Dawn Mucci’s head lice business had been operating for about a year in Toronto when she received a call from a Sudbury woman asking her to buy a franchise.
“I didn’t have any franchises to sell because I had no intention of doing so when I started my business,” says Ms. Mucci, CEO of Barrie-based Lice Squad Canada Inc. , Ontario, with brick-and-mortar lice inspection and removal clinics across the country. “But it seemed like a good idea, so I said ‘yes’.”
That was 23 years ago, when commercial franchising in Canada was still in its infancy and franchising legislation existed only in Alberta. Today, Lice Squad Canada, with 35 franchisees and approximately four branches across the country, is one of approximately 73,000 franchises in Canada that collectively generate more than $68 billion in gross domestic product and employ nearly 1.4 million workers.
“The franchise industry is the 12th largest industry in Canada and a major contributor to the country’s economy,” said David Druker, Chairman of the Board of Directors of the Canadian Franchise Association and President and CEO of UPS Store Canada, a printing, shipping and business services network. “It’s a sector that has done very well over the past 30 to 40 years, even in times of uncertainty.
According to Mr. Druker, one of the key factors in the strength of franchising is its business model – a model that provides franchisees with a proven system and support to manage and grow a business in exchange for upfront fees and, in many many cases of ongoing royalty payments made to the franchisor or business owner.
Depending on the franchise they purchased and whether their license is for one or multiple locations, franchisees can generate a net income of around $75,000 per year or earn millions.
As with any other type of business, there are no guarantees of success in franchising, Druker says.
“But there’s no denying that franchisees have a higher success rate than independent family businesses,” says Druker, a former franchisee in the UPS Store Canada region who previously owned multiple Rogers Wireless franchises. “Even though franchising is made up of mostly moms and dads who host their own business in different parts of Canada, what’s different is that they operate under one system and have a support team behind them.”
For many franchisees across the country, this support team made all the difference during the height of the pandemic when entire areas were shut down for weeks.
“A lot of franchisees were able to get better directions faster than other businesses because there was an organized team in place,” says Druker. “At UPS Store Canada, UPS was working with governments and they were able to establish us as essential services early on. Most shipping and printing services that were independent were not able to do this.
Treat buying a franchise like starting a new business
Edward Levitt, a Toronto-based partner at global law firm Dickinson Wright PLLC, says those looking to buy a franchise can improve their chances of success by applying the same level of due diligence as if they were building a business from scratch. .
As a starting point, it’s important for potential franchisees to determine which franchise – or type of franchise – is most compatible with their personal and business goals.
“Ask yourself what do you want to do, what do you see yourself doing, do you want to be a restaurant owner or do you see yourself more in a business-to-business franchise?” says Mr. Levitt, who specializes in franchising and distribution law. “It’s really important because most franchisees work every day in their business and for many, buying a franchise is basically their way of buying a job.”
Once they have decided on the most appropriate type of franchise, the next step is to identify franchisors who operate in that industry and “shop around, shop around, shop around and talk to franchisors and franchisees in the space”, explains Mr. Levitt. “Ask franchisees how they were onboarded and trained, what kind of support they received, if they are happy or struggling.”
It’s also a good idea for prospective franchisees to talk to their banks about their experience lending money to all franchisees in the industry, as well as landlords who rent space to those franchisees, he adds. he.
“And go to a few of these franchises and just hang out and watch,” says Levitt. “It can really give you a good idea of whether or not it’s something you can see yourself doing.”
A big advantage these days for anyone interested in franchising is the wider range of business types and industries. Shelley Alvarado, co-owner of BeTheBoss.ca, an online platform that connects potential franchisees with franchisors, says franchising has come a long way from the days when being a franchise meant running a fast-food restaurant operation – usually in a mall – or a cafe.
“Today we have franchises that offer web design, landscaping, awnings, drone work, and IT and educational services like coding or tutoring,” she says. “We can attribute some of this to COVID, when many people lost their jobs or just thought it was time to make a change and decided to start a franchise. But even before COVID, the franchise had already begun to branch out.
For Canadians interested in buying a franchise, it means greater opportunities to get into the field before the markets are saturated, says Ms. Alvarado.
But it also means greater risks, adds Levitt.
“Franchising is based on past successes, on a proven formula,” he says. “But when new franchisors come in and they do something that no one has done before, maybe in an industry that didn’t even exist before, then you take a bit of a flyer with a new system in a new industry .”
In such cases, potential franchisees may be able to negotiate a deal that takes this increased risk into account — something “usually not possible” with an established franchise, Levitt says.
Franchisors also assume risk with every franchise they sell. Some franchisees find it difficult to follow the franchisor’s system, either because they are entrepreneurs at heart more apt to start their own business or, in some cases, because they try to cut corners, explains Mr. Levitt.
Some franchisees may also achieve a certain level of success and decide it’s right for them. “And that’s great for the franchisee, but of course franchisors are always looking for growth,” Levitt says.
Mucci of Lice Squad Canada says that while following the system is critical to franchising success, the ability to embrace change is just as important.
“Franchising is constantly changing – it has to do so to keep up with changes in the market and the economy, as well as consumer demand,” she says. “I’ve found at times that it’s the newcomers to the system who tend to follow it well and grow with it, while those who came early can get stuck in their ways.”
Whether they’re veterans or newbies, franchisees can also be so focused on making their business a success that they sometimes forget there’s an outside team they can turn to for help, says Ms. Mucci.
“I find that the people who get in trouble are the ones who don’t ask for help because they think it’s a show of failure,” she says. “So my advice to franchisees is to lean on your franchisor and your fellow franchisees, find a peer support group, be part of an organization like the CFA.”
Mr. Druker agrees. Franchising — as a franchisor or franchisee — means being part of a network where “you’re in business for yourself, but not by yourself,” he says.
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