If you've ever considered purchasing a franchise in Canada, you've probably focused on the more common food chains with big brand names that can be found on almost every corner. However, the smart time to buy a restaurant franchise isn't after the brand has become well established, it's when the company is on the rise. Buying a "household name” restaurant franchise can be extraordinarily pricey, and it can take you a long time to get a return on your investment.
On the other hand, getting in on the ground floor of a company whose franchises are just beginning to take off can be very lucrative. Of course, you'll need to do due diligence to find out if the company is right for you and likely to be successful, and you must consult professionals about the correct way to purchase a franchise. But investigating companies that are experiencing success in today's economic climate and are just beginning to expand makes a lot of sense.
Franchise Timing and Terms
With the Canadian economy in better shape than most, it makes sense to look for a Canadian-owned franchise if possible. Look for a company that's been around for a while, and one that established its flagship restaurant before beginning to expand. A good time to get in is when a franchise is fairly well established in one region, and just beginning to move into other provinces. This type of momentum with success behind it means that the company is a solid bet for success.
You'll want to ensure that whatever franchise you purchase will offer adequate support and an initial deal that makes sense. Here are some terms for an up-and-coming proudly Canadian restaurant franchise:
- Initial franchise fee is $40,000.
- Franchisee's ongoing royalty contribution is 6% of weekly gross sales.
- Franchisee's general advertising fund contribution is 1.5% of weekly gross sales.
- Total turn-key investment for a new neighbourhood bar and grill of 1500-3000 square feet ranges anywhere from $400,000 – $600,000.
- Minimum unencumbered cash investment required from the franchisee is $200,000.
Compare this to the more common brand restaurant franchises, some of which require a $45,000 initial fee, and listed minimum liquid assets requirement of $300,000. Something to keep in mind as well is that most successful applicants fill in that blank with a much higher figure. Estimates of the turn-key investment for a big franchises come in well over $1,000,000.
Ah, you say, but the more common restaurant names will fully support my franchise by training my employees at a Hamburger University, and can offer me help with finding a store location. If you investigate, you'll find that smaller companies have learned from the "big fish.” Again, using the up-and-coming franchise as an example, the company offers:
- A comprehensive training and support package to franchise owners, which includes the recruitment and training of all store opening team members.
- Management of all aspects of real estate acquisition, including the sourcing of locations for franchisees and negotiating competitive lease terms.
In addition, working with an energetic young company can be more fun! Check into franchise opportunities available with thriving Canadian restaurant franchises, and look forward to a delicious future!