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CFA Guidebook Series

SO YOU WANT TO BE A FRANCHISEE: A guide to getting started in franchising

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4 } What is Franchising? 6 } 10 Reasons to Become a Franchisee

2 FranchiseCanada.Online | www.cfa.ca ©Canadian Franchise Association, 2019

CFA Board of Directors

BOARD CHAIR John DeHart*, Nurse Next Door Home Care Services & LIVE WELL Exercise Clinic

PRESIDENT & CEO Sherry McNeil*, Canadian Franchise Association

1ST VICE CHAIR Gerry Docherty*, Good Earth Cafes

2ND VICE CHAIR David Druker*, The UPS Store

TREASURER Rick Chittley-Young*, BDO Canada LLP

SECRETARY & GENERAL COUNSEL Peter Snell*, Gowling WLG LLP

PAST CHAIR John Wissent*

CHAIR, LEGAL & LEGISLATIVE COMMITTEE Larry Weinberg*, Cassels Brock & Blackwell LLP

CHAIR, FRANCHISE SUPPORT SERVICES Tony O’Brien*, TruShield Insurance

DIRECTORSHadi Chahin, Mary Brown’s Chicken & TatersSteve Collette, 3rd Degree Training/Actual NutritionFelix DeCata, Boston Pizza International Inc.Lawrence Eade, Box Concepts Food GroupLafleche Francoeur, PaciniSebastian Fuschini, Pizza PizzaClark Harrop, McDonald’s Restaurants of Canada LimitedTerry Hould, ServiceMaster of Canada LimitedAndrew Hrywnak, Print Three Franchising Corporation Rimma S. Jaciw, CFE, WSI DigitalMarc Laurin, MTY GroupDon Leslie, A&W Food Services of CanadaJon-Anthony Lui, Tutor DoctorSherry McNeil, Shoeless Joe’s LimitedGary Prenevost, FRANNETStephen Schober, Metal Supermarkets Family of CompaniesFrank Stanschus, Little Kickers Bob Tipple, Expedia CruiseShipCenters

*Executive Committee member

Published by Canadian Franchise Association

ABOUT THE CANADIAN FRANCHISE ASSOCIATION (CFA)The Canadian Franchise Association (CFA) is the recognized authority on franchising in Canada. With more than 700 corporate members nation-wide, representing many of Canada’s best-known brands, CFA is the indispensable resource for the franchise community and advocates on behalf of franchisors and franchisees in Canada to enhance and protect the franchise business model. CFA promotes excellence in franchising and educates Canadians about franchising, specific franchise opportunities and proper due diligence through its many events, programs, publications, and websites (www.cfa.ca | www.LookforaFranchise.ca).

CANADIAN FRANCHISE ASSOCIATION 5399 Eglinton Avenue West, Suite 116Toronto, Ontario M9C 5K6Ph: 416-695-2896 or 800-665-4232F: 416-695-1950 W: www.cfa.ca / E: [email protected]

© 2019, Canadian Franchise Association (CFA). All rights reserved. Contents of this publication may not be reproduced either wholly or in part, without the consent of the CFA.

Legal Disclaimer: The opinions or viewpoints expressed herein do not necessarily reflect those of the Canadian Franchise Association (CFA). Where materials and content were prepared by persons and/or entities other than the CFA, the said other persons and/or entities are solely responsible for their content. The information provided herein is intended only as general information that may or may not reflect the most current developments. The mention of particular companies or individuals does not represent an endorsement by the CFA. Information on legal matters should not be construed as legal advice. Although professionals may prepare these materials or be quoted in them, this information should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

CFA Guidebook Series: So You Want to be a Franchisee 3

TABLE OF CONTENTSWhat is Franchising?�� 4

10 Reasons to Become a Franchisee�� 6

The CFA wishes to acknowledge and thank these National Sponsors for their support throughout the year. Find out more about these companies at www.cfa.ca/sponsorship.


What is Franchising?

Through the proven business concept and support provided by the franchisor, fran-

chisees are able to be in business for them-selves, but with the support of the franchise system, and access to the knowledge and experience of a network of franchisee peers.

Franchising is about sharing success. The success of a franchisee leads to the further success of the franchisor, and the franchise system as a whole. When you invest in a fran-chise, you gain access to consumer aware-ness and loyalty in the Canadian market-place, be it nationally, regionally, or locally. This instant brand recognition can bring many advantages, including a stronger posi-tion when applying for a business loan. As a franchisee, you’ll benefit by being licensed to use the franchise system’s proven branding, trademarks, and proprietary products, ser-vices, recipes, etc.

A franchise also provides you with the advantage of a tried-and-true system, and an operations manual that fully explains how you’re to replicate the franchise’s sys-tem at your location. While it’s impossible to eliminate all risk, if you work hard and follow the system, you can reduce the risk of business failure and increase your likeli-hood of success.

The franchise system can save you time and money by keeping you up to date on what’s happening in your market. Through the fran-chisor, you can stay on top of things such as business trends, research and development, new marketing initiatives, and changes in cus-tomer tastes or behaviours. This allows you (and other franchisees in the system) to focus on the day-to-day operation of your business, knowing that you have this shared knowledge available when you need it.

WHAT IS FRANCHISING?


What is Franchising?

As a franchisee, you also have strength in numbers. Many franchise systems have an established supply chain in place, along with established relationships with suppli-ers. By ordering your stock, supplies, and equipment through approved suppliers as a member of your franchise system, you may receive the benefit of preferential pricing or special delivery.

Joining a franchise system also gives you a network of peers upon whose knowledge and experience you can draw. If you encoun-ter an issue or have a question, your fran-chise system colleagues are just a phone call or email away. It’s likely that they may have encountered the same issue, and will be able to provide the appropriate advice to help you. In many systems, there are oppor-tunities for franchisees to come together to share ideas, experiences, and best prac-tices as part of a franchisee advisory group or at a franchisee convention.

What are the key responsibilities of the franchisee?While system-specific franchisee respon-sibilities will be outlined in the franchise agreement, there are a few key responsibil-ities that are generally required of franchi-sees across different systems:

The franchisee should:• follow the franchisor’s standards, meth-

ods, procedures, techniques, and speci-fications to ensure consistency;

• pay a fee (typically an initial franchise fee and ongoing royalties) to the fran-chisor for the right to use the franchi-sor’s trademarks (brand) and business system;

• take care of accounting, local market-ing, staffing, and other administrative aspects of operating a business;

• invest their time, particularly during the start-up phase, by working hands-on in their business to fully understand the operational side of the franchise; and

• work in partnership with the franchi-sor, allowing for effective two-way

communication between the two par-ties, to establish a mutually beneficial relationship.

While there are many important responsi-bilities that must be carried out by the fran-chisee, an important benefit of franchising is the ability to rely on the support, guidance, and assistance of the franchisor. That said, a franchisee must be prepared to work hard and take initiative, as no franchisor will do everything for you.

What are the key responsibilities of the franchisor?While the franchise agreement will outline the specific responsibilities and obligations of the franchisor, there are a few key franchi-sor responsibilities that apply in most cases.

The franchisor should:• undertake to provide franchisees with

operating systems and support services to help their businesses grow in ways that are effective, efficient, and profitable;

• continue to evolve the franchise sys-tem through, for example, research and development of new products and ser-vices;

• handle all brand advertising and (usu-ally) provide franchisees with assistance for local store marketing activities;

• protect and manage the brand and its trademarks, while ensuring consistency and quality standards are maintained by all franchisees in the system; and

• provide initial and ongoing training and support.

It’s important to note that while most franchisors are ready and willing to offer assistance and guidance, each franchise system is different, and may provide a dif-ferent level of support. Regardless of the assistance provided, as a franchisee, you’re considered a small business owner, and it’s important for you to assume a leadership role in your business.


10 Reasons to Become a Franchisee

Being part of a franchise means having the advantage of a tried-and-true system and

an operational manual that fully explains how to replicate the franchise’s system at your location. Each year, thousands of Cana-dians invest in franchise opportunities. Are you looking to be one of them? Here are the top 10 reasons why you should be.

1. No reinvention of the wheel required. A franchise prides itself on the system that it’s developed and tested over time. When you invest in a franchise, you gain access to and use of its operations systems, products/services, branding, and more. With a franchise, you’ll have the road map to recreate its success at your location.

2. Trademarks and patents. Franchisees are licensed to use the franchise’s branding and trademarks. This can save you time and money during the

start-up process, and there will be no need for you to go through the legal and governmental processes to secure the appropriate rights.

3. Territory rights. In most cases, franchi-sees are awarded the exclusive rights to offer their product or service within their designated area. The territory is assigned to reduce competition, and can vary in size and scope. Territorial rights should be set out in and protected by the franchise agreement.

4. Estimation of start-up costs. In an independent business, you would be charting new waters. With a franchise, others have gone before you, and can provide you with an example of what to expect in terms of start-up costs.

10 REASONS TO BECOME A FRANCHISEE


10 Reasons to Become a Franchisee

5. Franchisor support and training. As a franchise system requires consistency in quality and service from location to location, most systems will train new franchisees on the basics of operating their location. The duration, breadth, and depth of the initial training may vary by system, but most will offer edu-cation on aspects such as operational procedures, accounting, marketing, computer systems, and more.

6. Consumer awareness. A franchise brings its pre-existing consumer awareness, so even though the busi-ness may be new to the area, potential customers may already be familiar with the brand, whether through other locations or through its regional or national marketing.

7. Strength in numbers. Another advan-tage of a franchise system is working with suppliers and other merchants that have already been vetted for quality, pricing, reliability, and consistency. As a member of a growing franchise network with group purchasing power, you can gain immediate access to established relationships with vendors and may even enjoy perks like preferential pric-ing or special delivery.

8. Peer network and support. Being part of a franchise system means you have a pool of accessible, knowledgeable peers who are just a phone call or email away. If you’re experiencing an issue or chal-lenge with your business, chances are there are other franchisees in your sys-tem who have encountered the same or a similar issue, and can will have advice for how to overcome it. Some franchise systems have more formalized ways for franchisees to interact, such as online forums, franchisee advisory councils, or franchisee meetings and conventions.

9. Research and development. Through the franchisor, franchisees can be kept up to date on business trends and consumer tastes and behaviours. They can also benefit from their system’s research and development initiatives for things like new products and services, technology, and marketing. With the franchisor looking after this side of things, franchisees can focus on the day-to-day operation of their business, while knowing that they’ll still be on the leading edge in their industry and marketplace.

10. Small business ownership. Being a fran-chisee means you’re a small business owner with the brand and support of the franchisor backing you up. Remem-ber: in franchising, you’re in business for yourself, but not by yourself.

GET STARTED TODAY! WWW.FRANCHISECANADA.ONLINE

Everything you need to create your franchise future!Buying a franchise can be an overwhelming process.

The good news is you don’t have to do it alone. Franchise Canada is here to guide you through the franchise process, with everything you need in one spot:

www.FranchiseCanada.Online

Learn about franchisingEasy-to-read franchising articles and tutorials can make a huge difference as you navigate your franchising journey. Our resources have been designed with you in mind, and have helped many other prospective franchisees understand the franchise business model, and what it means for those starting out.

Prepare for business ownershipAre you a first-time business owner? Understanding your responsibilities as an owner is very important to your success in franchising. Gain competency in the basics of business ownership so you can run your business like a boss.

Discover franchise opportunitiesDon’t settle your future on the first franchise you see. There are over 1,300 different franchise opportunities available across more than 50 different industries, and at every price point. Explore the wide range of opportunities available to you in our online directory.

Connect with franchisorsBefore you sign a franchise agreement, get to know the people behind the brand that you’re set to partner with. You can speak to them in person and face to face at the Franchise Canada Show, or set up a meeting through our online directory.

Find financing and legal supportBefore you sign on the dotted line of the franchise agreement, you’ll need to ensure your finances are in order, and that you fully understand the franchise disclosure document. Learn from franchise professionals, who share their advice to help you through the critical disclosure process.

Receive regular, informative updates Get the latest Canadian franchise opportunities and industry news delivered straight to your inbox. Our free e-newsletter has the information you need to grow your franchise knowledge and learn how to invest with success.

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