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In addition to that, franchises can also be more successful than typical small businesses. With 50% of small businesses going out of business within 5 Years in Canada.
But only 14% of franchises going out of business in the same amount of time. And this is often because franchises get help from the head office. As well as they already have systems and processes created.
However, business owners should not make the mistake. Thinking that every franchise opportunity that is out there is the same as all other franchises. And should look at the information objectively.
In order to make a decision on which franchise the right one for them to purchase. They can get help doing this high hiring their Edmonton accounting firm. To help them look through all of the documents.
One of the first things that business owners should keep in mind. Is that the person that is selling the franchises. Although they may appear to be a business advisor, they are not.
They are in fact salespeople that have been hired to sell as many franchises as possible. And therefore, are not necessarily acting in the best interest of the business owner themselves.
Therefore, getting an objective view of the franchise itself can be very beneficial. Which is why Edmonton accounting firm recommends looking at three different franchises side-by-side.
Because that will help business owners get an objective view of all of the different franchises. Such as the systems in place, the royalty structure. And the financial information that they receive.
One of the first things that they franchise will likely give the business owner to be. Is a plain paper copy of the financial statements from their best locations. In order to make the franchise look extremely profitable.
However, business owners need to understand that they are getting incomplete financials from their best locations. And not only should they ask for accountant prepared financial statements.
They should also ask for financials from other locations as well. By doing a Google search, and asking for financials of the franchise locations they did not already receive financials for.
Can help a business owner get a much more average viewpoint of the financial information of the franchises. To help them make a better decision what they are likely going to make if they buy this franchise.
As well, their Edmonton accounting firm will be able to go over several different documents. Such as reading the franchise agreement, and applying the royalty against the revenue.
To help a business owner think of the things that are often overlooked. And people are buying a franchise. To ensure that the business owner is truly making the best decision for themselves about what business to buy.
Franchise can be a great investment says Edmonton accounting firm. However, not all franchises are created the same. And not all are going to be the great opportunity that they first appear to be.
For example, if business owners want to customize too many different processes. A franchise is not necessarily the best investment for them.
The reason why, is while a franchise is valuable because of the processes and systems that they have already in place. If a business owner does not want to use those processes and systems.
They need to consider why they want to pay the royalty fees. In order to have that name. Because if they are going to change so many of the different systems, they can save a lot of money by not paying the royalties.
Another reason why a franchise may not be the best opportunity for a business owner. Is because the royalty fees may be unreasonable for a variety of reasons.
This is why it is very important that business owners get as up-to-date and complete financial information as possible. Asking for accountant prepared financials for as many locations as possible.
The reason why this is so important. Is because it can help their Edmonton accounting firm look at the financial information objectively. As well as look at things that are often overlooked such as utilities, lease agreement and common area charges.
Because even though the franchises might all be from the same company. Different occasions are likely going to have different utilities and landlords. Which can make a huge difference to whether it is a good opportunity or not.
And based on this information, the royalties that business owners will end up paying may not be beneficial. Which is why it is very important to get an objective viewpoint from the financial information.
Another thing that their accountant will look at. When looking at the financial information of the franchise. Is to figure out if the owner’s time is accounted for fairly in the payroll numbers.
Because what might look like a great financial statement at first glance. If a business owner has their entire family working in the business. And not on the payroll says Edmonton accounting firm.
There is no way that a business owner will be able to duplicate that themselves. Unless they also have an entire family willing to work for free. So it might not be the great opportunity that it appears.
It is actually one of the most important things that business owners need to consider. And one of the things that is most often miss represented in the financial information that business owners get.
And while getting all of this financial information. As well as getting an accountant to look it over can be time-consuming. They might feel that there is a sense of urgency from the person selling them the franchise.
This is just a sales tactic used to inspire urgency. That is designed to create a faster sale. So business owners should push back on that urgency.
Because not only will these people get paid for selling the franchise. But this is not the only opportunity that they have. So even if this one does go away, a business owner will have another franchise opportunity very soon.
