Canadian Franchising
is recommended that you use a Quebec translator as the French used here is not the same as that of other countries. Additionally, the Franchise Documents themselves often need some revision to bring them into accordance with Quebec law but the changes are minimal.
Ways to Develop the Quebec Market
Quebec has a vibrant franchise industry with more than 100 homegrown franchise systems, many of which have over 100 franchisees. If planning on entering the province, there are several business models to choose from a few of which are discussed below: • VIA A MASTER FRANCHISE AGREEMENT. In this case the master franchisee steps into the shoes of the Franchisor and provides all services that the Franchisor is obligated to provide, in the province only. Unfortunately, experience shows this model to be unsuccessful, as there is not enough money to be made by each party in a master agreement (at 50/50) where the Franchisor is so close geographically. However, to the extent that the franchisor is willing to lower their share substantially, then this can work); • VIA AN AREA DEVELOPMENT. One or many agreements are made and an individual or corporation is granted several years in which to establish a predetermined number of units in defined territory. This agreement, with a solid candidate who has both general business experience and the financial capacity, is an excellent way to go; • VIA A JOINT VENTURES. This approach, where the franchisor and Quebec franchisee are partners in a venture for Quebec development, is becoming more popular; and • VIA TRADITIONAL SINGLE UNIT DEVELOPMENT.
My recommendation to brands coming to Quebec is to operate a corporate store for at least six months to a year. To many, this step is optional, however, I believe if you are going to do business in Quebec, you should fully understand the mar-
those who plan for entry thoughtfully and properly have been rewarded with higher ticket averages, higher royalties, greater brand awareness and very successful franchisees. ket and its complexities. The only real way to do that is with a corporate store. Additionally, this gives you a ‘showroom’ from which to sell additional franchises and a cash flow to find franchise development. Later on, this store can be sold, or my preference, it can be kept as a corporate test center. Remember, what makes a good franchisee in one territory in Canada may not be suitable in Quebec. By having both local representation and preferably a corporate store, you will be best placed to evaluate exactly what qualifications a franchisee requires and if the candidate before you meets them.
Quebec legislation
When entering any new legal jurisdiction, your current contracts have to be reviewed to ensure compliance with the laws of the host province. In Quebec, there is no franchise legislation per se, and there is no legal obligation to prepare or provide a Disclosure Document. However, if you are from a disclosing province, it is always a good idea to provide prospects with your Disclosure Document so that they can have the same information as prospects in other provinces. The caveat is not to sign it. If you do you will be bound by it as you are in other provinces. Generally, it is provided with a cover letter and disclaimer stating that it is not to be relied on. It’s given as a goodwill gesture and because it answers most questions franchisees have. With regard to specific industry legislation Quebec, like all provinces has regulated industries such as pharmaceuticals, insurance, opticians, travel agencies, real estate brokers, and the like. Insofar as relationships, business or per-
sonal, these are all governed by the Civil Code of Quebec. This voluminous piece of legislation governs all relationships and imposes in every contract whether it is stated or not, a duty of fair dealing and good faith in relationships. Quebec is the only province in Canada that has a Civil Code. Lastly, Quebec’s security legislation while it has a different mechanism and name, achieves the same results as the Personal Property Security Act (PPSA), by granting a right in all movable property. Although, unlike other provinces, commercial landlords have the legal right to—and always do—register a prior charge against all the assets on the leased premises, both movable and immovable. The landlord’s charge is generally equivalent to the value of the gross rent for the term of the lease. The franchisor can still register a security interest, but it will be ranked 2nd to the landlord, or third if there is a bank loan. The Quebec market is both vibrant and vital. Quebecers love to try new concepts and the idea of being the “first in Quebec” to have a new concept, is a very appealing selling point. Contrary to what you see in the press, Quebec is not in the middle of a hostile civil war on language or anything else for that matter that should keep a franchisor from expanding here. On a day to day basis, it’s business as usual; one third of the Canadian population is willing to reward businesses by shopping more frequently, paying higher prices, and remaining loyal, all in return for a valuable experience and good value for the dollar. There’s a reason why it’s called “La Belle Province”, and it’s a lot closer than Mars! LORI KARPMAN is President of Lori
Karpman & Associates Ltd. The only full service management consulting firm that can respond to all the needs of a developing brand, provincially, nationally or internationally. For more information: www.lorikarpman.com Email: lori@lorikarpman.com
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