Toronto's Business Lawyer BlogBlogging on legal and corporate ideas and innovations. |
||||
|
EARLIER BLOGS |
THE BUSINESS LAW BLOG
F Over the past few months, I have had the opportunity to review a number of franchise opportunities that have been extremely scary. These franchises are marketed to unsophisticated wanna-be entrepreneurs who are looking to get into owning and operating their own business. Unfortunately, the only people that are going to see the financial rewards associated with this endeavour are the franchisors, as a result of their over-inflated franchise fees and ongoing royalty fees, which they diligently prosecute and demand from their franchisee clients. For many franchisors, I believe they have lost sight of the original purpose of franchising - to establish a mutually beneficial business partnership from with new partners from which all parties are the beneficiaries. Instead, many franchisors are overly focused on extract these great fees that the major international franchisors are legitimatly capable of commanding (as these companies real provide value to their franchisees), as opposed to working with the franchisees to make them a success and thereafter sharing in the profitability of the business. Personally what I would like to see in these new franchise systems is a graduated approach to franchise fees and royalty fees, given all the other start-up costs associated with launching a new business. However, that is not the case, as almost every franchisor looks to put the new franchisee deep into the red, from which it is exceedingly difficult to emerge. And you have to ask yourself, what is the value associated with that - nothing! The franchisee has so many restrictive covenants in their legal agreements that they really don't have the means to misuse the opportunity provided by the franchisor. Meanwhile, the franchisee is expected to service a greater than necessary debt, thereby incurring excessive interest charges and preventing them from realizing a profit from the business (from which the franchisor would natural benefit more from than their current arrangement). And by not working with the franchisee, the entire franchise system does not thrive because it does not have the extremely positive reputation that would come with working with the franchisees to truly make them profitable. Nevertheless, this is merely my personal perspective on the state of franchising, although I would hope that more prospective franchisees will scrutinize the true value of the franchise business opportunity and franchisors will make a better effort to take a graduated approach with their franchisees that makes them more profitable and successful.
|
|
||
|
Toronto Business lawyer Christopher Neufeld with the law firm of Neufeld Legal Professional Corporation (1 Yonge Street, Suite 1801, Toronto, Ontario M5E 1W7), is admitted to practice law in Ontario, Alberta and New York State. Christopher's legal practice focuses primarily on business law, in particular corporate commercial transactions and contract work. The content of this website is purely for informational purposes and should not be relied upon - as you should consult a lawyer with respect to the specifics of your particular legal matter. Please review our legal disclaimer and privacy policy prior to contacting us and be advised that contacting us does not create a lawyer-client relationship. Copyright 2011. |
||||
|
Site Map Disclaimer Terms of Service Email Toronto Business Lawyer |
||||
