What You Need to Know About Food Franchising in Canada

Fast food is the classic franchising business, but now you can find all kinds of food franchising opportunities from upscale restaurants to candy, smoothies, ice cream, coffee and health food.

The International Franchise Association (IFA) estimates that about one-third of all franchises are related in some way to food. And food is big business. According to Statista, Canadians spent over $90 billion in the food retail sector in 2015 and an additional $866 million on coffee in the same year. The restaurant industry in Canada generates about $75 billion in annual sales.

It is notoriously difficult to be a successful standalone restaurant, particularly when the economy is bad. When things aren’t going well, full-service restaurants are the “first to feel the pinch and the last to feel the recovery,” according to senior analyst at market research firm IBISWorld Nima Samadi. That’s why having the support of a major brand can be so helpful in the restaurant or food retail industry.

Within the food industry in Canada, franchises are classified as either quick service restaurants, full-service restaurants or retail food outlets.

Quick Service Restaurants

Quick service restaurants (QSRs) account for approximately $26 billion in annual sales, according to GE Capital’s 2015 Canadian Chain Restaurant Industry Review. They attract 64 percent of total foot traffic and generate 44 percent of all sales in commercial restaurants and this segment is expected to keep growing gradually at less than one percent annually until 2020.

Obviously, with a moniker like fast food, the main goal with QSRs is to get people their food as quickly as possible while still maintaining quality. Staff training is easier in QSRs since the food is virtually always simple to prepare. Also, you can open a QSR in a place with a relatively small population. QSRs like Subway and A&W have made a living out of popping up in gas stations along highways in towns that don’t seem like they would be large enough to support them.

It’s no surprise that among QSRs in Canada, Tim Horton’s leads the way in terms of locations, according to Foodservice and Hospitality magazine. “Timmy’s” is followed by Subway, McDonald’s, A&W, Pizza Pizza, KFC, Dairy Queen, Wendy’s, Burger King and Swiss Chalet.

Starbucks follows Tim Horton’s as the coffee franchise with the most units in Canada while Cold Stone Creamery and Yogen Fruz are the frozen treats franchises with the most units in the country.

Full-Service Restaurants

Like their quick service counterparts, full-service restaurants (FSRs) accounted for about $26 billion in sales, according to the aforementioned GE Capital report. The report also states that QSRs and FSRs together represent 87.4% of commercial foodservice sales in Canada.

The focus on FSRs is quality over speed. This means staff training and every other aspect of running the restaurant will be more difficult and costly than running a QSR. While you can train pretty much anyone to make fast food, you’ll need people with actual culinary education and training for an FSR kitchen to ensure quality is maintained. You’ll also need to be in a population centre large enough to support the restaurant, which will rule out many small towns.

Even with the backing of a major brand, running a restaurant and keeping it profitable is a lot of work. Full-service outlets also require a significantly greater initial investment than a QSR, but if your dream is to own a restaurant, franchising definitely gives your chances of success a substantial boost.

Within Canada, Boston Pizza leads the way for FSRs in terms of most units, followed by The Keg Steakhouse and Bar, according to Foodservice and Hospitality.

Food Retail

Growing at three percent in 2016, the Canadian food retail industry accounted for $145 billion in revenue that year, according to Euromonitor, and it’s expected to grow to $154.3 billion by 2021. With the current weak Canadian dollar, importing of foods, especially from the United States, can be challenging for Canadian food retailers, but rising food prices help offset this.

In addition to grocery stores, food retail franchises can also include bakeries, convenience stores, food gifting services and vending machine franchises.

Industry Trends

As it has been for the past several years, healthy eating is the biggest trend in the Canadian food franchising industry. Phrases like “fresh,” “no hormones or antibiotics” and “Canadian, Grade A beef” are more important than ever as consumers look for the healthiest possible alternatives.

Even vending machines, which used to be the domain of sugary and salty snacks, have given way to healthy eating with franchises like Karma Box popping up to offer people healthier alternatives to chips, pop and chocolate bars.

Restaurants continue to get rid of ingredients like artificial preservatives that they believe consumers are trying to avoid. Places like Panera Bread and Papa John’s have made big PR campaigns about getting rid of ingredients they deemed to be unhealthy in an effort to cash in on the healthy eating trend.

Another trend in the Canadian food franchising industry is the rise of so-called fast-casual restaurants, which fall between QSRs and FSRs. They offer healthier alternatives to the usual fast food fare, but they do it in the same amount of time as a QSR and for a slightly higher price margin (although tipping isn’t usually expected in a fast-casual restaurant).

South of the border, the fast casual sector has been growing by the proverbial leaps and bounds and that growth is reflected up here in Canada, too. Franchises like Five Guys Burgers and Fries, Thai Express and Mucho Burrito are experiencing significant growth, according to Technomic and that trend is expected to continue, especially as more American fast-casual franchises turn their eyes north.

Compliance

Any businesses that deal with food are governed by regulations about food handling, cleanliness, bathrooms, nutrition labelling and waste disposal. You’ll want to check with your provincial and municipal governments to make sure you are in compliance with any and all laws pertaining to restaurants and food retail outlets.

If you have always dreamed of owning a restaurant or you are interested in getting involved in the food retail industry, FranNet can help you find the perfect franchise to connect with. Sign up for a free FranNet franchise search and consultation today.

Aug 28, 2017