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Protect Yourself From Hidden Costs When Buying Franchises.

Things To Know When You Buy A Franchise

A franchise is the authorization to legally sell the goods or services of a company, and to operate a business under their standards. Buying franchises can be the ideal option for someone who wishes to own a business without having to lay down the groundwork, such as trademarks, branding, product/service development or start up capital. The Calgary based franchise lawyers at Kahane Law can help when buying a franchise in Alberta. Call today: 403-225-8810.

Steps To Buying Franchises

There are several steps involved with buying franchises and many factors to consider before signing any paperwork. For example, consider:

  • Any requirement to set up a new corporation
  • Becoming licensed to operate as a franchisee
  • Your concerns to ensure the completion of proper due diligence
  • Paying applicable fees to the franchisor to operate the business
  • The term in which you will operate the franchise (generally 5-10 years)
  • The percentage of royalties you will pay to franchisors
  • If a financial contribution towards marketing and advertising efforts is required, and if so, the annual percentage
  • Your overall financial ability to handle the costs involved with maintaining a franchise, even against risk factors (such as an economic downturn)

A Franchise You Buy Is Like Leasing A Business

It’s more suitable to compare buying franchises to leasing or licensing. When you buy a franchise, you are not considered the owner of that company. As a franchisee, you’re temporarily granted the rights to operate a business using a specific company’s trademarks, branding, materials and systems. While buying a franchise requires a fixed term, it is never a guarantee that you will have the option to renew once the term is finished.

Key Factors To Consider When Buying Franchises

There are several legal factors involved with buying franchises, such as information disclosure. Before buying a franchise, it is required by Canadian law for the franchisor to provide specific financial information to the franchisee, prior to signing documents or accepting any form of payment. There are also regulations as to which variables are negotiable or nonnegotiable (such as product pricing). Always ask your franchise lawyer to review all the franchise disclosure documentation and explain those in detail to you.

Protect Yourself From Hidden Costs and Obligations

Seeking legal advice when it comes to buying franchises is one of the smartest things you can do to avoid confusion, error and failure. A lawyer may also be able to point out overlooked risks of buying a particular franchise (such as the quality of a location or a lack of capital from the franchisor). In addition, often hidden costs and obligations (which then cost you money) to the franchisor exist buried in the agreement. There are so many of these hidden aspects that could ultimately cost you your business, that it is impossible to list them. Before you buy a franchise, it is very important to have a professional review the franchise agreement and disclosure. Potential hidden costs include taxes in Canada. Always discuss these aspects with your lawyer and accountant.

Getting A Franchise Lawyer To Protect You!

Any business owner would agree that buying franchises is nothing short of an extensive process with potential heavy risk. Before making any decisions, it’s best to seek legal advice to help minimize the risk involved and set you up for success on your new venture. Kahane Law Office has franchise lawyers who are ready to help you in Calgary, Alberta. Call Today! 403-225-8810 in Calgary, Alberta or toll-free at 1-877-225-8817 or email us directly here.