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Ask questions and understand franchise law before buying

The decision to purchase a business is a complicated one. Ontario business people who are considering buying an existing franchise should be aware of franchise law before making this decision. They should also ask four key questions before deciding whether the sale is right for them.

The first question which should be asked is about the seller. What is his or her motivation in selling the franchise? In many cases, part or all of the reasons someone is choosing to sell is that the franchise is not profitable. The second question the franchise buyer should ask, which is a follow up to the first, is whether the business is successful. Unsuccessful businesses can be great investments for those who are able to turn them around, but potential buyers should carefully consider whether the reasons for unprofitably can be rectified.

Ontario residents who have never owned a franchise or have little understanding of franchise law should take even more time to examine the deal before buying. They should ensure that franchise ownership is compatible with their personal values and financial situation. Carefully considering the time and resources one has to contribute to the franchise will clarify whether the purchase is a good idea. 

The final question potential franchise owners should ask is which professionals they should retain in order to look over the deal. For example, a business broker and tax professional can help protect a buyer financially, while a lawyer can clarify issues around franchise law before, during and after a purchase. Those who are considering buying or selling a franchise in Ontario would be wise to contact a lawyer early on in the process to understand the complexities of provincial and national legislation around franchises.

Source:, "Should You Buy an Existing Franchise?", Bruce Hakutizwi, Dec. 7, 2017

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