The New Franchise Buying Process

Buying a new franchise is an effective way for aspiring business owners to transition into the world of entrepreneurship. A new franchise can offer a lower risk factor than a non-franchise due to proven systems and processes being in place and not having to create them. Franchising typically has a higher rate of success than new start-ups, not to mention that a franchise can provide a solid and stable foundation for you to effectively transition into becoming a business owner.

By reading this, you have taken the very first step towards owning your own business. Of all the new franchises that opened in Canada within the last 5 years, 86% are under the same ownership and 97% are still in business – making the purchase of a new franchise one of the more appealing ways to become a new business owner.

Pacific M&A and Business Brokers Ltd. will assist you in qualifying, selecting, and purchasing a new franchise no matter your level of experience.

 

Download the New Franchise Buying Process

 


New Franchise Buying Process

STAGE 1 – Qualification

While there are plenty of franchise opportunities across numerous industries, there are a number of things you should consider before purchasing a new franchise. Pacific M&A and Business Brokers will work with you to understand your business acquisition criteria and help you make an informed decision.

This starts by confidentially understanding your financial capacity. This information is not disclosed to anyone, prior to and without your explicit written consent. The information is used strictly internally for the specific qualifying purpose.

Pacific will also provide you with full disclosure pertaining to any relationship with the seller resulting in a clear understanding of all such relationships right up front.

STAGE 2 – New Franchise Criteria

A realistic search criterion will be established through a candid discussion between you and Pacific M&A and Business Brokers, in which your goals and expectations will be assessed. You will be presented with new franchise opportunities matching your needs for your consideration.

The Pacific franchise advisor will guide you through the specifics of each presented franchisor’s process.

Upon review of the available opportunities, presented materials, and assuming your interest level remains high enough to proceed further and learn more about a specific new franchise opportunities, a telephone or in person meeting is arranged with a franchisor to further discuss and analyze the opportunity to ensure that it will be a “good fit” for both parties.

STAGE 3 – Franchise Application & Process

After having researched and determined the best franchise fit, and having met or discussed the opportunity with the franchisor, should you wish to move forward you will be required to complete the franchisor’s application. At this stage, the franchise will vet you for their criteria qualifications assessment and if approved, you will be required to pay a deposit and/or attend what is called a “discovery day”. This involves travel to the franchisor’s head office to meet with their senior people to expose you to the franchise model ensuring that you match their qualifications and they match your desired criteria and expectations.

The list provided below gives you a step-by-step overview of the major steps that come with opening a franchise. Please note that the investment process may have some variations from company to company, and timelines vary between systems.

  1. Self-Evaluation
  2. Research
  3. Attend “Discovery Day”
  4. Speak to Other Franchisees
  5. Find a Suitable Location
  6. Choose a Franchise and Secure Funding
  7. Sign the Agreement
  8. Obtain All Necessary Permits & Insurance
  9. Hire Staff & Attend Training
  10. Open Your Franchise Business

STAGE 4 – Licensing Agreement & Closing

Following an agreement from both buyer and franchisor on general terms and conditions, the work of drafting a purchase and sale or licensing agreement commences – this is typically drafted by the franchisor’s lawyer and each side is responsible for their own respective legal costs.

Pacific M&A and Business Brokers will work with you to obtain the information you reasonably need to perform due diligence on the opportunity being presented to you.

The closing of the transaction takes place once all conditions precedent to your agreement to purchase the franchise are waived and the franchise agreement as well as all other ancillary agreements including financing have been agreed upon.