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Franchise Forecast 2022 Canadian Franchise Industry Economic Outlook April 2022

OOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVIC EALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOU RANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SE NIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • S EIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODU HILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WO RANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORAT HILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPREN OMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENO OME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC NTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEM OME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL B CONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCE PROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • T MALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITIO RANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAS RVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HE TNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS RANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SE NIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • S EIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODU HILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WO RANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORAT HILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPREN OMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENO OME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC NTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEM OME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL B CONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCE PROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • T MALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITIO RANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAS RVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HE TNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS RANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SE NIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • S EIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODU HILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WO RANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORAT HILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPREN OMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENO OME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC NTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEM OME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL B CONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCE PROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • T MALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITIO RANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAS RVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HE TNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS RANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SE NIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • S EIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODU HILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WO RANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORAT HILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPREN OMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENO OME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC NTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEM OME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • TRENDS • SMALL B CONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD DELIVERY • GROCE PROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITION • FRANCHISING • T MALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAST • FOOD SERVICE • FOOD GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HEALTH • FITNESS • NUTRITIO RANCHISING • TRENDS • SMALL BUSINESS • ECONOMIC DRIVER • ENTREPRENEURS • COMMUNITY • WOMEN IN FRANCHISING • SERVING NEIGHBOURHOODS • FRANCHISE FORECAS RVICE • FOOD DELIVERY • GROCERY • HOME IMPROVEMENT • HOME RENOVATION • HOME RESTORATION • CHILDREN’S PRODUCTS • CHILDREN’S SERVICES • SENIOR SERVICES • HE

Prepared by:

Canadian Centre for Economic Analysis

Franchise Forecast 2022: Executive Summary Franchised businesses are emerging from the pandemic and the subsequent global slowdown with renewed strength and vigor. The pandemic and our members’ response to the pandemic truly showed how franchising is about being in business for yourself, but not by yourself. We worked together, as a community, to provide the education, investments, and government supports needed to help our members survive and thrive during the greatest global economic slowdown in generations.

73,000+ Expected number of franchise units in Canada by the end of 2022

As Canadian Franchise Association (CFA) members know, franchise systems are made up of thousands of small businesses in every community from coast to coast to coast. The franchising sector is still, in spite of the economic turmoil of the past few years, the 12th largest contributor to the Canadian economy. In fact, our economic contribution to Canada’s GDP has increased from $100 billion in 2019 to over $120 billion in 2022. However, like all businesses, franchising in Canada has not been immune to the pandemic’s economic impacts. While we have seen significant growth in some areas, we cannot forget that the economic slowdown has hit some businesses and employees harder than others. The 2019 franchise forecast projected that franchised businesses would employ 1.9 million Canadians within 12 months. Unfortunately, the pandemic hit, and that growth in jobs did not materialize. Despite the significant job losses seen in many sectors, franchised business only saw a slight contraction. Franchised businesses are projected to employ 1.85 million employees in 2022.

12th

The franchise industry as a whole ranks as the 12th largest industry in Canada.

The pandemic also resulted in a contraction in the number of franchised businesses across Canada. Pre-pandemic, we were expecting franchising to grow to over 76,000 establishments. The contraction across many franchise systems means that in 2022, franchising is expected to grow to 73,000 establishments. Growth is projected in every single province and territory across Canada in 2022. Alberta is the province where the largest percentage growth in franchise establishments of 2.41% is expected. Next is Ontario at 2.27%, Saskatchewan at 2.27%, and Quebec is projected to have the fourth largest growth in the number of franchise establishments at 1.7%. Over the coming weeks and months, the CFA will be working with franchised businesses and governments across this great country to ensure the tools are there not only to deliver on this projected growth but to try and exceed it.

The economic contribution of franchising to Canada’s GDP has increased from $100 billion in 2019 to over

$120 billion in 2022

The CFA’s mantra is Growing Together™ and in 2022 we will continue to see franchising grow as we strive to help everyday Canadians realize the dream of building their own business.

Sincerely

Sherry McNeil, President and CEO Canadian Franchise Association

1.85 million

Canadians are projected to be employed by the franchise industry in 2022

This report is an independent study conducted on behalf of: 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: www.cfa.ca and FranchiseCanada.online.

An independent study conducted on behalf of:

ABOUT 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: www.cfa.ca and FranchiseCanada.online.

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About the Canadian Centre for Economic Analysis

About the Report

The Canadian Centre for Economic Analysis (CANCEA) is a socio-economic research and data firm. CANCEA provides objective, independent and evidence-based analysis and is dedicated to a comprehensive, collaborative, and quantitative understanding of the short- and long-term risks and returns behind market changes, policy decisions and economic behaviour.

CANCEA does not accept any research funding or client engagements that require a predetermined result or policy stance or otherwise inhibit its independence.

CANCEA uses modern techniques in data science and simulation for econometric analysis, business risk management assessments and demographic forecasts. CANCEA’s work includes market analysis, policy evaluation and risk management, business model optimization, cost-effectiveness and rate of return analysis, macroeconomic analysis, insurance risk evaluation, land use and infrastructure planning, logistics, and labour market analysis.

In keeping with CANCEA’s guidelines for funded research, the design and method of research, as well as the content of this study, were determined solely by CANCEA. This information is not intended as specific investment, accounting, legal or tax advice. This report was commissioned by the Canadian Franchise Association.

CANCEA also provides comprehensive Canadian data services incorporating 56,000 locations across Canada. Given the systems focus behind all of CANCEA’s work, CANCEA has a one-model approach to its analysis which allows various disciplines and stakeholders to be incorporated into a single analysis allowing for intended and unintended consequences to be understood.

Citation: The Canadian Centre for Economic Analysis. Canadian Franchise Industry Economic Outlook 2022. March 2022.

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TABLE OF CONTENTS Table of Contents .......................................................................................................................................... 4 List of Figures ................................................................................................................................................ 5 List of Tables .................................................................................................................................................. 6 1.0 Overview ........................................................................................................................................... 7 2.0 Franchise Establishments ................................................................................................................ 12 3.0 Gross Domestic Product (GDP) ........................................................................................................ 14 4.0 Employment and Wages.................................................................................................................. 17 5.0 Gross Operating Surplus (GOS)........................................................................................................ 21 6.0 Tax Revenue .................................................................................................................................... 23 7.0 Trends.............................................................................................................................................. 24 8.0 Conclusions ..................................................................................................................................... 26 Appendix A. Glossary ............................................................................................................................... 27 Appendix B. Methodology ....................................................................................................................... 29 Appendix C. Bibliography......................................................................................................................... 30

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LIST OF FIGURES Figure 1

Industry sector descriptions ..................................................................................................................11

Figure 2

Number of franchise establishments since 2020 at the start of each year ...........................................12

Figure 3

Provincial and territories total franchise-related nominal GDP ............................................................15

Figure 4

Total franchise-related nominal GDP growth, 2022-2023 .....................................................................15

Figure 5

Total franchise-related employment (FTEs) proportions ......................................................................19

Figure 6

Direct franchise employment (FTEs) proportions ..................................................................................20

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LIST OF TABLES Table 1

Overview of the national outlook ................................................................................................................7

Table 2

Provincial outlook for 2022: franchise establishments, nominal GDP and employment.............................9

Table 3

Provincial outlook for 2022: GOS, wages and taxes .....................................................................................9

Table 4

Top sector outlook for 2023 .......................................................................................................................10

Table 5

Provincial franchise establishment growth ................................................................................................13

Table 6

Top sector franchise nominal GDP .............................................................................................................14

Table 7

Provincial franchise-related nominal GDP outlook ....................................................................................16

Table 8

Canadian franchise employment growth ...................................................................................................17

Table 9

Canadian franchise employment growth by type of employment ............................................................18

Table 10

Provincial total franchise-related wage growth.....................................................................................20

Table 11

Provincial total franchise-related GOS growth ......................................................................................21

Table 12

Industry sector GOS growth ...................................................................................................................22

Table 13

Federal and provincial taxation revenue generated ..............................................................................23

Table 14

Provincial growth trends: establishments, nominal GDP, employment, GOS, wages and taxes ...........24

Table 15

Top industry sector growth trends: nominal GDP and employment .....................................................25

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1.0 OVERVIEW This report outlines the economic forecast for the Canadian Franchise Industry for the upcoming year and covers the net change in the number of franchise establishments as well as franchise-related economic indicators, such as gross domestic product (GDP), employment (number of jobs and full-time equivalents), and tax revenue generated by franchises. These results are further broken down by province and selected industry sectors. CANADIAN FRANCHISE INDUSTRY The Canadian franchise industry is estimated to have over 1,100 brands with at least one Canadian establishment with a total of about 70,000 franchise establishments in a variety of industry sectors. During the COVID-19 pandemic, the number of franchise establishments in the country did fall slightly from 72,100 in 2020 to just under 70,000 at the beginning of 2022. However, with the economy expected to grow over the next year as pandemic restrictions are removed, a rebound in the number of franchise establishments is expected.1 NATIONAL OUTLOOK Table 1

Overview of the national outlook 2022

2023 Forecast

% Change

69,732

71,196

2.10%

Part-Time

436.5

445.4

2.04%

Full-Time

940.0

959.9

2.11%

Total

1,376

1,405

2.09%

1,154

1,178

2.10%

Part-Time

516.3

526.9

2.06%

Full-Time

1,299

1,327

2.12%

Total

1,816

1,854

2.10%

1,553

1,586

2.11%

Direct nominal franchise GDP ($B)

$68.2

$71.1

4.19%

Total nominal franchise-related GDP ($B)

$115.8

$120.7

4.19%

Federal

$14.6

$15.2

4.19%

Provincial/Territorial

$13.1

$13.6

4.16%

Metric Number of franchise establishments

Direct franchise employment (‘000s)

Jobs

FTEs

Total franchise-related Employment (‘000s)

Jobs

FTEs

Total franchise-related tax revenue ($B)

Note that the analysis has not incorporated potential supply chain disruptions from the war in Ukraine and the renewed spread of COVID-19 in China in 2022 given the uncertainty of external events and the unknown impact upon economic activity.

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In 2022, the economic activity of the Canadian franchise industry is expected to grow by 4.19% (+$4.9 billion net increase), increasing the total franchise-related GDP contribution to $120.7 billion by 2023. As illustrated in Table 1, the total number of franchise establishments in Canada is expected to grow by 2.1% to a total of 71,200 franchise establishments. Furthermore, the Canadian franchise industry’s contribution to federal and provincial tax revenue is expected to increase, respectively, by 4.19% (+$611 million net increase) to $15.2 billion and by 4.16% (+$542 million net increase) to $13.6 billion in 2023. Total franchise-related employment in the country is expected to grow by 2.1% to 1.85 million jobs (1.59 million FTEs) by 2023, which is equivalent to 38,200 net new jobs (28,800 of which are directly due to franchises). Growth in employment is associated with a 4.19% increase in total franchise-related wages to $62.0 billion (a net increase of $2.5 billion in wages over the coming year). Part-time franchise-related employment is expected to increase slightly less than full-time employment, by 2.06% (+10,600 net new jobs) to 527,000 jobs while full-time employment is expected to grow by 2.12% (+27,600 net new jobs) to 1.33 million. PROVINCE AND TERRITORY OUTLOOK At the provincial level, in absolute terms, Ontario is estimated to have the largest number of franchise establishments added (+769 net establishments, growth of 2.27% to 34,636. However, the largest percent growth in franchise establishments is expected to occur in Alberta, where the number of franchise establishments is expected to increase by 2.41% (198 net establishments) to 8,433. Meanwhile, the lowest growth is projected to occur in the Territories, where the number of franchise establishments is estimated to grow by 1.03%. A breakdown of the provincial and territory projections for the franchise industry is provided in Table 2 and Table 3.

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Table 2

Provincial outlook for 2022: franchise establishments, nominal GDP and employment # of Franchise Establishments Amount

Total Franchise-Related Nominal GDP

Total Franchise-Related Employment (FTEs)

% Change

Amount

% Change

Amount

% Change

2022 to

2023

2022 to

2023

2022 to

2023

($B)

2023

(000s)

2023

2023 Alberta

8,433

2.41%

$15.3

4.46%

183.2

2.41%

British Columbia

10,683

1.97%

$19.2

4.05%

238.3

1.98%

Manitoba

1,778

1.93%

$2.6

3.99%

36.8

1.93%

New Brunswick

900

1.26%

$1.2

3.31%

18.7

1.26%

Newfoundland & Labrador

544

1.09%

$0.9

3.08%

11.2

1.08%

Nova Scotia

1,267

1.14%

$1.7

3.20%

26.7

1.15%

Ontario

34,636

2.27%

$60.6

4.35%

789.4

2.28%

151

1.21%

$0.2

3.27%

3.1

1.22%

Quebec

11,059

1.71%

$16.4

3.78%

242.8

1.72%

Saskatchewan

1,663

2.27%

$2.5

4.33%

34.3

2.27%

1.03%

$0.2

3.05%

1.6

1.03%

71,196

2.10%

$120.7

4.19%

1,586

2.11%

Prince Edward Island

Territories Total

Table 3

Provincial outlook for 2022: GOS, wages and taxes Gross Operating Surplus

Wages

Taxation (Federal and Provincial)

Amount

% Change

Amount

% Change

Amount

% Change

2023

2022 to

2023

2022 to

2023

2022 to

($B)

2023

($B)

2023

($B)

2023

Alberta

$5.5

4.47%

$7.62

4.45%

$2.96

4.46%

British Columbia

$6.4

4.05%

$9.52

4.04%

$4.30

4.05%

Manitoba

$0.8

4.00%

$1.24

3.98%

$0.60

3.99%

New Brunswick

$0.4

3.32%

$0.60

3.30%

$0.30

3.31%

Newfoundland & Labrador

$0.3

3.07%

$0.44

3.09%

$0.22

3.08%

Nova Scotia

$0.5

3.20%

$0.89

3.19%

$0.44

3.20%

Ontario

$17.9

4.36%

$31.87

4.35%

$14.63

4.35%

Prince Edward Island

$0.1

3.28%

$0.09

3.27%

$0.05

3.27%

Quebec

$4.7

3.79%

$8.52

3.78%

$4.70

3.78%

Saskatchewan

$0.9

4.34%

$1.16

4.32%

$0.56

4.33%

Territories

$0.1

3.03%

$0.08

3.06%

$0.03

2.92%

Total

$37.6

4.20%

$62.03

4.19%

$27.64

3.23%

Page | 9

SECTOR OUTLOOK Table 4 provides an overview of the outlook of the top franchise industry sectors across total franchiserelated GDP and total franchise-related employment in terms of full-time equivalents (FTEs). The Canadian franchise industry is projected to see relatively strong performance as the economy recovers from the pandemic. Sectors which may experience above average growth include those related to professional and business services. The accommodation and food services, despite being the largest sector by number of franchises and employment, is expected to take longer to recover. Table 4

Top sector outlook for 20232 Total FranchiseRelated Nominal GDP

Total FranchiseRelated Employment (FTEs) % Amount Change 2023 2022 to

Amount

% Change

2023

2022 to

($B)

2023

(‘000s)

2023

$31.39

4.07%

583

2.01%

$21.96

4.23%

319

2.19%

$13.63

4.32%

2.27%

$12.39

4.21%

138

2.14%

Professional, scientific and technical services

$9.21

4.42%

2.36%

Other services (except public administration)

$8.15

4.18%

143

2.12%

Manufacturing

$6.59

4.00%

1.94%

Construction

$4.77

4.27%

2.21%

Arts, entertainment and recreation

$4.28

4.12%

2.07%

Educational services

$2.17

4.22%

2.18%

Health care and social assistance

$1.93

4.26%

2.23%

Rest of sectors

$4.20

4.20%

2.15%

$120.67

4.19%

1586

2.11%

Accommodation and food services Retail trade Finance, insurance, real estate, rental and leasing and holding companies Administrative and support, waste management and remediation services

Total

Refer to Figure 1 on the next page for an overview of industry sectors and the types of franchises that fall under each industry sector category.

Page | 10

INDUSTRY SECTOR DESCRIPTIONS Figure 1 below provides an overview of the North American Industry Classification System (NAICS) industry sectors and the types of franchises that fall under each sector category. Figure 1 Accommodation Services (NAICS 721) Hospitality Products / Services Hotels / Motels / Campgrounds Commercial and Residential Services (NAICS 56) Administrative and Support Commercial - Janitorial Services Employment / Personnel Services Environmental Products and Services Event Planning Fire Prevention / Safety & Security Furniture / Upholstery Repair Home - Inspection Services Home - Maid / Cleaning Services Janitorial & Maid Services Lawn & Garden Supplies / Services Remediation Security Systems & Services Travel Waste Management Arts, Health and Fitness (NAICS 71) Health / Fitness / Nutrition Sports / Recreation / Entertainment Weight Loss Services / Body Contouring Educational Services (NAICS 61) Educational Products & Services Real Estate and Business Services (NAICS 52-53) Business - Supplies / Equipment & Services Business Services / Office Space / Co-working Space Financial / Cash Services Insurance Leasing and Holding Companies Rental Real Estate Food Services (NAICS 722) Food - Baked Goods / Coffee / Donuts Food - Quick Service Restaurants Food - Restaurants / Dining Rooms Health Care (NAICS 62) Seniors Services / Home Care / Transition Social Assistance Information and Cultural Industries (NAICS 51) Magazines / Publishers

Industry sector descriptions Printing and Manufacturing (NAICS 31-33) Building & Design Services Commercial - Supplies / Equipment & Services Printing / Copying / Shipping Sign Products & Services Wine Making Other Services (except Public Administration) (NAICS 81) Automotive & Truck Services / Products / Rentals Beauty / Cosmetics / Supplies Dry Cleaning / Clothing Care Hair & Nail Salons / Spas Tanning Salons Other Professional and Technical Services (NAICS 54) Accounting / Tax Services Advertising / Marketing / Promotional Products & Services Business Consultants / Services / Training Computer / Software / Internet Legal Painting Services Photo Imaging / Photography Scientific Construction (NAICS 23) Custom Deck Home/Commercial Improvement / Renovation / Restoration Retail (NAICS 44-45) Automotive dealers Children's Products & Services Commercial / Residential Services Food - Grocery / Specialty Shops/ Meal Assembly Home - Decorations / Furnishings Home Based Businesses Mobile Businesses Pets - Sales / Supplies / Services Pharmacy Retail Water Treatment Transport and Warehousing (NAICS 48-49) Consumer Buying Services Designated Driving / Transportation Services

Page | 11

2.0 FRANCHISE ESTABLISHMENTS The Canadian franchise industry is projected to grow by almost 1,500 net new franchise establishments in the coming year, an increase of 2.1% over 2022 to 71,200 establishments. As shown in Figure 2, this remains below the pre-pandemic numbers, as a full recovery will likely take several years. Figure 2

# establishments Number of franchise establishments since 2020 at the start of each year

72,500 72,000 71,500

71,000 70,500

70,000 69,500

69,000 68,500 2020

2021

2022

2023

Across the country, Ontario is expected to have the largest number of franchise establishments added (+769 net increase, growth of 2.27%) to 34,636. This represents 53% of all new franchise establishments in Canada in the upcoming year. Ontario is followed by British Columbia, projected to grow by 206 net establishments, resulting in a total of 10,683 establishments. However, Alberta is the province where the largest percentage growth in franchise establishments is expected to occur, at 2.41% with 198 new establishments. Quebec is projected to have the fourth largest growth in the number of franchise establishments, adding 186 (total of 11,059 and 1.71% growth). Further provincial breakdowns are provided in Table 5.

Page | 12

Table 5

Provincial franchise establishment growth Franchise Establishments 2022

2023

% Change

Alberta

8,235

8,433

2.41%

British Columbia

10,477

10,683

1.97%

Manitoba

1,744

1,778

1.93%

New Brunswick

889

900

1.26%

Newfoundland & Labrador

538

544

1.09%

Nova Scotia

1,252

1,267

1.14%

Ontario

33,867

34,636

2.27%

149

151

1.21%

Quebec

10,873

11,059

1.71%

Saskatchewan

1,626

1,663

2.27%

1.03%

69,732

71,196

2.10%

Prince Edward Island

Territories Total

Page | 13

3.0 GROSS DOMESTIC PRODUCT (GDP) The total franchise-related GDP is estimated to be $120.7 billion in 2023, a 4.19% increase over 2022. The direct GDP of Canadian franchises is estimated to be $71.1 billion which represents 59% of the expected total franchise-related GPD. Table 6 provides an overview of the direct and total franchise GDP growth projected for 2022 and 2023 by industry sector. Table 6

Top sector franchise nominal GDP Direct Franchise GDP

Total Franchise nominal GDP

($ Billions)

2022

2023

% Change

2022

2023

% Change

Accommodation and food services

$19.0

$19.8

4.06%

$30.2

$31.4

4.07%

Retail trade

$13.4

$14.0

4.23%

$21.1

$22.0

4.23%

$8.0

$8.4

4.32%

$13.1

$13.6

4.32%

$7.9

$8.2

4.21%

$11.9

$12.4

4.21%

$5.4

$5.7

4.43%

$8.8

$9.2

4.42%

$5.2

$5.4

4.17%

$7.8

$8.2

4.18%

Manufacturing

$2.7

$2.8

3.92%

$6.3

$6.6

4.00%

Construction

$2.2

$2.3

4.29%

$4.6

$4.8

4.27%

Arts, entertainment and recreation

$2.4

$2.5

4.12%

$4.1

$4.3

4.12%

Educational services

$0.8

$0.9

4.23%

$2.1

$2.2

4.22%

Rest of sectors

$1.1

$1.2

4.29%

$5.9

$6.1

4.22%

Total

$68.2

$71.1

4.19%

$115.8

$120.7

4.19%

Finance, insurance, real estate, rental and leasing and holding companies Administrative and support, waste management and remediation services Professional, scientific and technical services Other services (except public administration)

The primary driver of the growth in total franchise-related GDP is the food and accommodation services sector, which is expected to increase by 4.06% to $31.4 billion (+$1.23 billion from 2022). This is followed by the retail sector, which is expected to increase by 4.23% to $22.0 billion (+$890 million from 2022). Combined, these two industry sectors represent 44% of the growth in the total-franchise related GDP. If we consider direct franchise GDP contributions (i.e. GDP that is generated through the operation of franchise establishments and not through indirect and induced effects), the top three industry sectors with the largest direct franchise GDP percentage growth in Canada are projected to be:   

Professional and technical services, growing by $240 million (+4.43%); Real estate and business services, growing by $350 million (+4.32%); and Construction related services, growing by $100 million (+4.29%).

Page | 14

The differences are due to the indirect and induced impacts within these industry sectors which include the rent paid by many employees and franchisees. Figure 3 provides an overview of the change in total franchise-related GDP in the franchise industry between 2022 and 2022 by province. As evident below, the largest total franchise-related GDP is projected to occur in Ontario followed by British Columbia and then Quebec. Figure 3

Nominal GDP Provincial and territories total franchise-related nominal GDP

$70 $60

$50 $40 $30 $20 $10 $0 AB

2022

Ter.

2023

Of all the provinces and territories, Ontario, Alberta, and Saskatchewan are projected to experience total franchise-related GDP growth above the national average of 4.19%, as illustrated in Figure 4. The largest percentage growth in total-franchise related GDP is projected to occur in Alberta, with an increase of 4.5% (6.4% greater than the national average), followed by Ontario (4.4%) and Saskatchewan (4.3%). Figure 4 5.0% 4.5%

GDP Growth TotalNominal franchise-related nominal GDP growth, 2022-2023

4.5%

4.4%

4.0% 4.0%

4.3%

3.5%

4.19%

3.8%

4.0% 3.3%

3.1% 3.2%

3.3%

3.0%

3.0% 2.5% 2.0% 1.5% 1.0% 0.5%

0.0%

Page | 15

Table 7

Provincial franchise-related nominal GDP outlook Direct Franchise nominal GDP ($ Billions)

Total Franchise-Related nominal GDP ($ Billions)

2022

2023

% Change

2022

2023

% Change

Alberta

$9.04

$9.44

4.46%

$14.60

$15.25

4.46%

British Columbia

$11.07

$11.52

4.05%

$18.45

$19.19

4.05%

Manitoba

$1.60

$1.67

3.99%

$2.46

$2.55

3.99%

New Brunswick

$0.76

$0.79

3.31%

$1.15

$1.19

3.31%

Newfoundland & Labrador

$0.58

$0.60

3.09%

$0.86

$0.89

3.08%

Nova Scotia

$1.05

$1.09

3.20%

$1.65

$1.70

3.20%

Ontario

$32.69

$34.12

4.36%

$58.04

$60.57

4.35%

Prince Edward Island

$0.13

3.27%

$0.19

3.27%

Quebec

$9.58

$9.94

3.78%

$15.85

$16.45

3.78%

Saskatchewan

$1.58

$1.65

4.33%

$2.41

$2.51

4.33%

Territories

$0.13

$0.14

3.04%

$0.18

3.05%

Total

$68.22

$71.08

4.19%

$115.82

$120.67

4.19%

Page | 16

4.0 EMPLOYMENT AND WAGES The total franchise-related employment is projected to grow to 1.85 million jobs (1.59 million FTEs) by 2023, a 2.10% increase over 2022 and equivalent to 38,200 net new jobs. Direct employment in Canadian franchises, representing 75% of the total franchise-related employment, is expected to grow to 1.41 million jobs (1.18 million FTEs) by 2023, a 2.09% increase, and, equivalent to 28,800 net new jobs. Table 8 provides an overview of the direct and total franchise employment growth projection by province. Table 8

Canadian franchise employment growth Direct Franchise Employment

Provinces and Territories

Alberta British Columbia Manitoba New Brunswick Newfoundland & Labrador Nova Scotia Ontario Prince Edward Island Quebec Saskatchewan Territories Total

Total Franchise-Related Employment

2022 ('000s)

2023 ('000s)

% Change

2022 ('000s)

2023 ('000s)

% Change

FTEs

137.0

140.3

2.41%

178.9

183.2

2.41%

Jobs

160.4

164.3

2.40%

206.4

211.4

2.40%

FTEs

173.8

177.2

1.97%

233.6

238.3

1.98%

Jobs

205.6

209.6

1.96%

271.4

276.8

1.97%

FTEs

28.8

29.3

1.93%

36.1

36.8

1.93%

Jobs

34.6

35.3

1.92%

42.6

43.5

1.92%

FTEs

14.9

15.1

1.26%

18.5

18.7

1.26%

Jobs

17.1

17.3

1.25%

21.0

21.3

1.26%

FTEs

9.1

9.2

1.09%

11.1

11.2

1.08%

Jobs

10.2

10.3

1.09%

12.5

12.6

1.08%

FTEs

20.8

21.1

1.14%

26.4

26.7

1.15%

Jobs

24.4

24.7

1.13%

30.5

30.9

1.14%

FTEs

559.6

572.4

2.27%

771.8

789.4

2.28%

Jobs

670.8

685.9

2.26%

904.1

924.7

2.27%

FTEs

2.5

1.22%

3.0

3.1

1.22%

Jobs

2.9

1.21%

3.4

3.5

1.22%

FTEs

179.0

182.1

1.71%

238.7

242.8

1.72%

Jobs

217.2

220.9

1.70%

282.8

287.6

1.71%

FTEs

27.0

27.6

2.27%

33.5

34.3

2.27%

Jobs

31.8

32.6

2.26%

39.0

39.9

2.26%

FTEs

1.3

1.4

1.04%

1.6

1.03%

Jobs

1.6

1.03%

1.9

1.03%

FTEs

1,153.9

1,178.2

2.10%

1,553.2

1,586.0

2.11%

Jobs

1,376.5

1,405.3

2.09%

1,815.7

1,853.9

2.10%

Total franchise-related employment growth is fairly evenly split between full-time and part-time employment growth, which are expected to increase, respectively, by 2.12% (+27,600 net new jobs) to 1.33

Page | 17

million jobs and by 2.06% (+10,600 net new jobs) to 527,000. Table 9 further breaks down the employment growth across the provinces and territories by type of employment. Table 9

Canadian franchise employment growth by type of employment Provinces and Territories

Alberta British Columbia Manitoba New Brunswick Newfoundland & Labrador Nova Scotia Ontario Prince Edward Island Quebec Saskatchewan Territories Total

Total Franchise-Related Employment 2022 ('000s)

2023 ('000s)

% Change

Part-Time

54.2

55.5

2.39%

Full-Time

152.2

155.9

2.41%

Part-Time

74.4

75.8

1.92%

Full-Time

197.1

201.0

1.99%

Part-Time

12.9

13.1

1.90%

Full-Time

29.8

30.3

1.94%

Part-Time

5.0

5.1

1.24%

Full-Time

16.0

16.2

1.27%

Part-Time

2.7

1.09%

Full-Time

9.8

9.9

1.08%

Part-Time

8.1

8.2

1.09%

Full-Time

22.4

22.7

1.16%

Part-Time

260.3

266.1

2.23%

Full-Time

643.8

658.6

2.29%

Part-Time

0.8

1.16%

Full-Time

2.6

2.7

1.23%

Part-Time

86.7

88.1

1.66%

Full-Time

196.1

199.5

1.73%

Part-Time

10.8

11.0

2.24%

Full-Time

28.2

28.8

2.27%

Part-Time

0.5

0.99%

Full-Time

1.4

1.04%

Part-Time

516.3

526.9

2.06%

Full-Time

1,299.4

1,327.0

2.12%

At the provincial level, in absolute terms, Ontario is estimated to have the largest number of total franchiserelated jobs added by 2023 (+20,500 new jobs, growth of 2.27%) to 924,700 jobs (789,400 FTEs). This represents 54% of the total franchise-related new jobs projected to be created in 2022. British Columbia is the province with the next largest number of total franchise-related jobs added (+5,300 new jobs). However, Alberta’s projected level of growth in franchise-related employment for 2022, 2.40%, is the highest of all provinces and is 14% higher than the national average. The Atlantic Provinces and the Territories are expected to add the fewest franchise-related jobs, each adding under 400 jobs. These regions are experiencing lower population growth, therefore, there is less Page | 18

demand for net new franchise establishments (i.e., some franchises may close and new franchises may open, but net numbers are not changing as much as in other provinces). In terms of the industry sectors that will contribute the most to the total franchise-related employment in 2022, the food and accommodation services sector (36.8%) and retail (20.1%) are projected to have the two largest contributions, making up over half of all franchise-related employment. Figure 5 provides a breakdown of the sectors contributing to total franchise-related employment. Figure 5

Total franchise-related employment (FTEs) proportions

Other services (except public administration) 9.0%

Retail trade 20.1%

Administrative and support, waste Finance, insurance, real management and estate, rental and remediation services leasing and holding 8.7% companies 5.2% Professional, scientific and technical services 4.9%

Arts, entertainmnet and recreation 4.3% Manufacturing 3.0% Construction 2.6% Rest of sectors 3.3% Accomodation and food services 36.8%

Educational services 2.2%

In terms of direct franchise employment, the food and accommodation services (41.2%) and retail (21.8%) sectors are also projected to contribute the most, followed by other services (excluding public administration) (10.3%). A further breakdown is provided in Figure 6.

Page | 19

Figure 6

Direct franchise employment (FTEs) proportions Other services (except public administration) 10.3%

Retail trade 21.8%

Administrative and support, waste management and remediation services 8.8%

Arts, entertainmnet and recreation Professional, 4.3% scientific and technical Finance, insurance, services real estate, rental 4.1% and leasing and holding companies 3.3%

Educational services Construction 2.1% 1.7% Manufacturing 1.5%

Accomodation and food services 41.2%

Rest of sectors 1.0%

The increase in franchise-related employment is estimated to be associated with a 4.19% increase in the total franchise-related wages to $62 billion by 2023. This is a projected net increase of $2.5 billion in wages over the coming year. Table 10 provides a breakdown of the wage increases across the different provinces. Table 10

Provincial total franchise-related wage growth Total franchise-related wages ($ Billions) 2022

2023

% Change

Alberta

$7.29

$7.62

4.45%

British Columbia

$9.15

$9.52

4.04%

Manitoba

$1.19

$1.24

3.98%

New Brunswick

$0.58

$0.60

3.30%

Newfoundland & Labrador

$0.42

$0.44

3.09%

Nova Scotia

$0.86

$0.89

3.19%

Ontario

$30.55

$31.87

4.35%

Prince Edward Island

$0.09

3.27%

Quebec

$8.21

$8.52

3.78%

Saskatchewan

$1.11

$1.16

4.32%

Territories

$0.08

3.06%

Total

$59.54

$62.03

4.19%

Page | 20

5.0 GROSS OPERATING SURPLUS The total franchise-related gross operating surplus3 (GOS) is estimated to be $37.6 billion by 2023, a 4.2% increase (+$1.52 billion net increase) over 2022. Table 11 provides an overview of the total franchiserelated GOS growth projected by province and territories. The largest increase in total franchise-related GOS is projected to occur in Ontario (+$748 million net increase, growth of 4.36%), followed by British Columbia (+$250 million net increase, growth of 4.05%) and then Alberta (+$236 million net increase, growth of 4.47%). Table 11

Provincial total franchise-related GOS growth Total franchise-related GOS growth ($ Billions) 2022

2023

% Change

Alberta

$5.27

$5.50

4.47%

British Columbia

$6.17

$6.43

4.05%

Manitoba

$0.80

$0.83

4.00%

New Brunswick

$0.36

$0.37

3.32%

Newfoundland and Labrador

$0.29

$0.30

3.07%

Nova Scotia

$0.49

$0.51

3.20%

Ontario

$17.16

$17.91

4.36%

Prince Edward Island

$0.07

3.28%

Quebec

$4.52

$4.69

3.79%

Saskatchewan

$0.89

$0.93

4.34%

Territories

$0.07

$0.08

3.03%

Total

$36.10

$37.62

4.20%

The primary driver of the growth in total franchise-related GDP growth in the Canadian franchise industry is the food and accommodation services sector, which is estimated to increase by 4.08% by 2023 to $8.09 billion (+$320 million net increase from 2022). This is followed by the retail sector, which is estimated to increase by 4.23% by 2023 to $6.45 billion (+$260 million net increase). Further breakdowns of the total franchise-related GOS growth by sector are provided in Table 12.

Operating surplus is the return to capital of incorporated business. It consists of gross profits (including bad debts and charitable contributions) of corporations before income taxes, including capital consumption allowances, miscellaneous investment income, dividend pay net of dividend received, interest paid net of interest received, and inventory valuation adjustment. See full definition on the Statistics Canada website.

Page | 21

Table 12

Industry sector GOS growth Total Franchise-Related GOS growth ($ Billions) 2022

2023

% Change

accommodation and food services

$7.78

$8.09

4.08%

Retail trade

$6.19

$6.45

4.23%

$5.41

$5.64

4.31%

$3.77

$3.93

4.23%

Professional, scientific and technical services

$2.73

$2.85

4.40%

Manufacturing

$2.60

$2.71

4.02%

Other services (except public administration)

$2.13

$2.22

4.18%

Construction

$1.32

$1.38

4.26%

Arts, entertainment and recreation

$1.16

$1.21

4.12%

Educational services

$0.68

$0.71

4.21%

Health care and social assistance

$0.65

$0.68

4.24%

Rest of Sectors

$1.69

$1.76

4.21%

Total

$36.10

$37.62

4.20%

Finance, insurance, real estate, rental and leasing and holding companies Administrative and support, waste management and remediation services

Page | 22

6.0 TAX REVENUE By 2023, the Canadian franchise industry is projected to generate a total of $15.2 billion in federal taxation revenue (+$611 million net increase, growth of 4.19%) and $13.6 billion in provincial taxation revenue (+$542 million net increase, growth of 4.16%). Table 13 provides a breakdown of the federal and provincial taxation revenue projected to be generated by the Canadian franchise industry. Table 13

Federal and provincial taxation revenue generated Federal Taxation Revenue

Provincial Taxation Revenue

2023 ($ Billions)

% Change

2023 ($ Billions)

% Change

Alberta

$1.92

4.46%

$1.04

4.46%

British Columbia

$2.42

4.05%

$1.89

4.05%

Manitoba

$0.32

3.99%

$0.28

3.99%

New Brunswick

$0.15

3.31%

$0.15

3.31%

Newfoundland and Labrador

$0.11

3.08%

$0.11

3.08%

Nova Scotia

$0.21

3.20%

$0.23

3.20%

Ontario

$7.63

4.35%

$7.00

4.35%

Prince Edward Island

$0.02

3.27%

$0.03

3.27%

Quebec

$2.07

3.78%

$2.63

3.78%

Saskatchewan

$0.32

4.33%

$0.24

4.33%

Territories

$0.02

3.05%

$0.01

3.07%

Total

$15.20

4.19%

$13.60

4.16%

Province/Territories

Given its size, Ontario’s franchise industry is expected to generate the most federal tax revenue out of all provinces at $7.63 billion (+$318 million net increase, growth of 4.35%) and provincial tax revenue at $7.00 billion (+$291 million net increase, growth of 2.39%) by 2023. In terms of taxation revenue growth, Alberta is estimated to see the largest increase out of all the provinces and territories, with its tax revenue contribution growing by 4.46% to $1.92 billion federally and $1.04 billion provincially.

Page | 23

7.0 TRENDS All provinces and territories are expected to see growth across all franchise-sector metrics, although growth is expected to differ considerably from province to province (and territories). Alberta, Ontario and Saskatchewan are expected to have higher growth rates than the national average across all franchisesector metrics, while the Maritime Provinces, Manitoba, British Columbia, Quebec and the Territories are expected to see lower growth rates than the national average across all metrics over the coming year. These trends are presented by province in Table 14. Table 14

Provincial growth trends: establishments, nominal GDP, employment, GOS, wages and taxes

Franchise Establishments

Total FranchiseRelated nominal GDP

Total FranchiseRelated Employment (FTEs)

Gross Operating Surplus

Wages

Taxation (Federal and Provincial)

% Change

2022-2023

Alberta

2.41%

4.46%

2.41%

4.47%

4.45%

4.46%

British Columbia

1.97%

4.05%

1.98%

4.05%

4.04%

4.05%

Manitoba

1.93%

3.99%

1.93%

4.00%

3.98%

3.99%

1.26%

3.31%

1.26%

3.32%

3.30%

3.31%

1.09%

3.08%

1.08%

3.07%

3.09%

3.08%

Nova Scotia

1.14%

3.20%

1.15%

3.20%

3.19%

3.20%

Ontario

2.27%

4.35%

2.28%

4.36%

4.35%

1.21%

3.27%

1.22%

3.28%

3.27%

Quebec

1.71%

3.78%

1.72%

3.79%

3.78%

Saskatchewan

2.27%

4.33%

2.27%

4.34%

4.32%

4.33%

Territories

1.03%

3.05%

1.03%

3.03%

3.06%

3.07%

Total

2.10%

4.19%

2.11%

4.20%

4.19%

4.16%

New Brunswick Newfoundland & Labrador

Prince Edward Island

While GDP and employment are expected to grow across all industry sectors related to business, professional and technical services are expected to have the greatest growth. Growth in the food and accommodation sector is expected to be slower as the sector recovers from the disruptions during the pandemic. The trends in expected franchise-related growth by industry sector is shown in Table 15 below.

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Table 15

Top industry sector growth trends: nominal GDP and employment Total FranchiseRelated nominal GDP

Total FranchiseRelated Employment (FTEs)

% Change

2022-2023

Accommodation and food services

4.07%

2.01%

Retail trade

4.23%

2.19%

Finance, insurance, real estate, rental and leasing and holding companies

4.32%

2.27%

Administrative and support, waste management and remediation services

4.21%

2.14%

Professional, scientific and technical services

4.42%

2.36%

Other services (except public administration)

4.18%

2.12%

Manufacturing

4.00%

1.94%

Construction

4.27%

2.21%

Arts, entertainment and recreation

4.12%

2.07%

Educational services

4.22%

2.18%

Rest of sectors

4.22%

2.18%

Total

4.19%

2.11%

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8.0 CONCLUSIONS By 2023, the economic outlook of the Canadian franchise industry is expected to grow by an estimated 4.19%, increasing its total franchise-related GDP contribution to over $120 billion. Total franchise-related employment in the country is estimated to grow by 2.1% to 1.85 million jobs (1.59 million FTEs) in 2023 (equivalent to 38,200 net new jobs, 28,800 of which are directly due to franchises). Total franchise-related employment growth is split between full-time employment, which is estimated to increase by 2.12% (+27,600 net new jobs) to 1.33 million jobs, and part-time employment, which is expected to grow by 2.06% (10,600 net new jobs) to 526,900. Growth in employment is associated with a 4.19% increase in the total franchise-related wages to $62.1 billion (a net increase of $2.49 billion in wages over the coming year). The increased GDP, employment, and associated wages will result in an estimated 4.17% increase in federal and provincial taxation revenue contributed by the Canadian franchise industry. Federal tax revenue contributed by the franchise industry is estimated to reach $15.2 billion, while provincial tax revenue contributed by the franchise industry is estimated to reach $13.6 billion. In terms of the provinces and territories, the largest increases in franchise establishments, franchise-related GDP, employment, wages, GOS and taxation revenue are estimated to occur in Ontario, due to the size of the economy. Of the 1,460 net new franchise establishments projected to be created country-wide, over half (53%) are expected to be located in Ontario. Total franchise-related GDP and wage growth in Ontario is estimated to grow by $2.53 billion and $1.33 billion (growth of 4.35%), respectively, and franchise-related jobs are expected to increase by 20,500. However, the province projected to see the most significant percentage growth across all metrics by 2023 is Alberta. Alberta is estimated to outperform all other provinces and territories in terms of growth in franchise-related GDP (4.46%), employment (2.41%), wages (4.45%), number of establishments (2.41%), and total taxation revenue (4.46%).

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APPENDIX A.

GLOSSARY

Agent

An autonomous individual, firm or organization that responds to cues from other agents and their environment using a set of evidence-based behavioural rules in response to those cues.

Agent-based modeling (ABM)

A framework for modeling a dynamic system, such as an economy, using individual agents, their mutual interaction with each other, and their mutual interaction with their environment(s).

Direct Impact

The impacts directly involved in the operation of franchises. This includes the income and value of production of economic agents (i.e., workers and firms) directly involved in a franchise.

Employment (Full- Equivalent to person-years of employment refers to the amount of work time equivalents) typically performed by one person working full-time for one year. Employment (Total)

The number of employed residents living in a region, in a given year. These residents may work within their region of residence or may commute outside of the region to work.

Franchisee

An individual or organization that gets granted and holds the rights contained in the franchise agreement for the sale of goods or the operation of a service.

Franchising

Method of doing business in which one person, the franchisor, grants another, the franchisee, certain rights contained in the franchise agreement.

Franchisor

An individual or organization that grants the rights contained in the franchise agreement to a third party for the conducting of a business under their marks.

Gross Domestic The total unduplicated value of the goods and services produced in the Product (GDP) economic territory of a country or region during a given period.

Gross Surplus

Gross operating surplus is the surplus generated by operating activities after the labour factor input has been recompensed. It can be calculated from the Operating value added at factor cost less the personnel costs. It is the balance available to the unit which allows it to recompense the providers of own funds and debt, to pay taxes and eventually to finance all or a part of its investment.

Indirect Impacts

The indirect effects are the economic impacts that arise through business to business interactions throughout the supply chain.

Induced Impacts

Induced effects are the economic activity created through increased spending of those workers receiving incomes from franchises. They can also occur due to reinvestment of business profits to expand capacity or replace depreciated capital stock. These purchases or activities can lead to further employment, wages, income, and tax revenue that reverberate throughout different industries.

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Prosperity at Risk

CANCEA’s cutting-edge and innovative “big data” computer simulation platform that incorporates social, health, economic, financial, and infrastructure factors in an agent-based system.

Systems approach

The belief that in complex systems, the whole is not equal to the sum of its parts. Such an approach requires the understanding that different combinations of assets can have different values for agents and that agents have different constraints and desires, and cannot be treated as aggregates.

System effects

Impacts that transcend direct, indirect and induced effects, which are not traditionally measured by economics. These impacts arise from the relationship between every economic agent and the environment in which they operate, as they influence one another’s states and behaviours.

Taxation Revenue

The tax collected by the provincial and federal governments and is made up of income, consumption, and corporate taxes.

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APPENDIX B.

METHODOLOGY

The economic forecast of the Canadian franchise industry was conducted using CANCEA’s Prosperity at Risk® platform. Using over 170 tables from Statistics Canada, including Statistics Canada input-output data (I/O), and over 56,000 Canadian Census dissemination areas, the Prosperity at Risk® platform takes into account the demand and supply of commodities across industry sectors and unifies it with demographics, labour force dynamics, government finances, private capital investment, and the interdependencies of production to allow for the Canadian franchises to be quantified and forecasted. As the Prosperity at Risk® platform is an agent-based, event-driven microsimulation platform, it is capable of capturing the direct, indirect, and induced contributions, as well as identifying the contribution at different regional levels. By incorporating household behaviour, industry and firm behaviour, and federal and provincial tax rates, Prosperity at Risk® is capable of providing the economic impact across different economic indicators such as GDP (real and nominal), employment, wages, government revenue, and household income. Furthermore, Prosperity at Risk® also captures the “system impacts”, which consider the broader impact of franchises. In addition to internal model validation, the output from the Prosperity at Risk® platform is regularly tested against the results of other models. Cross model validation ensures Prosperity at Risk® is producing baselines that are in accordance with other models. Key models include:  

Public sector forecasts including Ontario Ministry of Finance (e.g., population and GDP); and Private-sector forecasts including major Canadian banks.

For more information on the Prosperity at Risk® platform and its applications, please refer to CANCEA (2017).

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APPENDIX C.

BIBLIOGRAPHY

Canadian Franchise Association. 2017. Franchising in Canada: Policy Briefing. Toronto: Canadian Franchise Association. CFA. 2017. "Franchising Research and Facts." Canadian Franchise Association. https://www.cfa.ca/newsabout-cfa-members/franchise-research-facts/. Frazer, L., S. Weaven, A. Grace, and S. Selvanathan. 2016. Franchising Australia 2016. Griffith Business School. Heintz, J., R. Polin, and H. Garrett-Peltier. 2009. How Infrastructure Investments Support the U.S. Economy: employment, productivity and growth. Political Economy Research Institute, University of Massachusetts Amherst. International Trade Administration. 2016. 2016 Top Markets Report: Franchising. U.S. Department of Commerce. PWC. 2016. The Economic Impact of Franchised Businesses: Vollume IV, 2016. Price Waterhouse Cooper. The Canadian Centre for Economic Analysis. 2016. "The Economic Impact of Canadian P3 Projects: Why building infrastructure 'on time' matters." The Canadian Centre for Economic Analysis. 2017. Understanding the forces driving the shelter affordability issue: A linked-path assessment of housing market dynamics in Ontario and the GTHA. The Canadian Centre for Economic Analysis.

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