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E-Myth – “Why most small businesses don’t work & what to do about it”

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In terms of franchises and how they work, and potentially buying a franchise for your small business, CFO services says, the whole value of a franchise is that everything is ready for you. What this means is it is basically a turnkey system. All of the products are in place, there’s no need for any building, of the structure or the brick-and-mortar location. Etc.

Often times and particularly for a new business owner, a lot of people will like that idea or at law least a lot of people think that they like that idea.

However, a lot of people as well like the idea of starting from scratch. This potentially is a more realistic idea and statistic of what small business owners and franchisees are looking for. It gives you more flex ability, however it is going to legibly take more time if you are going to be starting from scratch and building from the ground up.

CFO services asks why you want to burden yourself, your family, and your friends, with franchise costs and the royalty fees if you aren’t in fact going to use it at all or retain a franchise? Consider the fact that it may be akin to if you don’t want to use it, it’s just incomplete, so sometimes the training documents and processes are good enough for you to execute.

This is rather unfortunate, says your attendant is going to be incomplete, and you’re going to have to make stuff up as you go along. The reason for this is because you don’t have processes that you are going to run into like hiring restructuring, restocking shelves, etc. You don’t necessarily have the black-and-white ideas for how that goes about doing it.

Be very careful to as when you talk to a franchise, they are, well, in the business of selling franchises. That is what they do, full-time, all the time. CFO services says it’s just like walking into any other store. Their job there is to sell you things. It’s the same thing with talking to a representative from a franchise.

The reason for that is that now every time you talk to a representative from that franchise they’re going to tell you everything good about the product and nothing bad about the product, or as we are talking about, the franchise. Be very careful and make sure that you are doing your own homework, and putting your own boots on the ground and making sure that you are finding all of your answers individually.

What this means is you can potentially go visit two or three of the same franchise from different locations. Which can do to is you can also attempt to find different franchise locations in different financial situations. What will happen is they will tend to be very honest with you if you approach them in person. In person talks are better than on the phone.

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Be very cautious and careful, says CFO services. Generally, when you talk to a person who is in the business of selling franchises, or representative of that particular franchise you’re not going to get a very good indication of what the payroll numbers are or any other costs that you might need to incur. Because it’s going to be the owners, the representatives of that company, etc. who you are talking to. Their sole job is to sell sell sell.

As well, you may be talking to the owners, or their families who are not paid fair market rates for undercutting, or confusing the data. An owner whose potentially there at the business, or the franchise every day, working seven days a week who is only drawing a menial salary is not going to replace that person at all as hard as you can try. It’s really important to know how much the owner is working on that business. Chances are, keep in mind that whether it is a franchise, or starting your own business, that they are probably working double the amount of hours that a full-time person would be.

Keep in mind, says CFO services, you have to think of how much that owner salary is actually on the owner itself. Consider working backwards in this case. Some considerations would have to be what is the hours that you are open how much staff do you need to hire on? Figure out what’s a fair market rate for an actual manager to hire as well. Consider what the real payroll numbers are legitimately going to be so that you can get a better picture of your financials. That’s usually one of the exercises that they will go through. As well, it’s one of the most common accounts that are not right if you take the information honestly and for what it is.

Usually, says CFO services, it is very immaterial. What happens is unbeknownst to you, from within that franchise, you will see that the owner will be working, and they will be having their wife work with them instead of an employee, and all of their children working instead of retaining and paying for employees. None of them will be in fact showing up in the payroll numbers. It looks like a great investment for you at the time because obviously the payroll numbers are going to now be skewed. However it won’t be a good investment for you with honest numbers. That’s one of the things you should take a look at and make a point of finding out the honest answer with.

Consider the fact as well that 50% of all businesses fail within the first five years. What is likened to that is 14% of franchises also fail in five years. Don’t necessarily bet on those terrible odds. The very careful and make sure that you are properly educated and have done your due diligence before you put all your money down.