3 Smart Things to Do Before You Start Franchising in Canada

Jan 5, 2017 | General

We’re still in the dead of winter, but the economy is going to start heating up with the weather soon, which means it’s a great time to consider franchising in Canada. Today’s post outlines three things you need to do before signing the franchise agreement this spring.

  • Know exactly what you’re paying for. Buying a franchise gets you a lot of value, but they’re not all created equal. Some investors mistakenly treat franchising in Canada like a hands-free guarantee of financial success, and that’s simply not true.

    Boiled down to its bare essentials, franchising in Canada means buying the right to use someone else’s trademark, as well as their marketing and sales system. This right could be incredibly valuable or absolutely worthless depending on which franchisor you align yourself with. Before you commit to your franchise decision, ensure that your chosen brand has solid trademarks, a proven business model, and strong advertising assets.

    It’s also a good idea to look for brands that have many franchisees, as any system strong enough to sustain a lot of people will probably work for you. Furthermore, larger franchise families typically have greater visibility because of the collaborative impact of their marketing efforts.

    Before you start franchising in Canada, you’ll also need to know:
    1. How long your franchise agreement covers.
    2. Whether or not you are being granted an exclusive territory.
    3. Whether or not you have renewal rights, and under what conditions they’re triggered.

    4. Whether or not the franchisor provides training. 

  • Snoop around your targeted franchisor’s business.  Some franchisors earn their money by converting new franchisees into their system and pocketing the franchise fee, with no real intention of supporting your franchise’s development down the line. Don’t make your decisions based entirely on what the franchise website or consultant has to say; these “fly-by-night” franchisors know how to make a great first impression, but their scams rarely hold up to independent analysis.

    Once you’ve identified which franchise systems meet your needs, it’s time to start looking for the “Devil in the details.” A good starting point is to get a general sense of the franchisor’s business history. Have they been involved with other franchise systems? Are they new to this particular industry? Are they financially healthy? If you’ve chosen to work with a public company, their annual filings should be available through resources like SEDAR. If you see any financial red flags, excessive movement from industry-to-industry, or notice a pattern of “system jumping,” it’s time to reconsider.

    You can also find out if your prospective franchisor is involved in any litigation using resources like http://www.canlii.org. Don’t take this as being the whole picture, though; many disputes end up being settled through private arbitration and mediation that never goes on record.

  • Find out what your future franchise family members have to say. Talking to existing franchisees is kind of like peering into your future with that franchise system. Talk to as many different franchisees as you can to control for any exceptionally good or bad franchisee-franchisor relations. Ask how long they’ve been involved in the system, what they wish they could change, and whether they have any plans to sell in the future.

Want to learn more about franchising in Canada? Explore research guidelines, informational resources, and franchise recommendations at http://www.frannet.ca

About FranNet Canada

FranNet is a 29-year-old company with roots in the U.S. Its purpose being to nurture every entrepreneur’s dream of business ownership. We actively employ a specific profiling and consultation method. This method is geared to each investor with a specific business model and based on franchise trends typically found in TorontoOntarioVancouverBritish Columbia, or CalgaryAlberta. The most lucrative Canadian franchise opportunities are waiting for you. For more details visit – http://frannet.ca/buy-a-franchise/canada-franchise-buying-process/