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How to Succeed When Buying a Franchise Store and Financing Its Cost

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Franchise Store

It’s a road you want to go down successfully. We’re talking about your decision on buying a franchise in Canada, financing the franchise cost, and being successful in the franchise store or business you have chosen.

Clients always ask us if it’s ‘ risky ‘ to buy a franchise. Our answer is somewhat facetious, in that if a franchise fails, we prefer to have someone to blame – that’s you, the franchisor, or your franchise lender. It’s rarely the lender, leaving you and the franchisor.

The reality is quite frankly the same as if you were acquiring any business, namely, Do your homework! And invest some time in solid due diligence. Make a good decision about who you are going to do business with.

After selecting a franchise opportunity the challenge of financing the business becomes even more bewildering to some of our clients. Let’s share some solid tips, info, and suggestions around the successful financing of your franchise cost.

We often focus solely on your financing challenge when buying a franchise; we should add that it’s just as important to spend some time on understanding the general financing situation around the partnership you are about to enter into with your franchisor. Disclosure documents these days are fairly heavily weighted towards you as the franchisee understanding that you are entering into business with, so we encourage all clients to take a strong look at your franchisors profitability, its financial management, and any items of public record that might hint or portend of future problems.

Unfortunately many franchisees we talk to about franchise cost and how we will finance the franchise are under the misconception that there is 100% financing available for your new business. In Canada that is pretty well never the case, and you need to make a strong assessment of the maximum amount you can contribute to the venture from a personal equity basis. If you borrow too much and put too little in the financial folks call that being ‘ over-leveraged’- therefore any little bumps in the economy or your ability to generate sales becomes a huge problem if you aren’t properly capitalized.

And we already know your next question, which is ‘ how much do I have to put in ‘. We would prefer to give you a clear final answer on that one, such as xx %, but the reality is that your investment is tied to a couple of factors… the size of the financing you require, how you will finance it, and whether initial ratio analysis will show that you meet all qualifications.

A ratio is just a ‘ relationship’ of numbers. The two key ratios that you need to focus on in franchise financing are debt to equity and working capital. Typically you want to have only two times more debt than your investment in the business, and from a working capital point of view, you want to ensure you have liquid assets to cover at a minimum short-term payable.

Do franchisors offer loan assistance – the answer is yes… and no. By that, we mean simply that many franchisors have developed relationships with Canadian business financing advisors who assist franchisees in finalizing all aspects of the franchise cost financing – including business plan preparation, negotiations, sourcing debt, etc. You should rarely if ever, expect the franchisor to supply direct loan financing assistance – they are selling franchises, not building a financial empire.

In Canada typical methods of financing, a franchise are a BIL loan, a working capital term loan, and equipment leasing and financing.

Speak to a trusted, credible, and experienced business financing advisor who will work with you to successfully finance your franchise store in a minimum amount of time with a maximum amount of success!

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Canadian Imperial Bank of Commerce profit beats estimates on capital market strength

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TORONTO (Reuters) – Canadian Imperial Bank of Commerce beat analysts’ estimates for quarterly profit on Thursday, as it put aside lower-than-expected funds for loan loss provisions and its capital markets segment performed well.

Adjusted net income rose to C$1.64 billion, or C$3.58 a share, in the three months to Jan. 31, compared with C$1.5 billion, or C$3.24 a share, a year earlier. Analysts had expected C$2.81 a share, according to IBES data from Refinitiv.

Net income stood at C$1.63 billion, or C$3.55 a share, up from C$1.2 billion, or C$2.63 a share.

($1 = 1.2476 Canadian dollars)

 

(Reporting By Nichola Saminather and Sohini Podder; Editing by Shinjini Ganguli)

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National Bank of Canada beats profit estimates on financial markets strength

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(Reuters) – National Bank of Canada beat analysts’ estimates for first-quarter profit on Wednesday, as it set aside less capital to cover its loan losses and as earnings from its financial markets unit surpassed pre-pandemic levels.

Net income excluding one-off items rose to C$761 million ($605.41 million), or C$2.15 a share, in the three months through January, compared with C$620 billion, or C$1.70 a share, a year earlier. Analysts had expected C$1.71 a share, according to IBES data from Refinitiv.

 

 

(Reporting By Nichola Saminather and Sohini Podder; Editing by Amy Caren Daniel)

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Next GameStop (NYSE:GME)? Why 2021 Is the Year for BlackBerry (TSX:BB) – The Motley Fool Canada

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I tend to solidify whether financial news is truly a big deal by one thing: my husband. If he starts asking about something in the stock market, I know it’s a really big deal. That’s what happened when the historic rise of GameStop (NYSE:GME) flooded the airwaves.

While GameStop is no longer heading up headlines, I still think there is something to be learned from the meteoric rise and enormous fall of the company. In fact, it may not be the last time we see such a short squeeze from the likes of GameStop stock. In fact, this could be the year that we see many companies have such movement as the pandemic (hopefully) comes to a conclusion.

Place your bets

When I talk about bets, I want to be clear: I don’t mean you should start looking for the next short squeeze. That is a very dangerous game. In fact, the reason it’s called a short squeeze is because short sellers who bet the stock would lose money were forced to buy the stock just so they wouldn’t see their losses increase even further — not the best investment strategy, especially when the stock collapsed almost immediately after.

So when you place your bets on a stock, it should be as a long-term hold. It’s not really betting at all, frankly. You’re investing in a company’s fundamentals, believing it has the strength to go the distance. That’s why it’s a great time to get behind a company like BlackBerry Ltd. (TSX:BB)(NYSE:BB).

But here’s the great news. There could be yet another BlackBerry frenzy like we saw at the beginning of the year. Even one similar to GameStop stock. Why? Let’s dive in.

Deep value in post-COVID recovery

You might not consider BlackBerry stock as a solid post-COVID recovery play. However, the company’s recent movement comes largely from the announcement by the United States President Joe Biden that electric vehicles (EV) – and other green energy initiatives – will see massive investment worth billions of dollars.

Even better, President Biden stated he would be changing 650,000 federal vehicles into EVs. This announcement is just further fuel to the fire that is the EV industry — an industry that will see massive influence in BlackBerry stock. Several motor companies have announced plans to have a full-fleet of EVs and plug-in hybrids by 2030. The entire industry could be worth $1 trillion by that point, according to estimates!

And what company will many of these companies use for their in-car software? BlackBerry. The company even partnered with Amazon Web Services to improve its IVY platform, and make cloud-based data safer and more user friendly. With Apple and Google also potentially entering the car industry, BlackBerry stock could rise as its QNX software remains at the forefront of autonomous vehicle use.

COVID recovery fuel

So what does this have to do with a COVID recovery? Right now, motor companies remain stalled on the production line. The red tape that has to be crossed to see cars safely out the door is stringent. But as these walls slowly come down, companies should be able to ramp up production, which means a higher demand for BlackBerry’s software.

So really, even though there was a recent boost in share price, the company’s future growth prospects leave plenty of room to grow. BlackBerry stock could shoot up as it partners with even more household-name organizations. Investors may even see the triple-digit prices we saw two decades ago, leaving today’s share price of about $13 as of writing a steal of a deal.

Speaking of upside, here is another list of HIGH GROWTH options to consider before buying a risky stock in bulk.

Should you invest $1,000 in Air Canada right now?

Before you consider Air Canada, you may want to hear this.

Motley Fool Canadian Chief Investment Advisor, Iain Butler, and his Stock Advisor Canada team just revealed what they believe are the 10 best stocks for investors to buy right now… and Air Canada wasn’t one of them.

The online investing service they’ve run since 2013, Motley Fool Stock Advisor Canada, has beaten the stock market by over 3X. And right now, they think there are 10 stocks that are better buys.

Learn More Today!


John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. David Gardner owns shares of Amazon and GameStop. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.

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