Financial Post:

An increase in first-time franchisees, many of which are laid-off workers who’ve received a golden handshake in the past year, is causing some experts to warn potential franchisees about exactly what they are getting into.

Franchises aren’t buying anything. They’re renting the rights to a brand and that contract will expire at some date and, even if the contract is renewed, franchisees could be in for some significant costs to update or renovate their locations.

“This is an open-ended obligation to do a renovation at the end of your contract,” says Vancouver-based franchising lawyer Tony Wilson, with Boughton Law Corp. “You are renting [and] you’ve got to appreciate there’s going to be some costs.”

He suggests carefully reading the franchising agreement with a lawyer to determine if there is a way to cap renewal obligations to a manageable amount to avoid being landed with a $300,000 obligation to renovate and update the brand according to the franchisor’s demands. Full post.

Photo: J.P. Moczulski / National Post.

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