- franchises as a popular form of business ownership
- franchises as "customers" in B2B
- franchises as the most popular way to sell branded consumer products and services
used in the following courses taught by Prof. Richardson
- some of the following points
"Understanding Canadian Business" 5th Ed. and "Understanding Canadian Business" 7th Cdn Edition
|The intensity of the competition
in the franchise industry, among fast-food franchises, was profiled in
a detailed article in Maclean's magazine November 2012.
The article discusses, in particular, the competition among McDonalds and Tim Hortons and deals with how each chain is tweeking menu selection, facility layout etc. to get customers to leave one chain and patronize the other.
McDonalds, which recently lost first place globally to "Subway" as the fastest growing franchise with the most locations, saw sales decline in October 2012 for the first time in a decade.
# 1 most famous franchise in Canada
o CBC story about the origins of Timmies http://www.canada.com/topics/news/politics/story.html?id=4a4d4732-cc4a-434b-af7d-4280208f5406
story about Tim Horton's values Versus Starbucks
story: Troops in Kandahar to get a Tim Hortons shop
Hortons in Kandahar alomg with many US franchises
What is the history of franchising?
"How did it all start?"
|"More than 750,000 franchise businesses constitute the North American small business landscape, generating more than Can$1 trillion in sales. With a new franchise business opening somewhere in the United States every few minutes each business day.."|
success rate for franchise-owned business is generally better that the
success rate for many independent businesses, there is no formula
to guarantee victory. The same may also be said of the profits generated.
Often the margins you make are a reflection of your ability to properly
run your franchise, however you may be able to get a document from
the franchisor that illustrates the typical franchise earnings. If the
franchisor does not provide such a document, you should contact a number
of franchisees in the market you are interested in and seek their advice
on the business' profitability. One bad apple does not mean the concept
is flawed, so be sure to speak with at least five
|How do I investigate the franchisor?||This is critical
in a business environment where many people have been scammed over the
past few years.
"Acquire the franchise document
(Uniform Franchise Offering Circular), which is often referred to as the
UFOC. This document is prepared in accordance with the requirements of
the Federal Trade Commission (FTC). It contains information on the principals,
their backgrounds audited financials and a lot of other pertinent data
- including the current franchise agreement. Included in the UFOC is a
list of franchisees, which we suggest contacting and if possible,
visit prior to commitment. Be certain that you like the business. Gather
candid comments from a representative number. If you reach someone who
seems negative, attempt to determine if the comments appear legitimate.
Don't assume the business model is the problem solely because you speak
with a negative person. Furthermore, if you can see the franchisor
prior to your investment, we suggest taking the opportunity to meet the
people you will depend on for support."
|Considerations into getting a franchise||in an online
forum about franchises, different people post messages about
o having enough money
o being old enough
o having enough business experience
"Buying a franchise is a major decision. The commitment in capital and time is significant. You need to think through the process carefully, starting with an assessment of yourself and your motivations. Read as much as you can on the subject ..."
from the CFA website
|This is the main web site
The association serves the Franchisors as opposed to the Franchisees
addition to talking about how (in an entrepreneurial way) to select a franchise
and develop a SME, we will also spend a bit of time on the question of
"If your business is taking off, what about growing it by selling franchises
to other people"
WHY FRANCHISE YOUR BUSINESS?
|This web site serves people who have a successful growing business and want to expand by franchising.|
"Dreams fuelled by fabled franchise success stories have helped build a $90-billion business in Canada"
Gigi Suhanic, Financial Post
- how franchising originated
- some problems
- recent legislation to protect people who buy a franchise
written by Gigi Suhanic
Kentucky Fried Chicken and Dunkin' Donuts were among the first chains to start selling franchises. But it was Ray Kroc, founder of McDonald's Corp., who saw in franchising the opportunity to build a national brand and in the 1950s travelled the United States selling franchise licences for US$950.
Mr. Kroc's vision played out as he hoped it would. The Golden Arches took hold from coast to coast. And it was franchisees who came up with the chain's most famous products, including the Bic Mac and Egg McMuffin, as well as mascot Ronald McDonald.
Yet the annals of franchising are full of horror stories, too. In one messy case in the mid-'90s, 50 Pizza Pizza franchisees sued head office alleging it overcharged them for rent, advertising and other fees. They won the case and were awarded $1.6-million.
Franchising is a $90-billion business in Canada. In 2000, Ontario passed the franchise disclosure act to bring some order to the unregulated sector.The act, which mirrors legislation in Alberta, requires that franchisors disclose to a potential franchisee all "material facts" -- for example, the financial health of the franchisor and failure rates in the franchise- 14 days before any agreements are signed or any money is paid.
If any misleading information is given, the franchisee has the right to cancel the franchise for up to two years after the purchase and get his investment back plus damages, says John Sotos, a lawyer for franchisees in the Pizza Pizza case who also helped develop Ontario's franchise act. The act also says franchisees in Ontario are protected from retribution if they attempt to organize a franchisee association."
" Ninety-five per cent of Tim Hortons stores are franchisee-owned and operated, the remaining 5% being stores that are "in flux or transition," says Patti Jameson, vice-president of corporate communications for TDL Group.
According to the Tim Hortons
Web site, a franchise costs
"McDonald's has more than
30,000 restaurants worldwide, including more than 1,250 in Canada.
"Most of Canada is covered," says Ken Fong, vice-president and general
counsel for the fast food giant in Canada. Unlike the '80s when the corporation
kept a waiting list, one is no longer maintained. Mr. Fong says many of
the franchises are now into second-generation ownership and those stores
that do come available are often offered to current operators. "There
is limited opportunity because McDonald's [Canada] is a mature franchising
system," he says. Franchises range from US$455,000 to US$768,500, with
franchisees required to have a minimum of US$175,000, which includes the
US$45,000 franchise fee. The price tag covers kitchen equipment,
signage, decor and landscaping. McDonald's picks restaurant locations
and owns the building, charging franchisees rent based on 9% of gross sales.
Royalties and advertising costs are calculated on a maximum of 4% of gross
sales. Supplies are made available to franchisees through contracts
negotiated by head office. Franchisees must attend a two week course at
Hamburger U." Centres in Canada are located in Toronto, Montreal
and British Columbia. They also must do in-store training of six months."
The Toronto Star ran a very large article May 2003 about the problems that franchise owners have, and they used the example of 3for1 Pizza and Wings
James Daw, the Reporter who
built the story did a good job of covering the situation with 3for1
Pizza and Wings, as well as noting the challenges that any franchisee might
have if they did not do their research throughly.
Franchisors must allow someone at least 14 days to, among other things, review audited financial statements, read about the background of the franchisor and outstanding suits, and contact franchisees listed in the documents for their comments. So onerous is the penalty for failing to provide this information — a full refund of money plus compensation for the prospective franchisee's related losses — all franchisors were expected to fall into line.
But many would-be franchisees are unaware of their rights. No government or industry body was assigned to review the disclosure documents or license salespersons the way the Alberta Securities Commission did before June, 1995. Nor are there fines or jail terms prescribed. The only way for a dissatisfied franchisee or prospective franchisee to seek compensation is to go to court at great expense and satisfy a judge that proper disclosure was not provided."
|"The first time
a judge applied the Wishart Act was in late February , ordering Solhi,
3 for 1 and two companies directed by Bagherzadeh to pay $115,000 to
Karamjit Gill, Mamta Patel and their company, MAA Diners Inc. The
award covered the price of the franchise, plus $12,500 for the women's
losses from setting up and operating for a few weeks a Mississauga store
agreed was in a deplorable state when they took possession. Solhi and the companies claimed they met requirements for disclosure. But Justice Gertrude Speigel of the Ontario Superior Court of Justice rejected their explanation that no copies of the disclosure materials were made because of "sloppy paperwork." "In my opinion, this submission must fail," the judge wrote. The judge said it was also not enough that a lengthy agreement signed by the women included an acknowledgement that they had been afforded the opportunity to receive the disclosure documents in time."
Reporter James Daw continues
his investigation of 3 for 1 Pizza.
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