Small Business

6 Steps to Take Before Opening a Franchise

What you need to do before buying into an established brand

Written by Michael McCullough

Considering buying a franchise? Given the dislocation in Canada’s energy sector, a lot of people are thinking about it right now. Grant Bullington is a franchise specialist with FranNet, a kind of business broker that helps match would-be franchisees with franchisors.

FranNet, itself a franchise network, is compensated through a commission paid by franchisors; its services are available free of charge to prospective franchisees. Here are six steps Bullington says his clients go through before buying a business.

1. Think about the type of business you want

What’s your budget? The median franchise fee in Canada is around $40,000, plus a royalty—typically 5€“8% of gross revenues—or flat monthly fee. What are your financial goals? What are your skill sets? What is your temperament? What do you enjoy doing?

2. Identify a manageable number of candidates

FranNet typically introduces its clients to between three and five at first. Expect to put in five to 15 hours a week researching each option, and to spend around $5,000 for research expenses, travel and advisory services before it’s all done.

3. Let the franchisor find out about you

The more sought-after the franchise, the pickier the franchisor will be. Mostly they want to know that your skills, work history and financial wherewithal are consistent with their experience of successful franchisees. The attraction must be mutual before you can proceed.

4. Prioritize your opportunities

Here’s where you eliminate the concepts that just aren’t the right fit for you. Focus your efforts on what looks like the best candidate, and devote less time to the runners up. Don’t discard them, though—you may end up circling back to them later.

5. Undertake detailed due diligence

This is where you really have to bone up on the business, both to confirm it’s the right choice, and to learn what you need to know to open for business on day one. Franchisors will have their own educational materials, but don’t stop there. Talk with other franchisees and business owners in your network. This step alone usually takes three months.

6. Go through pre-closure

Typically franchisees pay a visit to franchise headquarters for final training and to sign the franchise agreement. By then you should have your financing in place, the same way you do when you buy a home. FranNet encourages all clients to hire a lawyer to review the franchise agreement before signing.


Do you own a franchise, or are you a franchisor? What other steps would you add to this list? Let us know by commenting below.

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