What You Need to Know About Automotive Franchising in Canada

With its sprawling size and abundance of amazing scenery, Canada is definitely a car culture. There’s nothing quite like hitting the highway for a good old Canadian road trip. Whether you consider your automobile to be your baby or you just see it as a means to get from point A to point B, there’s no doubt they play a crucial role in the lives of Canadians. 

The good news for potential business owners is that with all this car love in the country, it means people are going to need a lot of services to keep their chariots on the go and looking good. And that’s a huge market. 

The Automotive Industries Association of Canada (AIAC), which represents the entirety of the automotive aftermarket in the country, says the industry is worth $21 billion in Canada and employs over 388,000 people. That encompases any “part of the automotive industry concerned with the manufacturing, re-manufacturing, distribution, wholesaling, and retailing of all vehicle replacement parts, accessories, tools, equipment, chemicals and services, except those products that are used as original equipment to manufacture new vehicles,” according to the AIAC’s website.

Thanks to improved manufacturing methods, light vehicles like cars are staying on the road for an average of nearly 10 years in Canada and that means people are requiring constant maintenance on those vehicles to keep them going. To provide that maintenance, the country has nearly 4,700 automotive parts, accessories and tire shops along with over 23,000 general maintenance, collision, glass and other specialist outlets.

Trusted Professionals

Because vehicles are such a big investment for people, they want to know the businesses they entrust them to are professionals. And that’s where franchising can help in a big way. Most franchises in the automotive industry have a lot of brand equity already, which is to say people know and trust the brand.

This existing brand reputation is gold for a new entrepreneur. They can concentrate on running the business without having to also build trust in their brand because that trust is already there. People already know the logo, see the national advertising and equate the brand with expertise. You don’t get that from starting your own business.

Along with brand recognition, opting to get involved with a franchise also brings the advantage of receiving the backing of a major corporation, which often means it’s easier to keep up with technological advancements in the automotive industry. While independent shops may not be able to afford the latest technology, franchises often can and their franchisees reap the benefits by being able to in turn offer the latest technological advancements to customers.

Business Format vs. Product Franchising

The automotive aftermarket industry typically has two types of franchises: business format franchising and product franchising.

Business format franchising is what you might call “typical” franchising, where a franchise licenses its brand to a franchisee who follows the brand’s format for doing business. This type of franchising comes with a lot of support.

Product franchise models are where the franchisor simply grants permission to a franchisee to sell their product using their logo, trademark and trade name, but without having the franchisee follow a particular format. This type of franchising usually only has limited support from the franchisor.

The fee structure can vary between these two types of franchising agreements. Some franchisors require their franchisees to pay a franchise fee, plus royalty fees. Others will waive the royalty fees, but will require franchisees to buy and use proprietary products in the franchise. Others will waive both the franchise and royalty fees, but will require franchisees to make minimal inventory purchases.  

No Experience Necessary

You don’t need to have direct experience with the automotive industry to start an aftermarket automotive franchise. It’s the drive, determination to succeed and business sense that franchisors are more interested in. 

You’ll be hiring people to take care of the actual automotive work, so you can open a tire and lube shop without knowing how to do those specific things. A passion for cars is an asset, obviously, but the main thing franchisors want to see is that you have initiative to succeed.

Territory

Because the automotive industry is so competitive and there are so many customers to go around, exclusive territorial rights are not as common as they are in other franchising industries.

Franchise agreements will often grant franchisees the right to operate at a certain location, but without exclusive territorial rights. In the rare cases where it is granted, the size of the territory depends on the size of the neighbourhood, what natural and manmade boundaries are in place (like a river or a major road) and how many potential customers are in the greater area. Mobile businesses like product franchises do usually have a defined territory.

As long as Canada stays a car culture, there will always be vehicles needing maintenance, meaning potential customers for automotive franchise operators. To find the perfect automotive franchise for you, sign up for a free FranNet franchise search and consultation.

Jun 30, 2017