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Venture Profile
THE FRANCHISE BIZ:
THINKING ABOUT BUYING OR SELLING A FRANCHISE?
HERE ARE A FEW THINGS THAT YOU SHOULD KNOW!
Chris Daniels, Realm magazine
ifelong best friends Jeff Pylypchuk, 29,
and Peter Tofinetti, 30, never thought
they could turn their love of bike riding
into a business. Just four years ago, the two
were socking away cash at menial jobs in
Thunder Bay, Ontario.... Today, their bike
shop, Cyclepath, pulls in an impressive
$750000 a year in sales.
How did they do it? By purchasing a franchise business that matched their interest.
"We started cycling together-road racingwhen we were about 13, and we had always
been unimpressed with the service we received in bike shops," says Pylypchuk. "So, we
thought about starting our own business."
With their combined savings of about
$75 000 they considered opening an independent business, but that meant starting from
scratch-coming up with a store name, finding real estate, and attracting customers.
Then, they discovered Cyclepath, which at the
time was a successful bicycle franchiser with
50 franchises. Pylypchuk and Tofinetti decided to buy into the system. They paid
$40000for their franchise and took out a small
business loan to help with expenses such as
rent and merchandise. "It took off from there."
Did it ever! Their Cyclepath franchise
opened in 1996 and was almost immediately
profitable. Halfway through its second year,
the store was pulling in half a million dollars,
"which is double what we ever imagined,"
says Tofinetti.
They credit their success, in part, to the
franchise system. "There was good advertising
L
by a professional ad agency. The store looked
polished; you could tell a lot of research had
gone into these stores," says Pylypchuk.
"There were a lot of things we could have figured out over time, but by buying into a franchise, we basically bought the package, and
boom, it was set up."
Therein lies the allure of the franchise
business: It's the same adrenaline rush that
comes when starting an independent business, but with the instantaneous advantage of
being associated with a larger brand-name
company.
Franchising occurs in industries as diverse
as food and beverage, travel, automotive, and
high tech and is a booming business in
Canada, raking in $100billion in annual sales.
There are 1300 franchisers and 76 000 franchisees across the country, with a new franchise going up every 90 minutes. You can buy
CONTINUED-
a high-end franchise, like Choice Hotels, for
about $1.5 million. Or you can buy a low-end
franchise, like Jani-King International Laundromat, for just $1000.
According to the Canadian Franchise
Association (CFA), the average startup fee for a
franchise is between $25 000 and $35 000. While
every franchise system is different, franchisees
generally have to pay franchise fees, annual
renewal fees, and sometimes advertising fees.
"When you are making these payments, you are
doing so for the brand name recognition, for
expansion of the system, and for national advertising campaigns," explains the public relations
coordinator at the CFA.
Exploring
1.
2.
Why did Jeff and Peter choose
Cyclepath as their business venture?
A franchise is a licence to start an
independently owned business, like a
Cyclepath store, that will be part of a
chain.
a) What facts about franchises can
you find in the article?
b) What were the advantages of purchasing a franchise over starting a
new bike shop?
c) Create a diagram to show the
advantages and disadvantages of
buying a franchise.