Cover Story January/February 2019

2019 Franchising Trends Report

Bringing with it a series of sweeping changes that set the industry on a new course, 2018 was nothing short of a whirlwind year for Canadian franchising. From the legalization of cannabis on Oct. 17, to drastic changes in consumer behavior, the 2017/2018 calendar year was one of transition and for­ward momentum for the industry. As noted by the Cana­dian Franchise Association’s (CFA) first-ever Economic Impact Study, 2018 saw the opening of approximately 520 new franchises across the country, for a total of 75,765 franchise units. The study indicated growth from coast to coast, with new franchise units opening in all of Can­ada’s provinces and territories. In Ontario, despite mini­mum wage increase legislation worrying business own­ers throughout the province, healthy growth continued, with an additional 263 franchise units setting up shop in the province.

According to listings data collected for the 2019 Fran­chise Canada Directory, the franchise sectors with the largest five-year growth were Home – Maid/Cleaning Services (129%), Real Estate (111%), Educational Prod­ucts and Services (91%), Accounting/Tax Services (60%), Health & Fitness/Nutrition (35%), and Quick Service Res­taurants (34%). It’s not surprising that franchise systems with low investment costs and high returns are on the rise, says Wayne Maillet, franchise consultant and Presi­dent of Franchise Specialists.

“From a prospective franchisee’s perspective, the majority of these franchises are available for a relatively low investment. With hard work they can provide a great return on investment,” Maillet explains of the trend­ing sectors. “Further, prospective franchisees are also looking for opportunities that are in growing industries. These areas provide the consumer more free time and convenience. This is what today’s consumer is looking for. It is far easier to just contract the work out than do it yourself.”

Gary Prenevost, President of FranNet of South­ern Ontario and Eastern Canada, concurs. Prenevost notes that “macro trends of convenience” are leading to increased investment in franchise systems that are proactively conforming to changing consumer needs and habits. Whether the consumer is looking for a quick and healthy bite to eat or to effortlessly file their taxes, franchise systems that offer convenience are becoming increasingly popular.

“Consumers will travel less distances than we used to; grab and go food from the groceries and food delivery apps have changed the consumer eating habits over the last two years. Savvy franchisors are on top of this and maximizing the trend while less sophisticated franchi­sors are still struggling with that,” Prenevost says.

In this report, Franchise Canada explores franchise sectors that are trending based on both an increase in Directory listings, as well as trends the CFA is noticing within its membership. Read on to learn more about the systems within these sectors that are striking a chord with franchisees across the country.

35% growth in health and fitness franchise listings
over a five year period

Health and Fitness
Fitness is big business in Canada. As Canadians collectively become more conscious of their eating and fitness habits, more and more people are seeking to lead healthier, more active lives. Franchises across the country are actively meeting this demand, as the number of systems in this category continues to rise on an annual basis.

“The health and fitness category is a $32 billion industry with no signs of slowing down,” explains Wes Hodgson, Master Franchise with Crunch Fitness Canada. “Everywhere you look; TV, magazines, and social media – it’s all about fitness! Consumers around the world are taking charge of their health.”

Canadians are an active bunch. According to Stats Canada, more than 16.2 million Canadians aged 12 and over reported participating in at least 150 minutes of moderate to vigorous intensity aerobic physical activity per week. This bodes well for franchise systems within the health and fitness sector, and for pro­spective franchisees that recognize the industry’s growth. According to Hodsgon, investment in a dues-based business with recurring revenue, such as a fitness centre, is not only a smart move, but also provides entrepreneurs with the sense of satisfaction of keeping Canadians healthy, and helping them meet their fitness goals.

Crunch Fitness Canada
Franchising since 2010, Crunch Fit­ness fuses fitness and entertainment throughout its system of “#nolimits” clubs. Memberships start as low as $9.95 per month and offer incredible value for a club with state-of-the-art cardio and strength equipment, tons of free weights, world-renowned group fitness classes, and personal training and small group training through the exclusive HIITZONE Functional Training Ground.

A typical Crunch Fitness loca­tion includes 80 to 100 pieces of car­dio equipment, all produced by the top five or six manufacturers in the industry. The HIITZONE includes heavy bags, monkey bars, turf and other amenities for those who want a more vigorous workout. An enclosed 2,500-square-foot space is reserved for group workouts. Crunch Fit­ness Franchise clubs offer up to 60 classes per week, including yoga, Pilates, and Zumba, among others.

Owning a Crunch franchise means joining a community of like-minded entrepreneurs, working with a team and system that are tops in the industry, getting in on the gym floor of the fastest-growing full-size fitness brand, and doing something with purpose: helping people build healthy lifestyles.

Crunch Fitness takes a different approach to franchising than many of its competitors. Franchisees within the system are encouraged to invest capital to purchase and operate multiple units. The company currently has 250 sites open, but has sold 1,500 franchises to under 100 franchisees. Among the hundreds of franchisees in the system, only three of them are single unit owners. The remainder own, on average, 10 terri­tories, and will follow a plan to build one location as soon as the previous club gets established.

Crunch Fitness provides new franchisees with 240 hours of initial training that is delivered in class, in store, and online. The company pro­vides, ongoing support by reviewing clubs sales, revenues and profits and losses monthly and it has a full, in-house marketing department.

91% growth in Educational Products and Services
franchise listings over a five year period

Educational Products and Services
Education-focused franchises cover a lot of ground across Canada by providing kids of all ages with a diverse range of learning centres and programs covering every subject, from mathematics and English to science and the arts. Catering to children as young as preschool-aged all the way up to students preparing for university, these franchises offer a place for young Canadians to access that vital extra learning that can help set them up for future success.

“In our experience, the growth (of educational products and services) is driven by the passionate parents who are looking for opportunities to enhance their children’s education,” says Jeff Hughes, CEO of Level UP Learning Centres. “When enterprising parents aren’t able to find these activities, they look to companies like Level UP to help them fulfill their entrepreneurial passion and bring Level UP to their community.”

If you have a passion for spreading knowledge, then franchise opportunities within the Educational Products and Services category might be the right fit.

Level UP Learning Centers
In our fast-paced, digital world, skills in STEM (Science, Technology, Engi­neering, and Mathematics) are rap­idly increasing in demand. Accord­ing to Statistics Canada, the STEM sector of the job market is doing the most hiring, however, reports sug­gest that Canada is failing to produce enough graduates to fill such roles.

With public education sys­tems failing to meet expectations, demand for the supplemental edu­cation industry is growing. Parents across Canada are turning to supple­mental education programs to equip their kids with the STEM skills they need for the future. That’s where franchises such as Level UP Learn­ing Centers come in.

Level UP is a system of pro­grams for students in grades K to 12, designed to engage students in sup­plemental science, technology, engi­neering, and math (STEM) educa­tion. Level UP seeks to fill a void left by Canada’s education system when it comes to computer science. Cur­rently, there is no officially adopted national standards for computer sci­ence in Canada. As such, a cohesive progression of computer science knowledge and skills does not yet exist. Level UP aims to bridge this knowledge and skills gap with a com­prehensive program that prepares students for post-secondary educa­tion and a career in STEM fields.

Level UP employs a business model that leverages state-of-the-art technology to maximize the effi­ciency of management, communica­tion, and operations. The franchise system offers a variety of revenue models including monthly member­ships, summer camps, in-school and after-school programs, corporate events, birthday parties, and more. As an owner, franchisees receive ongoing support from the corporate management team.

34% growth in Quick Service Restaurant franchise
listings over a five year period

Ethnic Foods and Quick Service Restaurants
Canada’s growing diversity has led to a thriving food scene in Toronto, Vancouver, Montreal, and other urban centres. The increasingly diverse tastes of Canadians have spread from the big cities, into all parts of the country. While “Ethnic Foods” are not an official Directory listing category, the CFA has noticed an increase in membership of QSR (Quick Service Restaurant) franchise systems that are serving up flavours from Asia, the Middle East, India, and beyond.

Greg Ewasiuk, CEO of Holy Falafel, notes how the Ethnic Foods category is currently experiencing and forecasting significant, well above-average, growth throughout North America. He says that while many QSR franchises offer convenience, those serving foods beyond the normal hamburger and pizza offerings are catering to a consumer that is looking for not only fast service, but also for something new to satisfy their palates.

“People are tired of eating the same old, unhealthy boring food when they need a quick bite on their limited lunch or dinner time with everyone’s ever increasing hectic busy daily schedules. The entire mar­ketplace is desperately craving something new,” he says. “‘Ethnic Fast Casual’ is an entirely new category that brings exotic, healthy, and refreshing new global flavours from the predominantly small urban family-run amateur ‘mom and pop’ shops into the professional mainstream with efficient, clean, fast, safe, North American operations and consistency.”

For prospective franchisees looking to invest in a brand that provides consumers with healthy, flavourful foods coupled with convenience, ethnic food QSRs are a good option. Maillet notes how franchises in the QSR sector are making proactive efforts to focus on the needs of a new type of consumer: one seeking healthy options, and fast, without having to leave their homes, or even talk on the phone.

“Consumers prefer inexpensive, convenient, on-the-go dining. The recent trend in food service towards food delivery, with such services as Uber Eats or Skip the Dishes, provides even further convenience to the consumer. Home delivery can allow QSRs to expand their customer base without increasing overhead costs, since they do not require more space and seating. This can improve the bottom line,” Maillet says.

17% growth in Hair & Nail Salons/Spas franchise
listings over a five year period

Men’s Grooming
A lot has changed since the 1950s, when men’s fashion, particularly hairstyles, were painfully simple. In 2019, men have become increasingly conscious of their fashion choices, and their grooming is no excep­tion. This growing trend has led to the rise of men’s grooming franchises, as brands have jumped on the franchisability of the traditional barbershop model.

“Men have evolved to a point where it is now common to place a high priority on their appearance and personal style,” explains Cory Anderson, Managing Partner with Tommy Gun’s Original Barbershop. “They are wanting to create their own unique identity and the men’s grooming industry is helping them achieve that goal.”

Stepping beyond the traditional red, white and blue pole that is synonymous with the old fashioned men’s barbershop, franchise systems in the modern men’s grooming space provide haircuts and facial detailing, along with old-school services like a hot towel shave, but with a modern feel. With an explosion of products on the market to help men improve their look, men’s barbershops have entered the mainstream. Once a place for men to strictly get a quick haircut, franchises in this sector offer a wide range of amenities, such as sports on LCD televisions, and a hip, contemporary atmosphere.

A substantial increase of 17% in franchise directory listings in the Hair & Nail Salons/Spas category, is partly attributed to the fact that men across Canada are placing heavy importance on not only their looks, but also on the overall barbershop experience.

“Men’s expectations around service and quality has also increased recently. They want to support busi­nesses that are tailored to their needs. Tommy Gun’s has designed a concept specifically to service those high standards.”

Tommy Gun’s Original Barbershop
A throwback to the Chicago-style bar­bershops of the 1930s, Tommy Gun’s Original Barbershop was created to fill the void that existed in men’s grooming. To bridge this gap, the fran­chise system with more than 60 fran­chise units across Canada reinvented the barbershop experience, creating a brand new “male-oriented” location, focusing on service and convenience.

When guests enter a Tommy Gun’s barbershop, they are transported back to a time when men flocked to the barbershop for more than just a haircut. Tommy Gun’s décor is remi­niscent of 1930s Chicago or New York City, with a retro barbershop feel. To complement the personality of the diverse age of customers, the barbershop has been designed with the duality of the 1930s and a modern classic look.

Tommy Gun’s offers 10-14 days of initial training, including: point-of-sale systems, merchandising, customer ser­vice, retail operations, service opera­tions, and human resources. Ongoing training is also available, and focuses on initial opening training, follow-up training three months after opening, annual conferences, a stylist education program, operations manual, and man­agement seminars. Ongoing support from a district manager ensures opera­tions continue to run smoothly. To stay connected, a national annual summit gathers business partners, managers, vendors, and barbers from across the country to train, network, and share best practices.

When exploring franchise options, the Tommy Gun’s team advises pro­spective business partners to choose a brand and organization they can identify with to maximize their poten­tial success. For Tommy Gun’s, the undeniably cool vibe has created a strong culture that continues to grow daily, making them a cut above.

Emerging and Growing: Cannabis

The legalization of cannabis in Canada on Oct. 17 brought forth the creation of an entirely new franchise category. With Newfoundland, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia allow­ing for the sale of cannabis in private sector brick-and-mortar stores, cannabis presents a wide range of opportunities in franchising.

As noted in our Green Rush story, hundreds of Canadian entrepreneurs are jumping on the opportunity to get in on the ground floor of the newly found recreational cannabis industry. In Alberta alone, the Alberta Gaming Liquor and Cannabis Commission (AGLC) received a whopping 795 applica­tions for cannabis retailer licenses prior to legalization. With so many people looking to open up can­nabis stores, market saturation is definitely a concern. Franchising just might be the answer to the many unknowns and risks associated with investing in the cannabis industry, Maillet explains.

Along with the expectation that the recreational cannabis market is doomed to become saturated, there is also uncertainty as to what the profit margins will look like in this entirely new sector that is entering uncharted territory. In provinces such as Ontario, that are moving forward with a hybrid model of privately-run and government-operated retail stores, independent operations will be competing against their own government for consumers. There are also laws dictating where stores can be opened to navigate.

“With all of these factors, a franchise is the best way to minimize the risk. A franchise provides group buying power to maintain margins,” says Maillet. “The franchisor can monitor the changing landscape as it relates to cannabis as well as focus on finding the right locations. It can assist in the paperwork required to apply for a license. Overall, it can be much easier for a franchisee, as opposed to an individual trying to do it themselves.”

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