At FranNet of Canada, we understand that many of our clients – and those who may become clients – aren’t altogether familiar with the process of buying a franchise in Canada. This blog will serve as an explainer, going over the stages of what you should consider before, during, and after the franchise investigative process. According to the Canadian Franchise Association (CFA), of which FranNet of Canada is a member organization, franchises in this country contribute more than $100 billion CAD per year to the economy, employ 1.9 million, and account for the 12th largest sector of the economy.
The CFA recently announced some updated statistics about franchising in Canada that you might find interesting. There are almost 1,200 different franchise brands in the country (a 23% increase in the last five years), disseminated in approximately 76,000 unit locations. Franchising covers more than 50 industry sectors and the number of establishments has increased by four percent.
So, suppose you were looking to buy a franchise to become your own boss. Here are some facts you need to know before beginning your entrepreneurial journey. Let’s begin with what the law says, directly from the CFA’s “Franchising in Canada” snapshot:
Laws and Regulations
There is no federal equivalent to the U.S. Federal Trade Commission’s Franchise Rule. Instead, franchising is regulated at the provincial level. Six provinces (British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and Prince Edward Island) have franchise legislation in place. The legislation adopts the following five principles:
- The disclosure obligation – a franchisor must provide the prospective franchisee with a disclosure document at least 14 days before signing any agreement or receiving any payment
- The duty of fair dealing – a duty of fair dealing in the performance and enforcement of the franchise agreement is imposed in accordance with reasonable commercial standards
- The right of association – franchisees have the right to associate with other franchisees and to form or join an organization of franchisees without penalty or interference from the franchisor
- Rights cannot be waived – rights given to a franchisee and obligations imposed on a franchisor cannot be waived.
- Franchising in Québec – while Québec has no franchise-specific legislation, it operates under the Civil Code of Québec and the Charter of the French Language
Your Paths to Business Ownership
While you can start a business from scratch, buy an existing one, or choose to go the franchising route, we’re here to concentrate on the third option. With franchising, you’ll exchange an initial franchise fee for the rights to use the trademarks, likenesses, and business model of the franchisor – all part of your franchise agreement. All franchises operate on the premise of following a proven business model designed to help franchisees become successful owners.
Keeping an Open Mind
When searching for a franchise concept, one key rule is to keep an open mind in the investigating process. What you want isn’t what sounds cool, catchy, or trendy. Rather, what you want is a business model that aligns with your specific goals for your lifestyle and income-producing ability. It’s quite advantageous to enlist the services of a qualified franchise broker, such as FranNet of Canada, who can help you navigate through the process with ease – all at no cost.
The Final Stages
The franchise investigative process has specific stages and one of the most important involves the review of a brand’s franchise disclosure document (FDD). This document spells out, in chapter and verse, everything you’ll need to know about becoming a franchisee in the franchisor’s system. Once you’ve narrowed your choices down to 1-2 concepts, you may be invited to attend a ‘Discovery Day’ session, in which you’ll spend one-on-one time with representatives of the franchise brand who will assess your candidacy, then make a decision.
If the decision is positive, it’s time for you to make a decision of your own about moving forward as a franchisee in their system. That’s it, in a nutshell, but it’s highly advisable to seek the counsel of a qualified franchise consultant who can help you manage and navigate through the process. To get in touch, see below…
If you’re ready to begin your entrepreneurial journey, FranNet of Canada can help you get started. With consultants serving every Canadian province, there’s a representative near you who also lives and works in your area. To find your local province consultant, simply follow this link and select “Canada” on the FranNet Franchise Consultant Directory page of our website.