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Is a franchise a suitable business option for an entrepreneur?

Building a business from nothing can be a time-consuming process without guaranteed results. Many Ontario entrepreneurs start with a franchise of an already successful enterprise, hoping to skip the initial difficult years. However, purchasing a franchise comes at a price. In return for the franchisor's expertise, the franchisee (the person buying the franchise) typically pays a substantial price.

The franchisee buys a license to operate a franchise according to a set of rules provided by the franchisor. The advantage is that the franchisee benefits from an established brand name and ongoing advertising by the franchisor. Staff training is often provided, and a prescribed operating system must be followed. The franchisee can typically buy supplies in bulk from an already-established supply chain.

In return, the franchisee will sign an agreement stipulating exactly how the business must be run, and after paying the price for the franchise, the franchisee must pay monthly royalties and contributions for advertising. This business method offers little flexibility. For example, if the chosen franchise is a restaurant, the franchisee may not use any initiative to change the menu -- only the franchisor can order changes.

The agreements that are typically signed upon the purchase of a franchise are drafted to favour the franchisor. For that reason, it makes sense for any Ontario businessperson who even considers getting involved in this type of business venture to consult with an experienced business law lawyer. He or she can provide skilled advocacy every step of the way and ensure that the franchisee has all necessary legal protections.

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Merovitz Potechin LLP
300-1565 Carling Avenue
Ottawa, ON K1Z 8R1

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