The Toronto area is usually sprinkled with a generous number of opportunities for small business to flourish but it is a rare case when hundreds of prospects all converge in one place at one time. That is exactly what is happening when The Franchise Show rolls into the Toronto Congress Centre on Feb. 23 and 24.
Hosted by the Canadian Franchise Association, this two-day event is packed with seminars, face-to-face interaction with industry experts and the possibility of investing in more than 100 Canadian franchise systems. The Franchise Show is a great place for those interested in growing their income through franchise ownership.
But there is a lot of homework and careful consideration that should be a precursor to signing any contract.
“Shows like this are like a supermarket, you get to go to all the big franchise reps and talk to them,” said Drew Smylie, Centennial College’s Coordinator of Entrepreneurship and Business Administration Program. “But be careful because they are all going to put positive spin on it because this is a sales event for them.”
He reminded over-ambitious entrepreneurs that there are a lot of ways to lose money by selecting a franchise that has high up-front fees, large royalty payments or renovation costs that may not be initially obvious from a sales pitch.
Before signing anything, Smylie strongly advises that potential franchisees run the deal past several outside parties including other franchise owners, a certified accountant and a reputable lawyer.
Lawyers that specialize in franchise law are a rarity, even in Toronto. Ben Hanuka is a litigator at Law Works P.C. and has been a leading name in Canadian franchise law for the past 15 years.
“I see a lot of people who do a lot more due diligence when they are buying a television than when they buy a franchise,” said Hanuka.
He thinks the first and most important thing to get professionally analyzed is the disclosure document. Franchisors provide this document to potential franchisees before a contract is signed and it contains a lot of important information. Because there has been no legal agreement yet, the details of the contract can often be negotiated after careful consideration. Hanuka says this is one of the advantages of working with a smaller franchisor because an investor holds more power in negotiations.
“On the other hand, a seemingly better deal can be a trap in itself. Even with a well-negotiated deal, some (unproven) businesses are bound to fail,” said Hanuka. “Are you really prepared to be a guinea pig?”
Buying into a franchise can be a great way to grow an investment but requires a lot of careful thought and professional advice. Attending The Franchise Show is a great place to get started and get an idea of whether owning a franchise will be right for you.