What are the advantages and
disadvantages of buying a
franchise in Canada?


The Advantages and Disadvantages of Buying a Franchise in Canada

Buying into a franchise is a big commitment requiring — in most cases — a substantial financial investment.

Of course, it's not all about the money: a franchise offers the opportunity to become your own boss; to dictate your own hours; to be in control of your own destiny.

Nonetheless, when considering buying into a franchise opportunity, you must understand what you're getting yourself into.

So, we've put together this simple checklist of the advantages you can expect when you invest in your franchise and the disadvantages you might not have thought about.

5 Advantages of Investing in a Franchise

Of course, we're going to start with the advantages. We believe that franchising is an excellent route to career independence. No more slogging for the man — franchising puts you in the driving seat of an exciting business that could make you a very comfortable living.

The five most commonly recognized advantages of buying a franchise are:

Advantage #1: Your business infrastructure already exists

Buying into a franchise provides access to an operational, functioning business. The products and services have been tried-and-tested and honed to match your client base's needs perfectly.

The parent company has already worked hard to establish the brand and develop a marketing identity. They've worked on their SEO and built online authority so that your future customers feel they've found a company they can rely on.

And the franchisor will understand your location — they’re offering you the opportunity to become a franchisee because they’ve done the research and established that yours is a favorable location, offering a demographic that works for their existing business system.

Advantage #2: No experience is needed (often)

You wouldn't open up a cake shop without knowing what a cake is, so franchising often represents a fantastic opportunity to gain new skills that help you achieve expert status.

Parent companies provide world-class training for their franchisees. After all, they're entrusting their hard-earned reputation in your hands — it's in nobody's interest to let you start your business without the appropriate know-how.

So this means that, for most franchises that don't require a professional qualification, you don't need experience in the franchise's field. Just demonstrate a keenness to learn and diligently complete your training.

Advantage #3: You’re never alone

This isn’t as creepy as it sounds!

When you invest in a franchise, you become a member of a more extensive network. Your franchisor supports you through training and provides an operations manual to help you along the way. They even offer ongoing support and advice.

But one of the significant advantages of becoming a franchisee is that other people have done this before you. When you invest in your franchise, you become part of a network of other franchisees who are usually willing to support each other, offering advice and knowledge along the way.

And many prominent franchises have yearly annual conventions or AGMs — helping cement your support network in the flesh!

Advantage #4: Collective buying power

We all know that materials are cheaper if you buy them in bulk. But independent companies often lack the financial backing that permits them to invest in large-scale buying, meaning they get less favorable rates for equipment, materials, and goods.

In most cases, your franchisor has already developed relationships with providers, creating an operational supply chain that helps you save money on materials and goods.

Advantage #5: Financing may be easier to secure

Franchisors have established a functional business model that has already proven profitable, sustainable, and capable of expansion. And this stands you in good stead when applying for funding because banks and moneylenders often favor the franchise model — they can see in black and white how the business can sustain itself and grow.

On the other hand, independent companies can struggle to convince bank managers that their business idea has legs.

5 Disadvantages of Buying a Franchise

This would hardly be a helpful article if we only focused on the benefits! It's just as important to consider the potential downsides.

Here are the five most common disadvantages:

Disadvantage #1: You’re not in complete control

Some franchises give you reasonably free reign with their brand, allowing you to find your own way to develop your franchise business. But most franchises insist on greater levels of control over the way you conduct your business.

You might find there are restrictions dictating where you can trade, including specific operational functions and opening hours.

Find out the franchisor’s expectations before you sign on the dotted line.

Disadvantage #2: You’ll probably pay royalties

Remember, when investing in a franchise, you're buying into someone else's intellectual property. So, other than in rare instances, you'll probably be expected to share your profits with your franchisor.

This covers your use of the franchisor’s trademark and patented processes. However, some franchises don’t require royalty payments. Find out the full terms of the agreement before you shake hands on it.

Disadvantage #3: There may be set rates for certain expenditures

You may be obliged to invest in advertising, equipment, or machinery to satisfy the terms of your agreement. And the contract may also dictate the amount of money you need to spend.

Sometimes, it could cost you more than if you were to invest in these things independently. Do your research!

Disadvantage #4: Reputation is reliant on other franchisees

Of course, joining a franchise network can offer excellent support for your fledgling venture. But remember, your franchise's reputation relies upon all franchisees' performance. If another franchise performs poorly, it could affect the reputation of the entire network.

Always get in touch with other franchisees as part of your due diligence.

Disadvantage #5: the franchisor dictates contract renewals

There's always a chance that your franchisor could withdraw your rights to trade using their branding and trademarks if your franchise performs poorly.

Alternatively, they may refuse to renew your agreement on completion of the initial term if you’ve underperformed.

Common renewal practices include:

  • Providing notice of your intention to renew
  • Payment of a renewal fee
  • Updating or renovating your premises to meet the terms of the agreement

There’s no guarantee of success

Of course, we're not going out of our way to put you off. After all, franchising is usually a brilliant experience for both franchisees and franchisors. But it's always useful to be aware of the whole story.

Remember, no industry sector or business method guarantees success — and in this sense, franchising is no exception.

However, franchising can give franchisees a better chance of becoming their own boss.

Support and guidance

If you're hoping for continued support and guidance throughout your franchise journey, then franchising could be for you.

Just make sure you look at every possible eventuality before signing on the proverbial dotted line.

Good luck!

You have saved info requests

Complete Your Request