By Frank Zaid
Q: What are the most common legal and regulatory challenges of operating a retail business?
A: There are many common challenges, but they vary depending on the types of products sold, and if the business is franchised, there will be additional issues to consider.
Preparing a business plan
Before establishing a retail store, it is highly recommended for the prospective operator to prepare a business plan. This will likely be required by any financial institution or other organization that may lend money to finance the business.
A business plan is a written document that describes objectives, strategies, financial forecasts and the specific market being targeted. As such, the preparation of a business plan will help an entrepreneur determine realistic and timely goals, secure external funding, measure success, set out operational requirements and prepare reasonable financial expectations.
In a franchised business, where the franchisor is involved with the preparation of a business plan, that franchisor should ensure financial forecasts are included in the disclosure document (if applicable) that is given to the franchisee.
Securing financial assistance to start a new business will be highly dependent on the feasibility and reasonableness of the business plan. While new businesses typically rely on conventional bank financing, a retail business operator should also do research to see if there are any government financing options, too. There are some programs that apply to businesses across Canada and others that apply only within specific provinces.
Choosing a business structure
Before opening a retail store, a specific structure must be chosen to suit the requirements of the business and to provide the most efficient method of operation for tax purposes.
The most common forms of business structure are sole proprietorship, general partnership and incorporation. To provide limited liability for the owner of the business (e.g. the franchisee) and greater ownership and tax flexibility, incorporation is the most common type of structure for retail businesses.
Another factor to consider is the name of the business. In a franchise system, the legal name will often include the trademark under which the system operates, e.g. Magnifico Pizza North Vancouver. Short trademarks are easier for customers to remember. A professional-sounding brand can project the right image and establish public goodwill. Descriptive names can suggest what the business is selling. And a unique name will help differentiate the business from its competition.
Determining the location
We have all heard the real estate agent’s mantra: “Location, location, location.” For retail businesses, selecting an appropriate location is critically important. It needs to be easily visible and accessible to its target market of consumers.
Once the location has been determined, a myriad of legal and regulatory requirements come into play. The street address is usually required for all registrations, licences and permits. Zoning restrictions, including environmental ones, may affect the ability to conduct business in a certain area, so it is important to check on these first.