From the Canadian Franchising Association

With a mix of entrepreneurial opportunity and a tried-and-true formula for success, the franchise business model is an opportunity for people looking to be in business for themselves, but not by themselves.

When you think about a franchise, which well-known brands immediately come to mind: McDonald’s, KFC, or Subway, perhaps? “A lot of people think of franchising as ‘fast food,’” says Lorraine McLachlan, Canadian Franchise Association (CFA) president and CEO. “What most people don’t realize is that franchises can be found in nearly every industry, from quick service restaurants to automotive, education and retail, just to name a few.”

That’s because the franchise business model lends itself well to virtually any business sector. In franchising, the company that owns the brand (called the Franchisor) licenses its brand, product or services and way of doing business to an investor/business owner (called the Franchisee.) In return, the Franchisee provides a share of his or her income back to the franchisor. “Any business that can be exactly replicated in multiple locations can be a franchise,” McLachlan says.

There’s a wealth of franchises operating in Canada. A look at the CFA online member directory shows hundreds of franchise brands in a wide variety of categories. According to the CFA, there are an estimated 1,200 franchise systems and around 78,000 franchised locations across Canada.

Before you sign on to become a franchisee, you’ve got to do your homework. There are two things you need to assess: yourself and the franchise systems.

Knowing yourself and what motivates you is the first step to finding a great franchise fit. Think about how and where you’d like to operate your business and which industries or business sectors are most interesting to you. Look at your skills, talents and preferences and assess your financial situation.

Next, investigate the franchise brands that fit with your lifestyle and interests. Use all the research tools at your disposal, including franchise publications, websites and tradeshows. Speak with people from the franchise’s head office and talk to existing franchisees to get first-hand views on what it’s like to be a franchisee with their system.

As you research your options, what signs of a successful franchise system should you look for? “The success of a franchise system can be influenced by a number of factors,” says McLachlan, “so you will want to explore all aspects of the company as part of a proper due diligence process.”

Ask if the system is a CFA member. Members adhere to the Association’s Code of Ethics, which outlines ethical best practices for, among other things, disclosure of financial records and projections. The franchisor should provide you with full and accurate written disclosure about the franchise system in a timely fashion.

Look at the core of the franchise system concept: the products or services offered. The concept should be unique and differentiated from competitors, with a clearly defined market. There must also be consistency from location to location, an important hallmark of the franchise business model.

Ask how they select franchisees to operate their locations. “Just as you are investigating a system, the franchisor should be conducting their own due diligence about potential franchisees. They should be keen on ensuring any relationship entered into will be mutually beneficial,” McLachlan says. Beware if you feel hurried or pressured into a decision – a good franchise system will want to take the time to be certain that signing a franchise agreement would be in both parties’ best interests.

Consider the level of support, training and communication offered to the franchise system’s franchisees. You should receive information about this from the franchisor, but a great way to find out more is to speak with some of the system’s current franchisees. Ask them about what their initial and ongoing support and training entailed and their satisfaction with the amount of communication they have with head office. This can give you a clearer idea of what you can expect should you join the system.

Before signing on the dotted line, the more you can investigate and evaluate a franchise opportunity, the better, says McLachlan. “When you invest in a franchise, yes, you’re investing in a concept that has been developed and tested, but making an informed decision is a vital first step in realizing your franchise goals.”

For more information and to start your search, visit www.cfa.ca.

About the Canadian Franchise Association

With almost 500 corporate members nation-wide, representing many of Canada’s best-known brands, the Canadian Franchise Association is the national voice of franchising in Canada and works with all levels of government to develop industry-made solutions. CFA promotes excellence in franchising and educates Canadians about franchising, specific franchise opportunities and proper due diligence through its website (www.cfa.ca), programs, publications and events including The Franchise Show in Toronto, Vancouver and Montreal.