Franchising for New Canadians: Five Common Mistakes to Avoid

Franchising can be a rewarding financial and professional experience for new Canadians who have the right personality, attitude and willing to work as part of a team. If you are exploring franchising as a possible career opportunity, you are likely excited and eager to get started right away. Excitement is great, but you need to use that energy to carefully understand what’s ahead of you so that you make an informed decision. This will take time, but it will also help you to avoid common mistakes that could be costly.

Spending time at the front-end before you sign a franchise agreement, can help you to:

  • Reduce financial challenges related to your level of financial resources
  • Choose a great franchisor with a strong brand, business history and reputation
  • Ensure that you will be happy with your decision to open a franchise

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Here are five common mistakes that franchisees make when exploring franchising:

1. Not Consulting with Legal and Financial Experts

I can’t stress enough how important it is for you to work with a franchise lawyer and financial adviser/business accountant and to do so the earlier the better in your journey to being your own boss. By speaking to both of these professionals, they can identify any legal or financial issues that may not be in your best interest. Better you know about issues before you go too far down the franchising road.

By identifying any issues, these professionals can help you to avoid or minimize any unexpected costs, obligations, or challenges related to the franchise contract. The decision to own a franchise is a large investment of your time and money. Professional advice can help to minimize the risk and usually overcome legal and financial roadblocks before you sign a franchise agreement.

These professionals can also help you to understand complex Canadian legal or financial requirements that you may not be  familiar with. It’s important that you ask them any questions you have to increase your understanding.

2. Not Conducting Thorough Research (Due Diligence)


Now is not the time to save time by doing incomplete research. This will not save you time. In fact, this initial research may be where you need to invest most of your time. If you spend time talking to both current and former franchisees, you can gather information that either confirms your decision to work with a particular franchisor, or you may decide you want to explore other franchisors. Either way, knowing this information early on will save you time and money.

It’s important to speak to a number of current and former franchisees. It may be tempting to speak to only one or two franchisees. However, it will be easier for you to spot themes and trends if you speak to more people. Have an open mind and listen carefully to what the franchisees are saying. Think carefully about what information you would like to gather, Here are just a few areas that you can explore:

  • The nature of the franchisee’s relationship with the franchisor
  • Did the level of sales and profit meet or surpass the franchisee’s expectations for the business or were they less than their expectations
  • How the franchisor settles disputes
  • The level and quality of training and ongoing support

Former franchisees can also provide important information about why they left the system. This could tell you important information about the culture of the franchise.

Once you collect the information, you need to be honest with yourself about the information you have gathered. Avoid relying on a “gut feeling” to guide your decision making, or only paying attention to the positive information that you heard. Ideally, you want to make a decision based on balanced input.

The information you collect will either confirm that you are making a sound decision, or you may decide to research other franchisors. In any case, you can be confident that you have not cut corners and entered into a situation solely based on a gut feeling.


3. Not Creating a Business and a Personal Budget


A large risk occurs when franchisees do not have enough capital to get them through any unforeseen downturn in the economy or changes in the marketplace. There could be a number of reasons why you would need more capital. You need to prepare for this. Speak to an accountant to help you to understand the costs that you will have to cover.

Create a personal budget that will allow you to cover one year of personal expenses to handle unexpected financial demands with confidence. An accountant can help you understand what your investment would mean for your personal financial situation.


 4. Over-Estimating How Much Control You’ll Have as a Franchisee

This item speaks to your “fit” for franchising. If you are a newcomer to Canada, you likely have many traits that would serve you well in franchising. It takes hard work and long days, optimism, determination, patience and focus on achieving success to uproot your life and move to a new country. These traits are also essential in the franchising environment. However, to be a successful franchisee, you will be required to follow:


  • Guidelines
  • Processes and systems
  • Prescribed operating manuals

These are proven systems that have contributed to the franchisor’s success. So, if you desire to do business your way,  you will face problems with the franchisor.

How willing are you to follow these guidelines and systems? This is a minimum 10 year commitment and If following these guidelines  is going to be difficult for you, perhaps franchising is not the best business option for you. Again, you need to be honest with yourself when you ask yourself this question. Better that you know this about yourself before you pursue a franchise opportunity. Not everyone is cut out to be a franchisee. If you’re not a fit for franchising, you will not be happy or satisfied for very long.


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5. Not Matching Your Skills and Interests with Franchise Opportunities

The franchise industry has many different sectors and many categories within those sectors that you can select from. Take time to identify your skills, interests, knowledge, and related experience to find a franchise sector (for example:  Food) and category (for example: Indian) that aligns with your interests and passion. No matter how profitable a particular franchise is, it won’t be long before you are dreading what you’re doing if your heart isn’t in it.


Increase your self-awareness of your strengths and interests and then explore franchise categories that align to your personality. Once you have landed on a particular category, search for brands that best represent that category. Again, this is important research, so take your time and collect all of the information that you need.


You can minimize your risk and avoid a decision that can be costly and stressful when you pay attention to these common franchising mistakes. You will be even more excited about your potential franchise opportunity in Canada when you know you have taken all the right steps.


Visit our Franchising for New Canadians Learning Center to help you make an informed franchising decision.