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Many business owners often go to their Edmonton accounting firm after already having made the decision on which franchise they want to purchase. However, this does not help business owners look objectively at the financial information.
Instead, accountants typically recommend business owners keep three different opportunities in mind. In order to decide which one is going to be the best opportunity for them.
When they bring the financial information to their Edmonton accounting firm. Their accountant will be able to help them figure out if the financial information they have is from accountant prepared financials. Or if they have been simply given plain paper financials.
While plain paper financials can help a business owner get a rough idea. Of the financial information of that franchise. Whenever possible, business owners should ask the franchise for accountant prepared financials.
So that they will have a better idea of all of the financial information. Instead of an incomplete financial statements such as a lane paper copy. The next thing that their accountant will likely ask for.
Our financials from more than one location. Franchises typically will show financial statements for their best locations. But it is very important that a business owner gets the information from the average locations as well.
Business owners should do a Google search in order to find the other locations that they have not been given the financial information for. And request those financials.
So that they can get a more complete picture of an average location. And how much money they should expect to bring in. Instead of just looking at the financial information from their best locations.
Another thing that their accountant will help them do. Is look through the franchise agreement. And apply the royalty against the revenue. To see if this is something that is reasonable, or not.
There accountant will also be able to look through things that are often overlooked. Such as utilities, lease agreement and common area charges.
Because even though the different franchise locations are the same franchise. The different locations can often mean that there are different landlords, that have different rent and rules.
And by allowing their accountant go through all of this information individually. Can end up with a much more objective viewpoint of the financial information of each franchise. To help a business owner make a decision on if this is the right franchise for them.
There accountant will also look at the financials. And figure out at the owner’s time is accounted for fairly in the payroll numbers that they received. Typically, the business owner’s time is not accounted for fairly.
The business owner of that franchise might say that they are getting compensated. But they might be working twelve hour days, six days a week. And still only be taking a twenty thousand dollar salary per year.
It is very important that business owners get their accountant to help them make an objective and informed decision. About which franchise they want to buy, if any. Business owners should always enter into this decision by being very informed.
Franchises are very attractive to many people says Edmonton accounting firm. Often, they are seen as an easy way to get into business. And others see them as a failsafe way to become a business owner.
And while studies have shown that a higher percentage of franchise owners are still in business. Compared to 50% of small businesses in Canada that go out of business in five years.
Not all franchises are created the same. They often have different royalties that have to be paid. As well as they might have additional fees for advertising, online marketing.
And they might require a business owner to get all of their supplies from the same place. Which can be difficult for some business owners. Especially when they are in a more expensive art of the world.
Also, if business owners want to customize to many processes. Franchise may not even be a good investment. Since the benefit of a franchise is in the processes and systems that they have already created.
Therefore, nobody should be purchasing a McDonald’s, thinking that they know a better way to hire staff. And if there are too many systems they want to change or customize.
They might be far better off creating their own business. Because paying a royalty fee for franchise system they are not using. Is often seen as a waste of money.
And it could end up with business owners getting in trouble with the franchise. For not adhering to the systems that they have set up.
However, business owners who do want to buy the franchise. Because they do like the idea of having a system in place for every thing.
They need to ensure that they go through all of the franchise systems. To ensure that it is not missing something important. Because the value of the franchise. Is the fact that everything has been figured out and systematized for them.
When business owners are looking at the different franchises. Edmonton accounting firm recommends looking at about three different franchises side-by-side. So that they can truly be objective.
Many business owners come to their Edmonton accounting firm with the franchise that they have already become emotionally invested in. Which makes it difficult for them to be objective.
So why looking at three different franchises at the same time. And help business owners figure out what is it about the franchise system that they like. And which company does it best. And which one has the best royalty structure and payout.
If business owners truly want to choose the right franchise for them. They should talk to their accountant, so that they can end up with the decision that is most beneficial for them.
