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Organizations and individual entrepreneurs continue to adopt more innovative approaches to business. Evidently, globalization and technological developments have played crucial roles in this business. Generally, these two factors have increased the rate of business processes. It is observable that brands have advanced beyond their domestic and regional markets (Schell 2011).
There is a notable platform for global business negotiation and franchise opportunities. There are several fundamental elements to be considered while establishing and conducting an international franchise. Strategies applicable in the management of complications associated with international franchise are eminent within all sectors of investment.
Entrepreneurs interested in franchise business must take into consideration the crucial challenges. Ideally, the basic objective is always to minimize the negative implications of franchise operations. Precaution and effective examination is vital for all parties interested in the global franchise business (Lorette 2013). This paper presents critical considerations to be undertaken during the establishment of a franchise investment.
Additionally, it describes the process of assessment of the risks and returns associated with the business. There is a description of the laws providing special protections to the franchisee. The report also indicates vital analysis and recommendations to be adopted by the franchisees.
Assessment of the Risk and Returns of the Franchise Investment
The report focuses on investment in the franchise within the Canadian hospitality industry. For this segment of international franchise, the interested parties must consider a variety of factors. However, it is vital for them to examine the risks and returns linked with this global franchise initiative. Canada is strategically fit for the establishment of the franchise.
Particularly, the country faces a huge influx of tourists and international travels (Herman 2013). This enables the hospitality industry to realize great revenues and profits. Therefore, it is the ideal destination for the establishment of this kind of investment. It is imperative to indicate that Canada has one of the greatest potential markets for the franchise sector.
The nation borrows a lot of franchise strategies and ideas from the major U.S business industry. Those involved in the franchise industry must note that Canada has distinct features. These might have severe business implications. Such important characteristics include the unique regional and the demographic elements. These factors require adequate attention for the business to realize its targeted success.
Franchising is a process in which the private businesspersons purchase the entitlements to establish and manage a site of a potential company (Arthur 2000). Regulatory concerns within Canada must be fully complied with during the process. The franchisor and the franchisee must be engaged in a legal contract.
The contract must indicate and explain the terms and conditions in a comprehensive manner. There are a variety of advantages and disadvantages associated with the franchise business. These must be noted before the franchisee signs the legal business contract.
The franchisee must note that the foremost procedure is to analyze and accent to the terms indicated within the contract. Failure to observe this consideration might lead to the experience of potential losses by the franchisee. The Canadian hospitality industry borrows certain regulations indicated in the “international franchise association” (IFA) charter.
Nonetheless, other regulatory frameworks emanate from the statutory provisions in Canada (Arthur 2000). The franchisee interested in the Canadian hospitality is entitled to several benefits. They are likely to obtain adequate familiarity with the company’s name.
In addition, the impact of the original company’s culture, brand and training may help in the development of a powerful franchise stature. These merits are vital for the successful running g the franchise business in Canada.
The franchisee is likely to benefit from the bustling hospitality industry in different ways. The high level of revenue recorded from the tourist sector is set to minimize the probability of failure of the franchise. The explicit Canadian business and investment policies might also lead to a considerable level of business success.
The parent company might be willing to extend its innovative practices to the franchise (Elgin 2002). These might include human resource training and apprenticeship. Employee welfare is one of the crucial elements of success. It must be extended to the franchise organization.
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Generally, provision of a support strategy to the franchise owner has positive implications on its overall performance. The franchisee must face the elementary risk of raising the rights required for operation of the franchise. There are additional costs required to develop the necessary enterprises and functional systems. This may also cover employee remuneration.
The Canadian business laws must be complied with to the maximum level. These also include other necessities involving tax regulations and costs incurred during business licensing. The costs involving the authorization of the capacity to run and manage a franchise in the Canadian hospitality vary in a significant manner. The franchise entrepreneur may remain liable for other constant expenditures.
These might have negative implications on the business. Indicatively, they differ in orientation, such as those linked to the royalties and use of the name or brand of the mother company. In the end, such identifiable on-going expenditures might deeply minimize the level of expected profits (Lorette 2013). Other potential precautions might increase the level of associated business risks.
For instance, the Canadian franchise is still under refinement. Therefore, certain laws might predispose the franchisee to significant levels of risks. Certain regulations underlined within the franchise contracts appear very stringent and punitive to the business owners. The owners of the franchise must also comply with the contract. The aim is to reduce the likelihood of termination of the contract.
Factors to Be Considered For a Franchise Investment
There are diverse factors to be considered for a franchise investment in the Canadian hospitality industry. The franchisee must know that Canada has restrictions on trademarks. Canadian authorities only safeguard legally registered trademarks.
The power to register such trademarks is only exercised by the federal government. The importation of franchise laws from the U.S must be avoided. Particularly, the franchisee must consider innovative techniques applicable within the hospitality industry. Regulations that advocate for individual franchises must be reviewed (Schell 2011).
There are different franchise investment policies within distinct regions in Canada. These include the “grant master franchise and development agreements.” Observably, these franchise agreements remain unique for every province in Canada. Integration of the domestic businesspersons in the franchise process must be considered.
This is because it is a fundamental initiative that improves the level of engagement of local communities in the franchise process. It is also critical for the franchisee to adopt the “Canada oriented marketing.” This enables them to enhance the brand and extend the local market for the franchise (Herman 2013).
This initiative shall help the franchise business to flourish within Canada. The “Canadian franchise association”, (CFA) plays a crucial role in the regulation and protection of the franchisees. Therefore, the franchisee must examine and be conversant with the regulatory measures in the CFA.
Laws Giving Special Protections to the Franchisee
The provincial disclosure provisions are evident in three of the major provinces in Canada. Ideally, this provision offers the franchisee a special kind of cushion and protection from exploitation by the mother organization.
There are other provinces with necessary protective legislations for the franchisee. Generally, these regulations have different monitoring agencies throughout Canada (Herman 2013).
Some of the regulatory frameworks indicated under the provincial disclosure in Ontario and Alberta are aligned with those of the U.S. This regulation subjects the franchisor to certain conditions that must be attained before any business contract is signed by the potential investors.
For instance, all of the parties are required to make public all the material information regarding the deal. The “uniform franchise commission of Canada” is in the process of establishing a universal franchise law.
The franchisee must be aware of all legal requirements of the business within Canada. Additionally, it is vital to consider the refinement of these regulations. This shall help to enhance the development of a fully protective and regulatory authority.
The hospitality sector is one of the leading franchise industries with approximately 40% records (Schell 2011). However, many precautionary measures must be exercised to ensure minimal losses. The franchisee must be keen to develop effective and transparent business partnerships.
Comprehensive documentation and legal consultations are critical components of the franchise business. Stringent measures are appropriate in the practice of franchise business. It is also upon every investor to examine the franchise contracts before they accent to any conditions.
Arthur, A. Canada’s Hospitality Sector; Consolidation, Consolidation, Consolidation. 2000. Web.
Elgin, J. Choosing a Legal Form for Your Franchise. 2002. Web.
Herman, M. International Franchising. 2013. Web.
Lorette, K. Definition of a Franchise Business. 2013. Web.
Schell, C. Canadian Franchise Industry. 2011. Web.