Hello friends! I need a little advice on something. My brother and I are planning to run a restaurant business. We have an option to purchase a franchise restaurant or start a new one of our own. I know both has it's own positives and negatives. A franchise restaurant will definitely help in promotions, but is it risk free? I have read in this blog by a franchise lawyer Toronto about franchise compensating franchisee for financial loss. Is that applicable for every case?If then I guess it will be a little safer option, though I am not entirely convinced. I would like some advice here. Thanks!
Mon Aug 29, 2016 6:51 am
a10games New Poster
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Mon Aug 29, 2016 7:32 am
giblcarinsurance First Time Poster
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I Read Your Post
Very helpful post indeed
Mon Aug 29, 2016 10:20 am
oldguy Senior Member
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quote: but is it risk free? I have read in this blog by a franchise lawyer Toronto about franchise compensating franchisee for financial loss.
You are overlooking one of the most basic laws of investing - ie," risk and return are directly proportional". That law applies to securities, real estate, business, et al.
When you buy insurance (a guarantee against loss) you are hiring someone to take the risk for you. That is true of all insurance - ie, extended warranties on appliances, car warranties, etc. (that includes compensating franchisee for financial loss). So you have to choose between 'self-insuring' vs buying insurance .
Hopefully, it is NOT risk free. By definition, if you hire someone to assume your risks, they need to be compensated for covering that risk (essentially ALL of the earnings.) So - you need to avoid taking uncompensated risks (your management skills) - but you need to take the compensated risks. That requires risk evaluation, risk mitigation, risk management.