Key Differences Between Buying A Business And A Franchise

Key Differences Between Buying A Business And A Franchise

When somebody is deciding to take the big step of going into business for themselves, they have a lot of decisions to make. Each one is as important as the other. What is decided early on in this venture can determine the success or the failure of the business.

Options For Going Into Business

One of the first decisions that have to be made is regarding the business itself. The interested person has some options to choose from such as:

  • New business start up
  • Buying an existing business
  • Buying into a franchise

It can be a little overwhelming, so the best way to come to a conclusion is by making a comparison.

A New Business Start Up

For many, this is often the first option that they consider because it is the one that they may feel the most familiar with.  There are a lot of steps that have to be taken to get a new startup going.

Buying An Existing Business

It is another option that may be a little easier compared to the business start up as some of the concerns are eliminated. However, it does come with its own set of risks.

Buying Into Franchise

Some may think that this is on par with an existing business, but some distinct differences make it a more viable choice for many.  These are easily recognized when making a comparison.

The Planning Stage

Every business needs to start with a business plan. The franchise will already have this in place, and much of what it covers will be substantiated because the company itself is established.

The start up business will need a business plan to be developed right from scratch.

The existing business may have had a business plan, but there are no guarantees that it has been followed or can be substantiated. It is something a prospective buyer of the business would have to take the time to determine.

The Growing Pains Of A Business

Every business goes through growing pains while it is getting established. It is a critical phase for the new business owner. They often run into many challenges when it comes to this phase. For example, there may not be enough cash flow to carry the business when it is not as yet able to carry itself. It is one of the biggest stumbling blocks for a new business.

For an established business, this phase has been completed. It doesn’t mean that there are not any repercussions as a result of it. Usually, it is this stage of the business that the owner determines what is working for the company and what isn’t. They learn from mistakes made and correct them. An established business owner needs to be business savvy for this to be a success. A purchaser of an established business doesn’t know whether this has taken place. The fact that the business is still operating may not be an indicator. It has to be determined why the business owner is selling the business in the first place. If it is because it is not growing or flourishing, then it could be as a result of the effects of the growing phase.

A franchise has gone through the growing pains and weathered them successfully. Otherwise, they would not be in a position to offer a franchise opportunity. For people to buy into a franchise, it has to be an established business that is flourishing. It is partly as a result of coming through this first phase of business.

The Brand

A new business owner has to establish its brand. It partially takes place during the growing phase and is a critical component to getting the business established now and allowing it to grow in the future.

An established business has had plenty of time to develop their brand. It is tough for a prospective buyer of the company to determine how much brand awareness there is.

With a franchise, brand awareness is already in place. It has been established with the successful growth of the main business and is further supported by the additional franchises.

Related article: What Do Leaders Say About Small Business Approved Franchise Options

The Finances

A start up business can be challenging to get financing for. It has not proven itself in any way, so it may be difficult to convince financial institutions to lend money towards it.

An established business may fall into the same category as a start up business. Except financial institutions will want to rely on financial data that already exists for this business. Lenders will heavily scrutinize it for its past, present, and future viability.

A franchise is often easier to obtain financing for because it has a proven financial track record. The lending institutions have a lot more data that they can rely on to make their lending decisions.

Support And Training

A start up business usually doesn’t come with any support or additional training that may be needed. It can be stressful for the new business owner. They may have professionals that they can rely on for general support but none for the specific business that is being operated.

The existing business comes with limited support. The previous owner may be willing to hang around for a week or two while the transition of ownership is taking place, but in many cases, this is not enough.

With a franchise, the support and training is ongoing. The support can come at many different levels. The head office of the franchise normally tends to the marketing of the brand, which is a big plus for any business. Then when it comes to training, it is readily available as the franchisor wants to set the franchisee up for success. Also, the franchisees carry on the credibility of the brand. So it is in the best interests of the franchise to provide ongoing support and training where necessary.

Overall when doing an analysis such as this, the franchise is the better option for the majority. It is for  those who want to become business owners with as many of the risks being eliminated as possible.

Does Canada MedLaser Franchise?

franchise options

There are a lot of people who have heard about Canada MedLaser and the exceptional reputation that it has. For some who are thinking of going into business for themselves, this particular business holds a great deal of interest for them. The good news is that Canada MedLaser does franchise.

What Is Canada MedLaser?

It is a company that has created a series of locations that are operated by franchisees. The foundation of these clinics is they offer medical aesthetic services that are very popular throughout Ontario. The types of services It being offered are:

  • CoolSculpting
  • Laser hair removal
  • Cosmetic injections
  • Skin rejuvenation and restoration
  • Non-surgical skin and body treatments

Each of these services are ones that are in high demand and have created the need for responsible professionals to deliver them. It can take many years for an individual to gain a solid reputation in the provision of these types of services. The Canada MedLaser franchise program eliminates this as they have already established their reputation. It is a reputation that gets carried forward with anyone becoming a franchisee.

The Right Investment

Anyone that is going to buy into a franchise needs to know that it is not only solid now but will be in the future. The beauty industry is one of those industries that stay consistent no matter what is happening to the economy. When looking at the category of medical aesthetics, this is an industry that is showing a solid financial foundation, with it currently being an $11 billion industry and a projection to grow to $17.07 billion by 2023. These are figures that should give anyone thinking about a medical aesthetics franchise all the confidence it needs to enter into this industry.

A Reputation At Stake

When buying into a franchise, the interested party has to know more besides how well the industry is doing. They need to understand what a particular franchise offers that stands above the rest. With Canada MedLaser there is quite a long list, such as:

A Corporate team that has a hands-on approach:

There is a designated team that oversees the franchise program. They are the backbone of the franchises. By making sure they have all the resources they need for success. At the same time, making sure that none of the franchises are putting the reputation of the brand at risk. It not only protects all of the franchises but the Corporation itself.

The Leading Technology

Technology in today’s world is the key to success. Both the medical and the beauty industry have made great strides in the technology that they use. When these are combined like they are with Canada MedLaser, then it sets the company up for success and in return, benefits the franchisees.

The Benefits of Technology

The technology that applies to this industry allows it to be able to offer leading treatments and introduce new ones as they become available. It means that the franchises are always on the leading edge of what is new and exciting. There is never a risk of their franchise operation becoming stale or outdated. There is still a reason for Canada MedLaser clients to return for services and constant growth in new clientele. These are two essential components of a successful franchise.

Related article: Financing Options For A Franchise

Knowledge and Expertise

When an individual is starting out in business, there is always a growth stage. Along with a trial and error phase. It is something that is usually eliminated when buying into a franchise. Such is the case with the Canada MedLaser franchises. The company has put these two critical stages to anew business behind them. It is a distinct advantage to the franchisee. The brand has already been established, and the franchisee can focus on their location. It is far less time consuming and far less expensive compared to a regular business start-up.

Wearing Two Hats

In any business, the owner usually has to wear at least two hats. One applies to their expertise in their type of business. The other is the administrative side of the company. Both must be compatible and work together. Often a new business owner may struggle with the administrative side. With a Canada MedLaser franchise, the training includes both sectors of the business. The Corporation realizes the success of the franchisee is dependent on both of these areas. Therefore the Corporation provides not only a marketing kit and resources but ongoing marketing support.

The Services

Any of the services that are offered by a quality medical spa usually require extensive equipment. For the private business owner going into this industry, knowing which equipment is going to deliver the best and most wanted services can be a challenge. It can also be costly if the wrong choices are made. It again is another problem that does not have to be addressed. At least not when a business owner opts into a Canada MedLaser franchise. Corporate decisions have been made about what is going to be the most in-demand. With respect to services and what equipment and training is required to deliver that service.

These are significant decisions but ones that been made by Canada MedLaser throughout the time they have been in business. Their success at this is supported by the fact that the Corporation has three locations of its own successfully operating in different parts of Ontario that include Toronto, Vaughan and Mississauga.

The Right Timing

Timing is also essential when considering going into business. For the medical spa industry now is a prime time to enter into it. Many baby boomers are now in their early years of retirement. They have the time and money to spend on themselves. Their appearance is important to them, and they want to take advantage of the latest technology that is going to help preserve their youth.

Then there is the youthful that have become savvy about prevention and want to take advantage of whatever is available to them to help them preserve their appearance.

Both of these potential target markets are huge and being part of a franchise like Canada MedLaser that can meet their wants and needs is the ticket to success.

Financing Options For A Franchise

Financing Options For A Franchise

Deciding to go into business is a big one. For those who have opted to buy into a franchise, they may need assistance with financing. In Canada, there are some great options for this, and they each should be explored carefully before making the final decision as to which one to choose.

Banks

It is usually first on the list when an individual is looking for financing for a franchise. It is because most people are familiar with these types of financial institutions. What they may not be familiar with is the commercial side of banking. It is the department that looks after businesses and is quite a bit different from personal banking. It means when you are applying for a franchise loan that you may be dealing with new personnel at the bank with who you are not familiar. Banks will often lend money to franchises.

Canadian Programs

Often the government has different incentives in place to encourage new business owners. These can change at any time. Some of the resources that may be available are:

Innovation, Science, and Economic Development (ISED)

They can provide a good deal of information in regards to going into business. They may be able to suggest some financing options for franchises. They may be able to provide funds through some of their additional programs like the Canadian Small Business Financing Program. There may be restrictions on the use of the funds when it comes to franchises like the money cannot be used for the fees. However, it can be used for other essential purposes like the purchase of equipment, or qualifying fees.

Government Grants and Funding

Relying on the government resources that pertain to new businesses can also lead directly to different types of funding that may be in place. A useful resource is the Canada Business website.

Franchisor Financing

Many franchisors realize that potential franchisees may not have access to the funds they need to buy into the franchise. To make this easier, they may offer financing options. Some franchisors will make agreements with specific lending institutions to back their applicants financially.

Borrowing Privately

Some individuals are in a situation where they may be able to borrow from friends and family. Some financial options may be able to be negotiated with this type of lending.

There could be the traditional loan where it is agreed upon that the money will be paid back within a specific period at a set amount of interest.

If it is a family member, then the terms of repayment may be more flexible. The party loaning the money may be willing to allow the franchise to become solid financially before reimbursement is made. Also, any interest fees may be omitted.

There may be someone in the family or a friend that would want to become a partner in the franchise, which would then mean only having to come up with half of the required money.

Another option may be to offer a private lender a percentage of the profits for a specific period. This could be instead of paying back the principal amount or instead of any specified interest.

Angel Investors

These are individuals who want to invest their money in the success of others. A franchisee is a good example. They naturally want something in return, which is usually some equity.

Setting Up For Success

Researching the potential resources for financing for a franchise business is just the first step. The next and critical step is being prepared to convince a potential lender that they will be making a good investment. It doesn’t matter who the lender is. It is a step that cannot be overlooked.

Related article: Key Differences Between Buying A Business And A Franchise

The Proper Documents

A potential lender is going to want to see some documentation that supports the viability of this type of venture.

A Resume: They are going to be keenly interested in the credentials of the person buying into the franchise. The best way for them to determine this is by the individual’s resume. This will give them some idea as to the type of experience they have. For example, if an individual is going to buy into an aesthetics franchise, they may have many years of experience working in this field. If so, then it builds the confidence in the lender, that the applicant is qualified.

Proof Of Residence: The lender is going to want a physical address. They may also want to know if the applicant owns or rents their residence and how long they have lived there.

Financial Data: The potential lender will do a credit check. They will ask questions about the applicant’s financial status, such as whether they have any other sources of income.

Tax Returns: These are often required as they are the most reliable proof of an individual’s financial status. It is also an indicator that the applicant is not in arrears with their tax filings.

Business Plan: This can be a fairly lengthy document and one that should be adequately prepared. It has to give the potential lender an obvious picture of the franchise as it is now and what the projections are for the business throughout future increments.

What Is Looked At?

Knowing what the criteria are that lenders use when assessing a loan can be helping in making sure the applicant is prepared. These are what are commonly called the 5 C’s. These are:

  • Credit History
  • Capacity
  • Capital
  • Conditions
  • Collateral

Presentation

Aside from the documentation that will be necessary, there is a physical presence that will also be important. Applicants looking for franchise funding have to present themselves as serious business people. It starts right from their appearance to their demeanour. They need to be knowledgeable about the proposed franchise and be prepared to answer questions concerning it.

Applying for financing with confidence will allow the applicant to present themselves in a much stronger way. Most people find it intimidating to ask for money, but being fully prepared is a real confidence builder.

What Do Leaders Say About Small Business Approved Franchise Options

Small Business Franchise

There are many different ways that an individual can start their own business. Some ways are easier than others, and some are far more successful. An option that should be considered for entering into the business world is through a franchise. Some have given this a fleeting thought, but because of their lack of knowledge about this type of business they are hesitant in pursuing it. Leaders in small business approved franchise options have identified some important facts about small business franchises that can help assist those who want to capitalize on the benefits of a franchise.

What Are Some Of the Holdbacks And How To Over Come Them?

There are a few common holdbacks that prevent some who want to enter into a business from pursuing a franchise.

Not Enough Confidence

Some feel that the successful franchises are too big for an individual that is just starting out in a business.

  • What may not be realized is that there are small business franchise options. Different criteria can be used to define what a small business is. The most important are those that are provided by the Canadian government because they base their statistics on this criteria.

The Cost Factor

Others are concerned about the amount it will cost for a buy in.

  • The bigger a franchise is, the more it is perceived as being successful. This, in turn, means opting into one of these is going to demand a significant amount of capital. This is another concern that can be eliminated with a small business approved franchise. Being as it is in the small business category the buy-ins for the franchises are not as high.

Interest and Commitment

There are some who feel that the franchises that are available are not in industries that they are interested in.

  • With small business franchises becoming popular, it means there are more opportunities for those who want to operate a business in an industry of interest to them. For example, an esthetician that wants to start a business does not want to enter into the food industry.

Related article: Financing Options For A Franchise

How Popular Are Small Businesses In Canada?

Before even thinking of starting a business, an individual has to have the confidence in knowing that this is viable. To help determine this it means looking at what leaders in the business community forecast and what the statistics support.

According to the Government Key Small Business Statistics for 2017:

The figures provided are based on SMEs (Small to Medium Enterprises). The criteria for ranking businesses are :

  • Businesses with 1 to 99 paid employees is classified has a small business
  • Those with 100 to 499 paid employees are medium sized
  • 500 or more employees is a large business

According to statistics for December 2018 there were 1.18 million businesses operating in Canada. Out of this, 1.15 million fell into the small business category. It means that 97.9 percent of the businesses are small businesses.

What is even more encouraging for those thinking about a small business is that out of the small businesses, 53.8% of them are called micro-enterprises with 1 to 4 employees. This should give those who are thinking about a small business franchise confidence in know they can start out with a small number of employees or just with themselves serving the business until it grows.

Something else that is important when it comes to the statistics is realizing that 78.4% of the small businesses are in the service sector compared to 21.6% that are in goods producing. This is a statistic that can be helpful when choosing the type of small business franchise that one wants to consider.

The Benefits of A Small Business Franchise

The first benefits to be considered for the small business franchise are all the solutions mentioned above that it provides for dealing with hesitations that some have.

The next benefit is that all of the benefits that are applicable to large business franchises are totally applicable to those in the small business category. These include:

  • The brand has built its reputation, which can take years for an independent business to do.
  • Statistics show that franchises tend to be more successful compared to stand alone businesses.
  • Business experience is not the main priority with a small business franchise. In a lot of cases, the company offering the franchise will provide the necessary business training.
  • Although the business is owned by the individual they have the support of the company providing the franchise.
  • It can often be easier to obtain financing for a franchise compared to a new start up company.
  • Some of the standard business costs are reduced, such as that for marketing and advertising of the Brand itself. Depending on the franchise contract and type of franchise. This is a big plus when it comes to getting a business known.

Getting Started

No business opportunity should be rushed into. Therefore there are some starter steps that need to be taken by those interested in small business franchises.

Familiarization

The first step to becoming a small business franchise owner is to familiarize yourself with information such as what has been provided here. These are the basics and can be expanded upon once an interest is raised in a specific industry. All leaders in the small business franchise industry emphasise that becoming familiar with what this industry is about should be the starting point.

Interest

The majority of business owners that have achieved success have done so because they are in a business that is of interest to them. One that they some knowledge about or perhaps they originally were educated in. For example, those who are experienced in services that pertain to the beauty industry would be more comfortable in a franchise that is related to this.

Looking At The Options

Once the first two steps are completed, then it comes down to looking at the options. For those who feel that a small business franchise would be of interest to them then let us provide you with some further guidance by contacting us at Canada Med Laser.

5 Things To Consider Before Buying A Franchise In Canada

What a Franchise

There are many different ways that an interested person can become the owner of a business. Options are available for starting businesses. There are opportunities for buying existing ones. A better option may be purchasing a franchise. No matter the approach, some things need considering. There are some essential things to consider before buying into a franchise.

1.Understanding What a Franchise Is

When a person buys into a franchise, they are purchasing specific rights to the business. They are purchasing the right to utilize the business system of the franchise as well as use its

brand. Every franchise will have clear and concise policies that cover the rights of the buyer.

The Cost of a Franchise

There is a cost for the rights that the buyer is being given. There can be a big range in these costs. Many are under the impression that the majority of their franchises may be out of their financial reach. However, there are some great opportunities now available for Canadians to buy into small business franchises. Some examples of these can be found in the beauty industry in different categories such as aesthetic services, or hair salons.

Renting vs. Ownership

What has to be realized is buying into a franchise is the agreement pertains to renting the applicable rights.. It is not outright ownership. As such, there will be a time limit attached to the contract. This can range from five years to ten years. Most often, these agreements also contain a right to renew. This is for the protection of the person buying into the franchise and the one building the business during the agreement terms. The renewal provision is not something that automatically takes place.

Another consideration with a franchise is being able to assign the rights. This, too, is not something that is automatic and will be part of the negotiations when the terms of the agreement are created. Most often, there are conditions that will apply to the renewal or an assignment. If these conditions are not met, then this portion of the agreement can be voided.

Related article: 10 Things to Consider Before Laser Hair Removal in Toronto

2.FDD

FDD is the Franchise disclosure document. There are laws in some of the Canadian provinces that must be adhered to when it comes to the FDD. This document must be given to the franchisee at least fourteen days before they sign the contract. Although this may vary among the different provinces. It is vital that anyone that is going to enter into a franchise knows what the regulations and laws that pertain to franchises according to their province.

The FDD is the document that really gives all the information as to the workings of the franchise. It will contain the following information:

  • Who the franchisor is and if there are any parent companies, previous owners or affiliates
  • Business experience
  • Litigation
  • Bankruptcy
  • Initial fees
  • Other fees
  • Estimated initial investment
  • Restrictions on products and services
  • Franchisee’s responsibilities
  • Financing
  • What help will be given to the franchisee such as advertising, marketing, training
  • Territory
  • Trademarks
  • Copyrights, patents and proprietary information
  • Franchisors responsibility for participation
  • Renewal or transfer information as well as transfer and dispute resolutions
  • Public Figures
  • Representation of financial performance
  • Franchisee information and outlets
  • Financial records
  • Contracts
  • Receipts

3.The Boiler Plate

The boilerplate is the agreement that the franchisor has developed for the franchise. This is what every franchisee agrees to when they enter into a contract. Sometimes a new franchisee’s lawyer will want to make several changes to this. It can be a waste of money because there will be a lot of terms that are non-negotiable. The franchisee’s lawyer should not this. What it means is choosing a lawyer that is familiar with franchises as they will automatically know what is negotiable and what is not.

That doesn’t mean that nothing can be changed, but changes should be chosen carefully and realistically.

4. Is This The Right Franchise For You?

Part of this decision is also based on whether having your own business is right for you. For example, there are a lot of aestheticians who have worked for others for several years and have created a large clientele for themselves. Yet, if they were to leave that establishment, they could not take those clients with them based on business ethics. Many who are in this situation would rather be in a position where they are working for themselves. A franchise in this industry would allow them to do precisely that.

Then it is a matter of choosing a franchise that is going to meet the wants and needs of the new business owner. Aside from looking at the legalities, there are ways to determine if a proposed franchise is going to be the best choice.

Talking to other franchisees. They are the ones that are going to have the most experience with the business outside of the franchisor themselves. There are some basic questions that could be asked of the franchisee that will provide some important information. Such as:

How long has the franchisee been in their location, and were they the first ones to have this particular location?

This will give an interested party some idea as to how long it took the franchisee to get established.

Are they happy that they made the decision to go with this franchise?

This is an open-end question where the franchisee may freely discuss the pros and cons that pertain to them.

While these are two simple questions and important ones, they are questions that should be asked for a couple of franchisees within the same franchise. This is because there will be variables that affect their answers. For example, their location will have a bearing on their answers. Also, personal feelings, such as whether owning their business, was the right thing for them. This would not necessarily be a reflection on the franchise itself.

5. Being Informed

There is a lot to learn about franchises in general, which should then be carried on to learning more about the specific franchise that has captured their interested.

The good news is that there are some great opportunities now in Canada for small business franchises.