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Thinking of Buying a Franchise?

A franchise is a legal agreement between a franchisor (seller) and the franchisee (buyer) in which the franchisor grants the franchisee the right to distribute certain goods or services developed by the franchisor in a particular way, in a particular location, and for a specified period of time. In return, the franchisee pays the franchisor various fees and royalties.

If you are thinking of buying a franchise here are a few matters to keep in mind:

  • Do you like the activity you are considering enough to make a commitment to the franchisor for the term of the franchise agreement?
  • Do you like the franchisor's staff / those people with whom you will be working?
  • Are you willing to follow the franchisor's rules and system?
  • Can you afford the franchise? (such as the initial franchise fee and on-going royalties)
  • Have you carefully studied the legal documents which govern your operation of the franchise with a lawyer, such as the franchise agreement and operating manuals?
  • Does the franchise you are considering have a track record of success?
  • Are the other franchisees generally happy and successful?

Some pros to buying a franchise rather than starting your own business include training received from the franchisor; supervision and ongoing advice from the franchisor, proven products and methods; collective buying power; and ongoing research and development of new products, ideas and systems.

On the other hand, some cons to consider include: franchises are usually expensive to purchase and there are usually ongoing payments based on sales (royalties) to be paid to the franchisor; loss of independence; ability to expand limited by franchisor; you are not really buying a business but buying the rights to conduct the business under a franchise agreement for a limited time - usually for 10, 15, or 20 years, most often with renewal options..

For more information with respect to a purchase of a franchise or if you are considering franchising your business, contact Tamara Huculak, lawyer and registered trademark agent at BRAWN KARRAS & SANDERSON 604 542-5344, or by email at thuculak@bkslaw.com.