Sweat eq­uity and cap­i­tal

That’s what it takes to open a suc­cess­ful fran­chise in Canada

The Telegram (St. John’s) - - BUSINESS -

Beeru Man­nan owns two Freshii lo­ca­tions in Bri­tish Columbia with his brother, and the duo plan to open an­other pair of the chain’s restau­rants in the prov­ince next year.

The vet­eran fran­chisee, who’s been af­fil­i­ated with three other brands pre­vi­ously, was drawn to Freshii’s fo­cus on healthy din­ing op­tions.

Stand­ing in his Burn­aby, B.C., lo­ca­tion while em­ploy­ees prepped fresh veg­eta­bles in the kitchen, Man­nan said he be­lieved it was an up-and-com­ing chain in the health food seg­ment that could grow ex­po­nen­tially.

The broth­ers are two of many Cana­di­ans run­ning the 78,000 fran­chise units in the coun­try that fall un­der some 1,300 brand names, in­clud­ing Freshii, ac­cord­ing to the Cana­dian Fran­chise As­so­ci­a­tion.

Peo­ple look­ing to join their ranks want to be their own boss, en­joy the flex­i­bil­ity that comes along with that, and de­sire di­rect con­trol over their fi­nan­cial in­vest­ment, ac­cord­ing to sur­vey re­sponses com­piled by the CFA.

Prospec­tive fran­chisees should re­search the com­pany, build an emer­gency fund and closely read the fine print on all doc­u­ments be­fore mak­ing a big cap­i­tal in­vest­ment, ac­cord­ing to fran­chisees and in­dus­try in­sid­ers.

Freshii pro­vided Man­nan and his brother a list of all their fran­chisees and they trav­elled to Toronto, Chicago and Port­land to speak with some.

“That was im­por­tant to us, that it wasn’t dic­tated who we speak to,” says Man­nan, who asked about the level of sup­port they re­ceive from head of­fice and any op­er­a­tional chal­lenges.

A big red flag, he says, would have been neg­a­tive com­ments about their ex­pe­ri­ences with head of­fice.

Re­cently, dis­agree­ments between some Tim Hor­tons fran­chisees and their par­ent com­pany, Res­tau­rant Brands In­ter­na­tional, about man­age­ment moves has re­sulted in two class-ac­tion law­suits be­ing filed on be­half of fran­chisees and RBI tak­ing le­gal steps of its own.

Sukh Au­jla, who owns 11 A&W lo­ca­tions with his brother, says one way to de­ter­mine how much a fran­chisor will sup­port you is through its ap­pli­ca­tion process.

When his fam­ily first looked into own­ing a fran­chise, they ap­plied to and were ac­cepted by a num­ber of chains.

“Some fran­chises just wanted the ba­sic in­for­ma­tion - how much money you had, what’s your ba­sic ex­pe­ri­ence and back­ground - and you got ac­cepted very quickly,” Au­jla says, adding A&W’S more thor­ough vet­ting process made them more feel the com­pany would likely be more sup­port­ive of its se­lected can­di­dates.

Once prospec­tive busi­ness own­ers choose a chain, they must be pre­pared to put up a big cap­i­tal in­vest­ment.

It’s also im­por­tant to set aside some funds for work­ing cap­i­tal beyond the ini­tial re­quire­ments to cover any short­falls if, for ex­am­ple, the fran­chisee un­der­es­ti­mates the num­ber of staff needed or over­es­ti­mates ini­tial sales.

Up­front fees can range between less than $10,000 to more than $1 mil­lion. A&W, for ex­am­ple, re­quires a min­i­mum in­vest­ment of $350,000, ac­cord­ing to its web­site, though it runs a pro­gram ask­ing for $150,000 up front for peo­ple un­der 35 years old.

Most peo­ple need some type of loan to fi­nance the in­vest­ment, Lor­raine Mclach­lan, the CFA’S CEO said in an email. There’s a ded­i­cated fran­chise team at most banks, she says, who can help se­cure fi­nanc­ing.

Some fran­chises also have re­la­tion­ships with cer­tain banks, says Au­jla, and fi­nan­cial in­sti­tu­tions tend to have more con­fi­dence in fran­chisees than en­trepreneurs go­ing into busi­ness for them­selves.

“You got the brand power be­hind you,” he says.

“It’s not like you’re open­ing up your own res­tau­rant un­der your name. No one knows who you are on the street.”

Once the busi­ness is open, part of the path to suc­cess comes down to hard work. Au­jla re­calls be­ing a teenager when his par­ents opened their first A&W lo­ca­tion and work­ing long shifts in the res­tau­rant with his brother.

CP PHOTO

Beeru Man­nan, who owns and op­er­ates two Freshii restau­rants with his brother and is in the process of open­ing two more, poses for a pho­to­graph in Burn­aby, B.C., on Mon­day Oc­to­ber 9, 2017.

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