Franchising is a method of doing business in which one person, the franchisor, grants another, the franchisee, certain rights contained in the franchise agreement.
These rights govern the way in which the franchisee will conduct their business. The franchisee gains access to the franchisor’s proven business system, including the operations manuals which will outline the systems and processes used to operate the franchise.
As the success of a franchised business depends on all franchisees delivering the same positive customer experience, the operations manuals are one of the key ways a franchise system can ensure consistent delivery of its product or service. Deviating from this uniformity and consistency of experience can be confusing to customers and can undermine the entire system.
The relationship between the franchisor and the franchisees is symbiotic with the franchisor depending on the franchisees for revenue and the franchisees depending on the franchisor to grow the brand and create greater demand for the product/service which, in turn, leads to more customers. The franchisor, in addition to providing the standard operating system, typically offers its franchisees initial and ongoing training and support and assistance with marketing.
While many people may think of franchising as limited to ‘fast food,’ businesses that operate using the franchise business model can be found in all sectors and industries – automotive, travel, senior care, education, and health and fitness just to name a few. Franchising can help businesses expand by having franchisees invest in the concept and open and operate locations under the business’ brand.
A business that is suitable for franchising, no matter its product or service offering, has a history of success and a tried-and-true formula that will allow it to replicate that success in new location. Also, if it is your business that you will be franchising, you must consider your own leadership skills and style. Ask yourself if you are prepared to work with other entrepreneurs (your future franchisees) and to provide them with the time, advice and initial and ongoing support they’ll need.
While franchising allows a company to expand through franchisee investment instead of corporate investment, you will still need to be prepared to fund the upfront costs associated with becoming a franchised business. This includes (but is not limited to) developing training and operations manuals, disclosure documents, franchise agreements, franchisee recruitment kits, as well as registering trademarks and creating a financial model for your franchise. You’ll need to work with a team of franchise support services professionals, such as a franchise lawyer, consultant, marketer, banker and accountant, to help lead you through the process. Make sure that your team is made up of people who have experience and expertise in franchising. The Canadian Franchise Association’s franchise support services members offer professional assistance for new franchisors. Access company listings and contact information for these franchise professionals in our member directory.
- Franchising is an attractive and powerful way for Canadians to achieve success as small business owners
- Franchisees are able to be in business for themselves but with the support and assistance of the franchisor, the advantage of the franchise system’s past success, and access to the knowledge and experience of a network of franchisee peers
- When you invest in a franchise, you align yourself with a brand that may already enjoy established consumer awareness and loyalty in the Canadian marketplace
- By joining an already established system, you do not have to invent the business from the ground up like you would as an independent business
- A tried-and-true system and an operations manual fully explains how to replicate the franchise’s system at your location
- The franchise system’s proven branding, trademarks, and proprietary products, services, recipes, etc reduces the risk of business failure and increases your likelihood of success
- Through the franchisor, you can stay on top of things
- Franchisors research business trends, research and development, new marketing initiatives, and changes in consumer tastes or behaviours
- This access to shared knowledge allows you to focus on the day-to-day operations of your location
- Joining a franchise system gives you a network of peers upon whose knowledge and experience you can draw
- Your franchise system colleagues are just a phone call or e-mail away
- In many systems, there are opportunities for franchisees to come together and share ideas and experiences as part of a franchisee advisory group or at a franchisee convention
While system-specific responsibilities required of the franchisee will be outlined in the franchise agreement, there are a few key responsibilities that are generally required of the majority of franchisees.
The franchisee should:
- follow the franchisor’s standards, methods, procedures, techniques and specifications to ensure consistency;
- pay a fee (typically an initial franchisee fee and ongoing royalties) to the franchisor for the right to use the franchisor’s trademarks (brand) and business system;
- take care of accounting, local marketing, staffing and the 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;
- work in partnership with the franchisor, allowing for effective two-way communication between the two parties and a mutually beneficial relationship.
While there are many important responsibilities that must be shouldered by the franchisee, an important benefit of investing in a franchise 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.
While the franchise agreement will outline the specific responsibilities and obligations of the franchisor, there are a few key responsibilities of the franchisor that generally apply in most scenarios.
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 system through, for example, research and development of new products and services;
- handle all brand advertising and (usually) provide franchisees with assistance for their local marketing activities;
- protect and manage the brand and its trademarks while ensuring consistency and quality standards are maintained by all franchisees in the system;
- provide initial and ongoing training and support.
It is important to note that though most franchisors are ready and willing to offer assistance and guidance, each franchise system is different and may provide different levels of support.
Regardless of the degree of assistance provided, however, a franchisee must be prepared to work hard and take initiative, as no franchisor will do everything for you.
CFA’s Franchise Canada online directory is a great place to start your franchise search.
The listings provided on those pages will give you an overview of the company and brand, as well as a convenient form so you may request more detailed information from individual franchise brands. The listings are reserved exclusively for Canadian Franchise Association (CFA) members in good standing. The information contained therein is to be referred to only as a guide. As the information within company listings is provided by individual companies, the Canadian Franchise Association does not guarantee the accuracy of the information contained in the listings and recommends you contact the franchise system(s) of interest directly for further details.
Learn more attending the Franchise Canada Show and reading Franchise Canada articles