This guide is meant to equip educators with the information you need to teach your students all about franchising. Below, we’ll take you through the fundamentals of the franchising model, the basics of buying a franchise and franchising an existing business, and the legal ins and outs of franchising.
On this resource page, we’ve also compiled some helpful information including quizzes to test students’ knowledge and a collection of franchise tutorials for those who want to dig in and learn about the process of opening a franchise.
Franchising is about sharing success, and the Canadian Franchise Association’s mission is to help everyday Canadians achieve their dreams of owning their own businesses through franchising. If you would like to get in touch to request further resources or a school visit, please contact us.
What is Franchising?
For Canadian entrepreneurs (or future entrepreneurs) looking to start a successful career as a small business owner—or take their small business to a wider customer base—franchising is a popular and attractive business model.
In fact, the franchise industry is one of the country’s largest, with 1 in 10 Canadians directly or indirectly employed by the franchise sector. There are franchised businesses in every province and territory in Canada, across industry categories like retail and commercial services, health and fitness, food service, real estate and business, arts, and more!
On a basic level, franchising is a business relationship in which an owner (franchisor) gives a license to a third party (franchisee) allowing them the right to use its operating system, name, trademarked materials, products, and marketing techniques. Under this model, a franchisee is able to own and run their own business while capitalizing on a proven business concept and with the support and assistance of a franchisor. In turn, the success of a franchisee leads to the further success of a franchisor.
When a business owner invests in a franchise, they align themselves with a brand that likely already enjoys established consumer awareness and loyalty in the Canadian marketplace. This brand recognition brings many advantages, including a stronger position when applying for a business loan. Some other advantages to investing in a franchise rather than starting a business from scratch include:
- License to use the brand’s proven branding, trademarks, and proprietary products and/or services
- A tried-and-true system and an operations manual that fully explains how to replicate the franchise system’s success
- An established supply chain and strong, pre-existing relationships with suppliers (possibly even preferential pricing)
- A network of peers within the franchise system who are available to share their knowledge and experience running the same business
- Access to trend forecasting, research and development, new marketing initiatives, and more through the franchisor
Franchisees are small business owners—even though they’ve joined an established system, they’re responsible for running their own business, and for its success. They’re expected to take on a strong leadership role, as they’re a business owner and not an employee of the franchisor.
Responsibilities of the Franchisee
Anyone investing in a franchise will sign a franchise agreement that outlines the terms of the agreement and any system-specific responsibilities for the franchisee. However, there are a few key responsibilities that are generally required from most 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 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; and
- Work in partnership with the franchisor, allowing for effective two-way communication between the two parties and a mutually beneficial relationship.
Responsibilities of the Franchisor
Aside from specific obligations and responsibilities outlined in the franchise agreement, there are a few key responsibilities that will apply to most franchisors.
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 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; and
- Provide initial and ongoing training and support.
Fast Facts: Franchising in Canada
Franchising is the 12th largest industry in Canada
It is a $120 billion sector that employs nearly 2 million Canadians
There are more than 1,300 franchise brands in Canada, with more than 73,000 franchise locations
Canadians interact with 3-5 franchised businesses every day!
Source: Franchise Forecast 2022: Canadian Franchise Industry Economic Outlook, Canadian Franchise Association and Canadian Centre for Economic Analysis (https://issuu.com/franchisecanada/docs/cfa_economicoutlook_2022_issuu?fr=sZGMwYzc0Mjk)