SPOTLIGHT ON CANADA
the franchise model. There are more than 30 industry segments franchised from retail and health care services to accounting and fitness. Franchise sales represent $100billion a year with more than 1,000 franchise systems in operation. The franchise model is amazingly adaptable, which makes it far easier for international companies to take their concepts and bring them into the Canadian market.
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contract with a master franchisee or area developer and license them to expand the franchise system throughout the country. With a master franchisee or area developer, a franchisor can avoid minefields such as employment law, tax planning, corporate structuring and filings. This still does not make them exempt from Canadian laws and regulations, but rather eases the path to success. The next step for a foreign franchisor
It is important to obtain the help of Canadian franchise professionals who understand the local marketplace and have experience dealing with companies with an international reach
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The origins of franchising can be traced back to the Middle Ages, but the franchise model as we now know it was pioneered by Isaac Singer in 1851. The sewing machine titan was only able to expand into Canada by charging a licensing fee to businessmen, who then owned the right to sell and repair his machines. Like Singer, those wishing to bring a new franchise system into the Canadian marketplace should take into consideration some important aspects of the process. It is important to obtain the help of Canadian franchise professionals who understand the local marketplace and have experience dealing with companies with an international reach. Speaking with a specialist lawyer, franchise consultant and financial advisors can help franchisors understand the idiosyncrasies of the local marketplace.
The basics
The first step in the process would be to decide how the franchisor should be introduced to the marketplace. Some franchisors enter the market either by incorporating a subsidiary in Canada or franchising directly from their head office. It is usually simpler, however, to draw up a
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is to register the system’s trademarks in Canada. This way the owner has exclusive rights throughout Canada that are valid in perpetuity as long as a nominal renewal fee is paid every 15 years, and the trademark is still in use. Conducting a clearance search of federal trademarks and name registers reveals any businesses using conflicting marks, and increases the likelihood of successful registration.
Legal considerations
The Canadian legal system has its roots in the common law tradition of the UK. While there is no federal legislation governing franchise disclosure, many provinces have adopted their own systems. It is important therefore for foreign investors to seek legal advice.
• There may be a number of import restrictions, duties and technical standards that should be considered if the foreign franchisor is also a supplier to the Canadian system.
• Canadian federal and provincial laws dictate that franchise agreements be customised for use.
• The legal system of Québec has its own distinctive character, enshrined in the Civil Code of Québec.
Finding the right franchisees Franchisors need to find franchisees that are passionate about the business and ready for the huge decision to change their life and become a franchise owner. Many opportunities exist in Canada for expanding companies to find their next franchisee, such as web portals geared towards franchisors looking for investors. Additionally, franchise and career consultants often point their clients in the direction of suitable franchise. Exhibitions, however, are without a doubt the best way to scout out and meet prospective franchisees. Industry events, such as the National Franchise & Business Opportunities Show, are a chance to promote franchises to thousands of prospects and check out what the local competition is doing. National Event Management, North America’s leading producer of consumer events, produces 26 Franchise Shows annually across the United States and Canada (
www.franchiseshowinfo.com). The events are well-publicised through major daily newspapers, radio, online, mobile and social media and are well attended by a targeted audience willing to invest. Franchising accounts for 10 percent of Canada’s GDP and reportedly accounts for one out of every five consumer dollars spent in Canada in goods and services. With thousands of Canadians looking to
improve their lives by becoming a franchisee, the market for foreign franchises couldn’t be better. n
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