Getting into a business by opening or buying a franchise isn’t for everyone. You have to prepare for it.
• Also read: Franchise: the key to a functioning union
• Also read: Business model: franchise heaven
• Also read: Laiterie Chagnon and Top Glaciers will compete against the multinational ice cream parlors
A future franchisee must visit franchises of the banner of his choice, ask questions and decide what really suits him: the formula, the schedules, the style and the quality of life … The brand’s values already they stay with him?
“A prospective franchisee must consult the franchisor,” advises Xavier Chambon, CEO of the Conseil Québécois de la Franchise. How long have you been in business? What support do you offer? Which purchasing conditions apply? What training do you offer? Is the franchise agreement negotiable? Under what conditions could I resell the franchise? With what advertising do you support the banner? »
A prospective franchisee can also ask if the franchisor holds regular meetings with their franchisees. If there is a system that allows you to compare yourself to others in order to improve.
According to Mr. Chambon, good franchisors produce regular reports and clear operating manuals, organize visits, audits and encourage comparisons. “It helps franchisees improve and it harmonizes the network,” he says.
Good franchisors listen to their franchisees and take their suggestions into account. For example, the McNuggets are the brainchild of a franchisee. Because a franchise is not a hierarchical, but a contractual connection.
Steps to take
Before the franchisor accepts your application, he qualifies his future franchisee. He must specify his financial and personal profile through a questionnaire, an interview and a series of tests. Some spend an afternoon or a day of trial within a franchise.
Then the prospective franchisee must make a down payment, based in part on the franchise fees, to reserve territory and conduct due diligence, for example.
This deposit may or may not be refundable depending on the banner. Depending on the economic sector, it fluctuates between 25,000 and 1.5 million US dollars and more. There are also construction costs.
The franchisor can then wait anywhere from 24 hours to several months, depending on the nature of the activity, before starting operations. With a home cleaning services franchise, the new franchisee can be up and running overnight. Sometimes you have to build a new restaurant from scratch and negotiate a lease. Training is often required, which can last from a few days to several weeks.
Then the franchisee has to pay annual service fees, which often range from $5,000 to $30,000 depending on the banner.
Depending on the industry, the down payment is between 20% and 50%. Some franchisors support the future franchisee with financing. In certain areas, such as gastronomy or retail, it makes a difference where banks are cautious. The reputation of the franchisor often makes the difference.
Many receive help through the Federal Small Business Financing Program (the famous PPE). In any case, you must draw on your savings.
You must be present
Franchisors are primarily looking for franchisees who will spend a lot of time with their franchise. Because such a business does not run by itself.
“Franchisors are entrepreneurs and must be good operators,” said Pierre Morin, head of the Top Glaciers group, which is behind seven Bilboquet Glacier franchises in the Montreal area.
The latter had a bad experience with a counter that no longer exists on the south coast. “When it works, the franchisee is hungry, he’s ambitious, he’s there,” he continues. We will not refuse a project from a serious person. But location is everything. And if the rent is too expensive or there is no terrace, we hesitate. »
Mr. Morin believes that franchising is beneficial to the franchisor, who can grow rapidly because the franchisee is funding the leasehold improvements. The franchisee, on the other hand, benefits from the reputation of the banner to be successful.
“But when times are tough, franchisees are often easy to criticize, and that’s not necessarily the franchisor’s fault. Franchising remains a risk sharing and needs to be well understood by the franchisor and franchisee. »
Can you share information about this story with us?
Write to us or call us directly at 1-800-63SCOOP.