Frequently asked questions about the Canadian franchising industry and the Canadian Franchise Association (CFA).
HOW DO I RESEARCH A FRANCHISE?
Conducting proper due diligence and research is your first step in becoming a successful franchisee. The franchise system listings on CFA’s online franchise directory are a good place to start the process. 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. You can peruse CFA member franchise systems alphabetically or by industry category. Each listing will give a brief overview of the system and provide you with ways to request additional information from the individual companies. 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?
The CFA Starter Kit provides a more comprehensive list of questions to ask, along with other information vital to your franchise due diligence process.
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.
Once you have requested, received and reviewed the franchise systems’ information packages, fully investigating the franchise systems that make your shortlist will usually start by meeting with company representatives. 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. (Learn more about franchise legislation in your province.) Review these documents 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 these people as they can give you essential firsthand knowledge of the day-to-day reality of operating that particular franchise.
WHAT IS THE CANADIAN FRANCHISE ASSOCIATION
The Canadian Franchise Association (CFA) helps everyday Canadians realize the dream of building their own business through the power of franchising. CFA advocates on issues that impact this dream on behalf of more than 700 corporate members and over 40,000 franchisees from many of Canada’s best-known and emerging franchise brands. Beyond its role as the voice of the franchise industry, CFA strengthens and develops franchising by delivering best-practice education and creating rewarding connections between Canadians and the opportunities in franchising. Founded in 1967, CFA consistently advances and supports the franchise community, and is the essential resource for information, insight, and expertise through its award-winning education, events, services, and websites: cfa.ca and FranchiseCanada.online.
WHAT DOES THE CFA DO?
The CFA educates Canadians about franchising, specific franchise opportunities, and proper due diligence through our publications, trade shows, educational events, and websites. The CFA is the publisher of Franchise Canada magazine and directory, two consumer publications available on newsstands or by subscription offering tips, trends and information on specific franchise opportunities.
The Franchise Canada Show, Canada’s largest and most-trusted franchise-only tradeshow, is produced by the CFA and held in Vancouver, Calgary, Toronto and Montreal. The association also holds Franchise Your Business seminars, along with other events, conferences, programs, seminars and webinars.
One of the CFA’s most valuable resources for prospective franchisees are our websites: FranchiseCanada.online, LookforaFranchise.ca and www.cfa.ca. Here, you can find an excellent starting point for your franchise research. Check out our Franchise Tutorials, sign up for our free e-mail newsletter, subscribe to Franchise Canada magazine and research specific franchise opportunities in our member listings.
WHO ARE CFA MEMBERS?
The CFA has over 700 corporate members nationwide, representing many of Canada’s best-known brands. Membership in the CFA is voluntary. Organizations which have applied for membership have been determined that they meet the CFA definition of a franchise, that the franchisor has a satisfactory relationship with their franchisees and that they have proper documentation to support their membership application. All members commit to abide by CFA’s Code of Ethics.
There are two membership categories.
Franchise System members represent a broad range of businesses such as Accounting and Tax services, Commercial Services, a wide range of Food Services, Health and Fitness, Home Improvement, Pets, Seniors and Home Care, Business to Business services, and more. The categories and member organizations of these categories may be viewed in our member directory.
Franchise Support Service/Supplier members are persons or companies engaged in providing products or services to franchise systems. Whether you’re looking for a franchise lawyer, accountant, consultant, marketing firm, financial services provider, or business products and services, CFA can help you find the industry’s most qualified professionals who are familiar with the franchise business in Canada. The categories and member organizations of these categories may be viewed in our member directory.
HOW DO I SEARCH FOR A SPECIFIC FRANCHISE COMPANY?
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.
In addition to our websites, you will also want to consider other ways of collecting information, such as attending the Franchise Canada Show, reading Franchise Canada articles, and the CFA Starter Kit.
WHAT IS A FRANCHISE?
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 first think of ‘fast food’ when they think of franchising, the reality is that any business that can be exactly replicated in another location can be a franchise. The Franchise Canada Directory has more than 50 categories of business offering franchise opportunities.
WHAT KINDS OF BUSINESSES OR SERVICES ARE SUITABLE FOR FRANCHISING?
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.
WHAT ARE THE BENEFITS OF BUYING A FRANCHISE?
Franchising is an attractive and powerful way for Canadians to achieve success as small business owners.
Through the proven business concept and support provided by the franchisor, 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.
Franchising is about sharing success. The success of a franchisee leads to further success of the franchisor and the franchise system as a whole. 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, be it nationally, regionally or locally. This instant brand recognition can bring many advantages, including a stronger position when applying for a business loan. As a franchisee, you will benefit by being licensed to use the franchise system’s proven branding, trademarks, and proprietary products, services, 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 are to replicate the franchise’s system at your location. While it is impossible to eliminate all risk, if you work and follow that system, you can reduce the risk of business failure and increase your likelihood of success.
As a franchisee, you are considered a small business owner and it is important for you to assume a leadership role in your business. 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.
The franchise system can save you time and money by keeping you up-to-date on your market. Through the franchisor, you can stay on top of things such as business trends, research and development, new marketing initiatives, and changes in consumer tastes or behaviours. This allows you (and the other franchisees in the system) to focus on the day-to-day operation of your location knowing that you have this shared knowledge available when you need it.
Being a franchisee also means there is strength in numbers. Many franchise systems have an established supply chain and strong relationships already established with suppliers. 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 gives you a network of peers upon whose knowledge and experience you can draw. If you encounter an issue or have a question, your franchise system colleagues are just a phone call or e-mail away. It’s highly possible that they may have encountered the same concerns you have and will be able to provide information or advice to help you. 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.
WHAT ARE THE KEY RESPONSIBILITIES OF THE FRANCHISEE?
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.
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 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.
WHAT SHOULD I DO IF I HAVE AN IMPORTANT ISSUE OR DISAGREEMENT WITH THE FRANCHISOR?
If you have a dispute with your francIf you have a dispute with your franchisor, your first step is to voice your concerns to your franchisor, either directly or via the franchisee advisory council (if one exists within your franchise system). Ensure you are clear on the rights, responsibilities and obligations of you, the franchisee, and your franchisor as outlined in your franchise agreement to make certain that the issue does not stem from a misunderstanding of an aspect therein.
If speaking to the franchisor and negotiating the issue directly does not resolve it to your satisfaction, the next step would be mediation. In mediation, a mutually agreed upon and neutral third party works with you and the franchisor to reach a mutually acceptable resolution.
The Canadian Franchise Association’s Ombudsman program may be a useful first step in this process. This confidential free service can help facilitate discussion of issues, assist both parties in finding a satisfactory solution and, where applicable, refer unresolved complaints to alternate methods of dispute resolution.
Litigation should be considered only as a last resort in cases where direct discussion and mediation have not been successful.factory solution and, where applicable, refer unresolved complaints to alternate methods of dispute resolution.
Litigation should be considered only as a last resort in cases where direct discussion and mediation have not been successful.
WHAT ARE THE BENEFITS OF FRANCHISING MY BUSINESS?
Franchising can help businesses expand by having franchisees invest in the concept and open and operate locations under the business’ brand. This allows a company to expand 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.
WHAT DO I DO IF I HAVE THE OPPORTUNITY TO BRING A FRANCHISE CONCEPT TO CANADA?
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WHAT ARE THE BENEFITS OF CFA MEMBERSHIP?
- Franchise System members tell us one of the most important reasons they are members is the credibility CFA membership provides. Organizations that apply for membership have been determined that they meet the CFA definition of a franchise, that the franchisor has a satisfactory relationship with their franchisees and that they have proper documentation to support their membership application. All members commit to abide by CFA’s Code of Ethics.
- Members have exclusive access to advertising in CFA media including CFA magazines and newsletters, exhibiting at our Franchise Shows, sponsoring events and other opportunities. Members receive preferred rates to attend CFA events such as the CFA National Convention and other educational events. One of CFA’s great strengths is providing members with access to thousands of prospective franchisees. As Canada’s best resource for franchising information, prospective franchisees rely on CFA to assist them with investigating what franchising can offer through our various events, products and publications. Our tradeshows bring in thousands of attendees annually. Our website receives over 28,000 unique visitors a month, generating almost 200 franchise requests per month. FranchiseCanada Magazine and Directory have a combined circulation of over 20,000. That’s a lot of prospective franchisees.
- Another important advantage of CFA membership is networking and information sharing. We provide opportunities for members to share ideas, best practices, tools and resources through our various events and member directories.
- Through CFA newsletters and bulletins, members are provided with articles and updates on legal and legislative issues affecting the franchise industry from Canada’s top legal and business franchise professionals.
- CFA Awards programs, including the Franchisees’ Choice Designation, recognize outstanding achievements of our members and supports our Mission to promote excellence and growth in franchising while serving the interests of our members and stakeholders.
- As the voice of franchising in Canada, the CFA works with all levels of government to ensure the development of industry-made solutions and more.