There are many benefits to franchising your business such as expanding through franchisee investment instead of corporate investment. By increasing the company’s points of distribution (its units) through franchising, the company can grow, expand, and gain market share.
Franchising also permits expansion into new regions and markets using the local knowledge and connections of franchisees in those communities. Franchisees, because of their investment and involvement in the franchise, are generally motivated to achieve even greater success because they are in business for themselves (with the support and assistance of the franchisor) and therefore benefit directly from the success of their franchise.
Conducting proper due diligence and research is your first step in becoming a successful franchisee.
Step 1
The franchise system listings on CFA’s online franchise directory are a good place to start the process. Each listing will give a brief overview of the system and provide you with ways to request additional information from the individual companies. All companies listed on the website are Canadian Franchise Association members in good standing and voluntarily agree to adhere to the CFA Code of Ethics.
Step 2
It is recommended that you contact the franchise brands in which you are interested directly for further details and more specific information.
Some questions you may want to ask as part of your due diligence include:
- Is the franchisor a member of the Canadian Franchise Association?
- How many years has the franchisor been operating?
- How many franchisees does the franchisor have?
- Can the franchisor provide a list of all franchisees?
- How does the franchisor choose its franchisees?
- How much is the initial franchise fee?
- What are the franchisor’s plans for future development?
- What is the competition for the product?
- What kind of support does the franchisor provide to franchisees?
- Will you be provided with a disclosure document? Does it comply with provincial laws or CFA’s minimum disclosure requirements?
After directly contacting the franchise brand, additional information will usually be sent to you by your franchise systems of interest in the form of a franchise information package, which may include (but is not limited to) the following:
- a history of the company;
- summary of the support and systems provided;
- news articles and/or press releases about the system;
- company mission statements and/or core values;
- common questions and answers (FAQ);
- an outline of estimated start-up costs;
- industry statistics and information;
- and an overview of the franchise application process.
Step 3
Meet with company representatives to develop a shortlist of franchises. These meetings will serve as mutual interviews, where both you and the franchisor can ask questions, get more information and better determine if you will be a good fit with the system.
From there, you will usually receive the company’s disclosure document. While some Canadian provinces mandate the provision of disclosure documents through legislation, all CFA members are required under the CFA Code of Ethics to provide disclosure documents in all Canadian provinces and territories.
Step 4
Review the company disclosure document with your lawyer (preferably a franchise specialist, see the list of CFA member directory for law firms) before you sign any contracts or agreements.
This comprehensive summary of information will provide you with background on the company, including its officers, on topics including (but not limited to) estimated working capital and annual operating costs for franchisees, training and support provided, litigation, and, typically, financial statements of the franchisor.
The disclosure document should also give you contact information for current and former franchisees of the system. It is recommended that you speak with former franchisees as they can give you essential firsthand knowledge of the day-to-day reality of operating that particular franchise.
Expanding into unchartered territory can be nerve-wracking—which is why the CFA has several programs in place to support franchise systems and suppliers to help international franchisees settle into the thriving Canadian business landscape.
The Canadian Franchise Association (CFA) has partnered with the International Franchise Association (IFA) to proudly bring you the Certified Franchise Executive (CFE) Certification Program in Canada.
The CFE Program sets the highest education standards for individuals and organizations, empowering franchise executives, managers, and small business owners to accelerate growth. CFE certification signifies a commitment to elevated professionalism, setting new industry standards for franchise training.
Members can also upgrade their skills from the convenience of their home, office, or on the go every Wednesday with Learn & Grow webinars! Register for a Webinar today!