Edmonton Accounting Firm | Why Do People Like Franchises
Often, when people are thinking about becoming business owners says Edmonton accounting firm. They look at franchises as an easy way of buying into business ownership. Although, there are many things that they need to take into consideration. Before they simply purchase any franchise they hear about.
It is very important to understand that often, when people see franchises as more successful than independent businesses. There are some statistics that can support the truth of this.
According to industry Canada, 15% of all small business owners in Canada fail in the first year of doing business. While 30% fail by year two. And half have failed by five years in business.
On the other hand, Edmonton accounting firm says only 14% of franchises have gone out of business by the time five years, around. Each might show that purchasing a franchise can be a better business decision. Then starting a business from scratch.
However, there are many different things that business owners need to keep in mind. Before they start assuming any franchise being better than starting their own business. And looking at why franchises are more successful is very important in doing that.
What people are paying for when they purchase of franchise says Edmonton accounting firm. Is the name, and that is what most people think is most beneficial. But that is not the case. What people are buying that has the real value. Is the systems and processes behind that name.
Someone else has come before the business owner. And figured out exactly what needs to be done in order to be successful in that tape of business. And then created a series of systems, checklists and processes outlining how to re-create and duplicate that result.
This serves more than one purpose. First, it allows a business owner to hire staff, and then easily teach them the same system. So that they can start running their business, while the entrepreneur has time to do whatever they want, but for successful business it is more time on the sales and marketing.
Once they are able to teach this system to more staff, the staff can grow the business, and hire more staff that they will teach the system to. And the business owner is no longer tied to the business. But by franchising this system. They are teaching that system to a wide variety of other entrepreneurs. So that they can duplicate the results, and find the same success in the business.
Because these systems and processes are the true value of the franchise. Edmonton accounting firm says entrepreneurs need to keep in mind to look at those systems and processes that they are buying. To ensure they are buying something that is valuable.
Because not all franchises are the same. And one franchise might have a lot of systems and processes to purchase. While another might not have the same information included.
Ultimately, franchises can be beneficial. If entrepreneurs buy the ones that have the right systems and processes in place. Otherwise, it may not be worth the franchise fee that they pay. Can end up with the business owner being better off by starting their own business.
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It is a decision that people need to make, whether to buy franchises. Or start their own business from scratch says Edmonton accounting firm. And often, people want to buy franchise. Because they do not have any ideas of what business they want to start for themselves.
Often, business owners get into business ownership, because they have been in their industry for so many years. And are an expert. And think that they can earn more money as an owner, then as an employee.
However, many people are not in a specialized industry. Or do not want to start a business in the industry that they have been in for years. Or maybe, they are looking for a break says Edmonton accounting firm.
And in this case, they might be looking for a different business to own. For these people, purchasing a franchise can be a great opportunity. However, not all franchises are the same.
And business owners need to compare many franchises to each other. To ensure the one that they purchase is as beneficial as possible.
The first thing that Edmonton accounting firm says entrepreneurs should take into consideration. Is the franchise fee, as well as the royalty fee. The franchise fee is the amount of money that entrepreneurs must pay in order to buy the franchise in the first place.
And this is typically the systems and processes that business owners paying for when they purchase a franchise. The royalty fee on the other hand is the amount of money that they must pay on a regular basis to remain a franchise owner.
Typically these are paid on a monthly basis, based on a percentage of their sales. But some franchises have a flat royalty fee and others have a cap on the royalty fee. Which can help a business owner keep more of the money that they make in their franchise.
Which is why it is important that they understand the franchise and royalty fees before they purchase a franchise. Often, business owners find out far too late. That the franchise that they have purchased.
Has hidden costs, or that the royalty fee is not what they thought it was. And they have a difficult time making ends meet. Because they are paying more in royalties than they were expecting to.
By hiring Edmonton accounting firm. Business owners can ensure that an accountant is comparing royalty to revenue. As well as looking at all of the other financial information.
Including reading the franchise agreements, looking at the specific financial information. And even checking utilities, lease agreements and common area charges.
If business owners truly want to purchase a business that can help them succeed. A franchise may be that golden opportunity. However, it is important for people to know, that they need to look at the specifics of the franchise. In order to make that decision.