or not the franchise model and resources are worth the financial investment and if the resources can ensure that the business can be successful.

If you are considering either starting or buying into an existing franchise model and need assistance the Halton Region Small Business Centre is here to help you. One of the goals of the Centre is to empower small and medium-sized enterprises and give you the tools to achieve success.  For more information about resources, services, business events and seminars, contact us by dialing 311, 1-866-442-5866, online at www.haltonsmallbusiness.ca, by email at smallbusiness@halton.ca or visit us at 1151 Bronte Road, Oakville. You can also follow us on Twitter.

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