{Updated February 2024}
According to the Canadian Franchise Association, franchising “is the 12th largest industry in Canada and the second largest franchise industry in the world.” Franchising is a $120+ billion industry in Canada and 1 in 10 Canadians are employed, directly or indirectly, in a franchise system. These facts indicate that franchising is an essential industry in Canada with the potential for long-term sustainable growth.
Clearly, franchising is an important facet of Canada’s economy. It’s worth evaluating the pros and cons of franchise ownership in Canada for those interested in being a part of this thriving industry.
6 Benefits of Franchising in Canada
There are several unique advantages to franchise ownership that you should consider.
#1 – Established Brand Recognition & Proven Business Model
Franchising offers the chance to join an already established brand, making it easier to build business relationships and attract new customers early on. Of course, you’ll want to join a franchise that has developed a solid brand. If you do this, not only will it be easier to attract and retain customers, but you’ll gain operational assistance, a network of fellow franchisees to learn from, increased purchasing power, and more.
Franchising also provides access to a successful business blueprint, which is not something you’ll get when starting a business from scratch. This unique feature means that franchise ownership is generally less risky and more successful than owning an independent business.
#2 – Legal Framework
Because Canada has a well-established franchise market, it also has comprehensive franchise laws in several provinces, such as Alberta, Ontario, and Manitoba, which offer legal protections for both franchisors and franchisees. These laws regulate disclosure requirements, franchise agreements, and dispute resolution processes, providing clarity and security for both parties.
#3 – Comprehensive Marketing Support
While the specifics might vary with each franchise, franchisees can generally expect the following type of marketing support from their franchisor:
- Branding and advertising materials such as brochures, signage, and promotional items along with advertising templates to use across various media channels.
- Digital marketing strategies such as developing and maintaining a central website for the franchise, social media management and content creation for franchisees, and search engine optimization (SEO) strategies to enhance online visibility.
- Marketing training and resources that include workshops and seminars on effective marketing techniques, access to marketing resources, and guidance for creating local marketing campaigns.
#4 – Training and Support
In addition to marketing support, a franchisee can also expect comprehensive training programs and ongoing support from the franchisor in various business aspects. Franchisors want their franchisees to succeed, so they will do everything they can to set them up for success. This is a win-win situation and a key advantage to franchise ownership.
#5 – Easier Financing
Of course, aspiring franchisees will need to consider the costs of starting a franchise in Canada. While it generally requires a significant investment, potential franchise owners will find that banks are more willing to lend to franchises with a proven track record rather than an individual starting a business from scratch. There are also various options for financing a franchise purchase in Canada, including a traditional bank loan, government-backed programs like the Canada Small Business Financing Program and the Canada Digital Adoption Program, financing opportunities from the franchisor, and more.
#6 – Territory Exclusivity
Many franchises offer territory exclusivity, which eliminates intersystem competition. This offers several distinct advantages for franchisees, which include:
- Franchisees can focus on developing their designated area
- Franchisees can establish a strong presence within their exclusive territory
- Consistent brand representation within a geographic area fostering customer loyalty
- Opportunity to build deeper relationships with local customers leading to repeat business and referrals
5 Drawbacks of Franchising in Canada
Of course, every decision in life is going to have certain drawbacks to consider. While franchise ownership comes with some significant advantages, it’s important to understand the potential disadvantages so you can make an informed decision.
#1 – Initial and Ongoing Costs
Whether you’re starting a business on your own or buying into a franchise system, you’re probably going to have to spend a significant amount of money. Unique costs to buying a franchise include franchisee fees and ongoing royalty fees, which can have an impact on your profitability. However, there are hundreds of Canadian franchise opportunities out there, and they all come with different costs and levels of support. Do your research and consider working with a franchise consultant to find what works for your budget.
#2 – Lack of Control
Many franchises have strict processes for startup, marketing, and day-to-day operations. For many people, this structure is one of the great appeals of franchising because it eliminates the guesswork. However, others find it challenging to limit their entrepreneurial creativity within the franchise system. Remember that every franchise is different, so it’s important to find a franchise that fits with your specific skills and desires.
#3 – Territorial Restrictions
While this can be a significant advantage for some franchisees because it eliminates competition within a particular area, others might be more frustrated with its limitations. Territorial restrictions will limit where a franchisee can operate, which will impact any desires or plans for expansion.
#4 – Reputation Risk
When you become a franchise owner, you gain the potential to reap the benefits of sharing a reputation with a successful franchise brand. However, it’s also possible that other franchisees’ operations in the same system will negatively impact your business.
#5 – Contractual Obligations
Buying a franchise is not a short-term investment. Rather, aspiring franchisees must be willing to make a long-term commitment to the franchise and sign the franchise agreement, which is “contract between a franchisor and franchisee outlining the terms of their business relationship and what is expected from each party.” Furthermore, there are potential challenges to exiting a franchise agreement early, including financial consequences, non-compete obligations, reputation damage, and more.
Is Franchise Ownership Right For You?
There’s no doubt that franchising offers significant benefits to those who hope to own their own business. There are always two sides to the same coin, so it’s also important to evaluate the cons to ensure franchising is the right fit for you.
FranNet is here to help. Our expert franchise consultants can evaluate your skills and abilities and match you with the right franchise brand. They can also walk you through the process from start to finish and answer any questions you might have. Schedule your free consultation today to get started on your entrepreneurial journey!