Canada has a thriving franchise industry, and a Canadian franchise attorney Tony Wilson points out 3 advantages of franchise ownership;
- Training in the business model. "They're training you to use their
system; training is a huge component in franchising," Wilson says.
- Access to a trademark and brand advertising. "That's what franchisees should expect — to get the benefit of the brand."
- Joint purchasing power. "If you're in a buying group with 16 other
restaurants, you're going to get your food cheaper than if you're one
restaurant buying your product by yourself," Wilson explains.
Wilson recently wrote, "Buying a Franchise in Canada: Understanding And Negotiating Your Franchise Agreement." Some of the franchise laws in the book only apply to Canadian franchisors.
Wilson also said that "You never own the business, really. You're just renting it from somebody else." Article
If you have been reading my articles for awhile, you know that I am not a card-carrying member of the International Franchise Association, and that I show both the positive and the negative sides of franchising.
I must say that I totally disagree with Mr. Wilson's statement. You are not "renting a business," when you buy a franchise. You are buying a system, and if you are a good fit for that particular franchise concept, you go in with enough working capital, and you follow the plan, (Which you found out was a good one, because you did superb research) then you have a reasonably good chance of small business ownership success.
Renting a business? Great statement to increase readership of that article, but not true, Tony…
What do you think? Are you "renting a business" when you purchase a franchise?
Tony wilson says
November 4, 2009 at 1:06 amActually, its totally like a rental. A lease of land is an imperfect, but satisfactory analogy.
In canada, when the term of the franchise expires ( without further renewal), the franchisee really has nothing left because the franchisor has no obligation to sign another contract with the now former franchisee.
I draft franchise agreements all the time. You never “buy” the system as a franchisee. You simply have a right to use the system, under license, until the term expires, then whatever rights you have to use the system expire.
The Franchise King says
November 4, 2009 at 6:06 amTony,
Thank you for stopping by..
In the US, when the franchisee does not renew his or her franchise agreement, (Typically 10 years) the franchisee is left with some equity. (Hopefully)
“Ownership” is a strange word. When we buy a car we feel that we own it. It’s “our” new car, “our” car, “my” car, etc. But only if we pay cash for it.
When someone invests in a franchise of their own, it’s “their” franchise.
In the numerous seminars that I do on franchise ownership, I ask my attendees what they are buying, when they invest in a franchise. The ones that seem to get it say that they are buying a system. I tell them to make sure they know that they are buying SOMEONE ELSE’S system.
As long as they know THAT going in, the semantics of the word “own” are not as important.
Buy renting? No way. Folks rent party tents. Not franchises.
The Franchise King
Joel Libava