CFA Guidebook Series: Resources for Educators

CFA Guidebook Series

$5.00

RESOURCES FOR EDUCATORS

Published by the Canadian Franchise Association

CFA Board of Directors BOARD CHAIR David Druker*, The UPS Store PRESIDENT & CEO Sherry McNeil*, Canadian Franchise Association

ABOUT THE CANADIAN FRANCHISE ASSOCIATION (CFA) The Canadian Franchise Association (CFA) is the recognized authority on franchising in Canada. With almost 600 corporate members nationwide, representing many of Canada’s best-known brands, CFA is the indispensable resource for the franchise community and advocates on behalf of franchisors and franchisees in Canada to enhance and protect the franchise business model. CFA promotes excellence in franchising and educates Canadians about franchising, specific franchise opportunities and proper due diligence through its many events, programs, publications, and websites (www.cfa.ca | www.LookforaFranchise.ca).

CANADIAN FRANCHISE ASSOCIATION 5399 Eglinton Avenue West, Suite 116 Toronto, Ontario M9C 5K6 Ph: 416-695-2896 or 800-665-4232 F: 416-695-1950 W: www.cfa.ca / E: info@cfa.ca © 2023, Canadian Franchise Association (CFA).

All rights reserved. Contents of this publication may not be reproduced either wholly or in part, without the consent of the CFA. Legal Disclaimer: The opinions or viewpoints expressed herein do not necessarily reflect those of the Canadian Franchise Association (CFA). Where materials and content were prepared by persons and/ or entities other than the CFA, the said other persons and/or entities are solely responsible for their content.

The information provided herein is intended only as general information that may or may not reflect the most current developments. The mention of particular companies or individuals does not represent an endorsement by the CFA. Information on legal matters should not be construed as legal advice. Although professionals may prepare these materials or be quoted in them, this information should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

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1ST VICE CHAIR Ryan Picklyk, A&W Food Services of Canada Inc. 2ND VICE CHAIR Todd Wylie, Master Mechanic PAST CHAIR Gerry Docherty*, Good Earth Coffeehouse SECRETARY & GENERAL COUNSEL Darrell Jarvis*, Fasken TREASURER Lyn Little, BDO Canada LLP CHAIR, FRANCHISE SUPPORT SERVICES Kirk Allen, Reshift Media CHAIR, LEGAL & LEGISLATIVE COMMITTEE Andraya Frith, Osler, Hoskin & Harcourt LLP DIRECTORS Steve Collette, 3rd Degree Training Chuck Farrell, Pizza Pizza John Gilson, COBS Bread Andrew Hrywnak, Print Three Franchising Corporation Rimma S. Jaciw, CFE, WSI Digital Joel Levesque, McDonald’s Restaurants of Canada Ken Otto, Redberry Restaurants Gary Prenevost, FranNet John Prittie, TWO MEN AND A TRUCK Stephen Schober, Metal Supermarkets Family of Companies Thomas Wong, Chatime Todd Wylie, Master Mechanic

©Canadian Franchise Association, 2023

TABLE OF CONTENTS What is Franchising? ��������������������������������������������������������������������������������������������������������������������� 4 How to Become a Franchisee �������������������������������������������������������������������������������������������������� 6 Business Plan and Financial Management Basics ��������������������������������������������������������� 8 Types of Ownership Models ������������������������������������������������������������������������������������������������������12 Basics of Buying a Franchise ����������������������������������������������������������������������������������������������������13 Due Diligence: Financial Aspects of Franchising �����������������������������������������������������������15 Dealing with Disputes ����������������������������������������������������������������������������������������������������������������� 16 Site Selection, Territories, and Real Estate �����������������������������������������������������������������������17 The Canadian Franchise Association Members and Community ����������������������� 18

The CFA wishes to acknowledge and thank these National Sponsors for their support throughout the year.

Find out more about these companies at www.cfa.ca/sponsorship

LAW FIRMS:

SHOWCASED FRANCHISES

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What is Franchising?

WHAT IS FRANCHISING, AND WHY DO STUDENTS NEED TO KNOW ABOUT IT?

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emember your first job? Whether you served coffee or taught swimming lessons, there’s a strong chance you did it at a franchise. Your boss was able to carve out a slice of business success by licensing the operating systems and putting their own spin on it, but have you ever considered following in their footsteps?

The franchising business model is one of the best ways Canadians can turn their dreams into reality and become successful small business owners, or even expand their franchises into multi-unit management empires. And it’s lucrative! The Canadian franchise industry Is projected to contribute $117 billion to the national GDP in 2023. The average shopper may not be aware of franchising in detail, but they’ve almost certainly interacted with franchises in one way or another.

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Franchising Fast Facts: • Franchising is present in the life of every Canadian: One in 10 is employed, directly or indirectly, by a franchise system.

• The average Canadian interacts with three to five franchise locations every day—from the local coffee shop to an after-school tutoring program.

• Canadian franchising is the second largest franchise industry in the world.

In one way or another, your students’ lives are impacted by franchising— whether they choose to go into the franchise business themselves or interact with these businesses in other ways. This handy guidebook provides educators with a compact overview of the need-to-know facts about franchising.

©Canadian Franchise Association, 2023

What is Franchising?

Why is franchising so popular?

Whether it’s brand recognition (Did somebody say McDonald’s?), a successful concept, or proprietary products or services, being a part of a franchise system brings advantages that you just don’t get when you start a business from scratch. Franchising

works because it offers potential owners a proven concept, while the head office team and franchisor provide support and assistance. So, while franchisees get to own their own businesses, they get to take advantage of fellow owners’ successes, and learn from a network of franchise peers.

What is the CFA? The Canadian Franchise Association (CFA) is a not-for-profit association representing and supporting the franchise industry. Our mission is to provide educational events and resources, advocate for legal protections for the industry, and host networking opportunities for franchisees, franchisors, and their communities. Along with this guidebook, here are some useful digital resources to help you learn about and introduce franchising to your students.

Go to FranchiseCanada.Online to catch up on issues of Franchise Canada, our bi-monthly digital publication.

Browse more than 1,300 franchise opportunities in the Franchise Canada Directory, an annual print and digital publication that includes information about the brands franchising in Canada.

Stay up to date with franchise industry news through Franchise Canada E-News, an e-newsletter sent to more than 27,000 subscribers twice a month.

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How to Become a Franchisee

HOW TO BECOME A FRANCHISEE

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ranchising refers to the business ownership model in which an owner (the franchisor) gives license to a third party (the franchisee), allowing them the right to use its operating system, name, trademarked materials, products, and marketing techniques.

It’s a special relationship because, although the franchisee must follow the systems laid out by the franchisor, they own their own business, meaning they retain some independence. Furthermore, the personal investment franchisees contribute through royalty fees works as a commitment that can’t be

found in a regular employment relationship.

Brands that fit the mold are wide and varied.

A franchise provides prospective business owners with a tried-and-true system and operations manual that explains how to replicate the system at a given location. The idea is that with a series of established processes in place, you can reduce the risk of business failure and increase your likelihood of success.

Joining a franchise system also comes with a network of peers whose knowledge and experience you can draw from.

Discussion breakout: Can you name three franchises you’ve interacted with recently?

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©Canadian Franchise Association, 2023

How to Become a Franchisee What are the key responsibilities of the franchisee?

While issues specific to the franchise system should be outlined in the franchise agreement (more on that later), there are a few key responsibilities shared among the majority of franchisees.

THE FRANCHISEE SHOULD: FOLLOW THE FRANCHISOR’S STANDARDS, METHODS, PROCEDURES, TECHNIQUES, AND SPECIFICATIONS TO ENSURE CONSISTENCY; PAY A FEE TO THE FRANCHISOR FOR THE RIGHT TO USE THE FRANCHISOR’S TRADEMARKS (BRAND) AND BUSINESS SYSTEM; TAKE CARE OF ACCOUNTING, LOCAL MARKETING, HIRING, 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; AND WORK IN PARTNERSHIP WITH THE FRANCHISOR, ALLOWING FOR EFFECTIVE TWO-WAY COMMUNICATION BETWEEN THE TWO PARTIES AND A MUTUALLY BENEFICIAL RELATIONSHIP.

What are the key responsibilities of the franchisor?

The franchisor must also adhere to its responsibilities.

THE FRANCHISOR SHOULD: PROVIDE FRANCHISEES WITH OPERATING SYSTEMS AND SUPPORT SERVICES TO HELP THEIR BUSINESSES GROW EFFECTIVELY, EFFICIENTLY, AND PROFITABLY; CONTINUE TO EVOLVE THE FRANCHISE SYSTEM THROUGH RESEARCH AND DEVELOPMENT OF NEW PRODUCTS AND SERVICES; HANDLE ALL NATIONAL 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.

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Business Plan and Financial Management Basics

BUSINESS PLAN AND FINANCIAL MANAGEMENT BASICS

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ne thing that all franchise opportunities have in common is the need to plan for success. By establishing a business plan, you indicate that you understand the tools you need to succeed.

Here’s what you should include in your business plan.

The executive summary The executive summary should: • Describe the franchise you intend to purchase; • Include the background and track record of the franchisor and other existing franchisees; and • Include a background of your products and services, while identifying your core market.

If you’re looking to join an established franchise, you’ll likely want to focus on that. If it’s a newer franchise system, you should focus on the market trends and opportunities available.

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Profiles of the management team For many lenders, this is the most important part of the business plan. The management team profile should: • Describe your skills and experience; • Explain why you’re suited to own and operate this franchise; and • Include the same information for any other members of your management team.

This is the place to highlight any attributes that make you particularly suited for this franchise, and to share any details about any previous business success. The more the lender believes in you, the more likely they are to provide the financing you need.

Description of products and services The description of your products or services should include: • Featured benefits; • Explanation of how your product or service differs from those of your competitors; and • Outline how you will deliver these ©Canadian Franchise Association, 2023

Business Plan and Financial Management Basics products and services at the ground level.

Here you should provide specific details about your offerings or services (coffee, car repairs, etc.), along with what sets it apart from others in the market.

Core market information This section should: • Describe your core market sector; • Outline your current competitors and future prospects; • Itemize strengths and how you’ll use them; • Itemize weaknesses and how you’ll address and improve them; • Estimate your projected market share; and • Describe your existing customer base.

Banks and lenders will want this information and it’s also important for you to have the answers to the following questions: Who’s your competition? What do they do well?

What do they not do well? How are you going to stand out? Is your market trending up or down?

Description of operations The description of operations should: • Describe the area and premises where the business will operate; • Explain how you will produce your products or services; • Refer to location, property, facilities, leases, employees, insurance, technology, equipment, and suppliers.

These crucial details should be determined before you get started. Location can be a particularly important one. You should provide as many details as you can about your location and the role it will play in your success.

Other supporting documents to include: • Your resume, and those of the key members of your management team; • Job descriptions; • Credit reports; • Letters of reference; • Letters of intent; and • Leases/contracts and other legal documents, as they pertain to the franchise you are purchasing.

The bottom line: Ultimately, your business plan should assure investors that: • There’s a market for your products and services; • You and your management team are capable; • You have the necessary physical and financial resources; • You know where you’re going, and how you’re going to get there; • You’re able to provide appropriate security; and most importantly, • That the franchise you’re buying is financially viable and that you can repay any money lent to you.

After completing a business plan, you should be ready to join the myriad Canadians who made their business ownership dreams a reality. But franchising isn’t free.

Franchise fees After finding a franchise opportunity that works for you, you must pay two types of fees: • Initial fee: Think of this investment like a buy-in to the franchise family.

An investment shows the franchisor that you’re committed to pursuing this relationship. CFA members’ initial fees range from $10,000 to upwards of $1 million.

• Royalty fee: An ongoing payment that’s usually a percentage of the franchisee’s yearly sales, either on a monthly, quarterly, or annual basis.

The initial fee covers the cost of training and support needed to get a new location up and running. The funds can go toward territory analysis, location scouting, recruiting and training, and more.

The royalty fee, on the other hand, covers the costs of ongoing support and services for franchisees. These can include shipping costs, an advertising fund, technology upgrades and maintenance, or even salaries.

These fees all go toward supporting your success and the success of the brand overall.

It’s a reciprocal relationship. But just because

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Business Plan and Financial Management Basics you buy in doesn’t mean you’re ready to start your success journey just yet. There’s also some signing a prospective franchisee must take care of before they officially become an owner, and that’s on the Franchise Agreement and the Franchise Disclosure Document (FDD).

The franchise agreement The franchise agreement is a special contract that describes the relationship between the franchisor and the franchisee. It grants the franchisee the rights to operate the business and distribute goods and materials associated with the trademark. It also outlines the fees franchisees must pay in exchange for those rights.

Some key features of franchise agreements include, but are not limited to • Location, leases, and protected territory: The franchisor must assign or approve the new franchised location, along with the approved lease for the location. The franchisor will usually provide a protected territory clause— agreeing to not grant another similar franchise in a competing area. The terms of the lease must match those of the

franchise agreement.

• Tenure: The agreement contains a fixed and renewal term—often 10 years each.

A franchisor may want a shorter term so it may impose renewal conditions (see below) sooner, whereas a franchisee may want the longer term for the opposite reason.

• Renewal conditions: Upon renewal, the franchisee will be required to pay a renewal fee, sign a current franchise agreement, and potentially make renovations to the franchise location so it complies with changing expectations for new franchisees.

The franchise disclosure document (FDD) The franchisor will give prospective franchisees a disclosure document to help them better understand the franchise concept and make a fully informed business decision. These documents contain a summary of the franchise business and the franchisor. In Ontario, the franchisor must provide the FDD before any sale of a franchise to a prospective owner. The FDD contains financial statements, all proposed agreements, and will help the potential owner determine

What is a Business Plan?

A business plan is designed to give lend-

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ers (such as banks and other financial

your goals, and make your business a

institutions) the information they need

success.

to assure them that you, as a franchi-

Visit FranchiseCanada.Online for an

see, have a well-thought-out strategy

article that provides a detailed look at

for your business. Before they offer you

some of the components of a great busi-

financing, they will want to know that you

ness plan.

have the desired skill set and experience; that there’s a demand for the products/ services you’ll be offering; that you possess the required resources; and that you have thought through and articulated a plan to overcome challenges, take

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©Canadian Franchise Association, 2023

Business Plan and Financial Management Basics whether they want to invest in the franchise.

The franchisee has 14 days to review the FDD upon receipt.

A typical disclosure document should include: • Information on the franchisor–history of the company, what it offers and how it is operated, how long it has been in operation, how many units/franchises it has, other brands it operates; • Background information on the key players within the system, such as its directors and officers, and those one would deal with as a franchisee; • Any history of litigation, civil actions, convictions, bankruptcies, etc. of the franchisor and/or its directors and officers; • A summary of the trademarks and other intellectual property that are licensed under the franchise agreement; • A summary of the costs and fees required to start and run the franchise business; • An outline of the training and ongoing assistance provided by the franchisor; • A list of current and former franchisees and their contact details; and • Financial statements and other fiscal information.

Additional attachments to the FDD can include:

• The franchise agreement; • The table of contents of the operations manual; • The franchisor’s certificate signed by an officer of the company stating all material facts have been provided and all information is true; and • A receipt to be signed and dated by the franchisee acknowledging receipt of the Disclosure Document.

Franchisors are required by law to supply disclosure documents in provinces where franchise legislation is enacted (Alberta, British Columbia, Ontario, Manitoba, New Brunswick, and Prince Edward Island have franchise legislation in place).

When pursuing a franchise opportunity outside of these provinces, many franchisors will provide these documents to potential owners in good faith to help them learn more about the opportunity.

If a franchisor fails to provide a prospective franchisee with proper disclosure when legally required, the franchise agreement can be rescinded for up to two years from when the franchise was granted. If your agreement is rescinded, you may also be compensated for losses sustained in acquiring, setting up, and operating the franchise business.

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Types of Ownership Models

TYPES OF OWNERSHIP MODELS

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he type of franchise agreement can vary, especially as the number of franchise units grows beyond single-unit ownership, like in the case of area devel­opment, multiunit franchising, and master franchising.

Area development is a type of franchise agreement in which the franchisee commits to opening a certain number of franchise units in any given geographic area throughout the contract timeframe. The franchisee must pay the initial fees, along with a franchise fee for each additional unit they open.

Single-unit ownership is a model in which a franchisee invests in one unit with no expectation of opening additional locations.

Multi-unit franchisees typically start as single-unit franchise owners and gradually add units to their portfolio.

Master franchising allows prospective owners to develop the brand name in a specific region. The master franchisee takes on the role of the franchisor in that region by recruiting franchisees and providing training and additional ongoing support.

Franchise legislation Franchising is legislated in British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and P.E.I. The legislation ensures that pro-

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spective franchisees are making an informed investment decision. If you’re thinking about going into franchising in these six provinces, you should get familiar with the laws that govern each province, like Ontario’s Arthur Wishart Act. Coming into effect in 2001, the Wishart Act defines exactly what a franchise is and demands a policy of “fair dealing” between franchisors and franchisees. Most important of all, the Wishart Act legislated that franchisors must deliver disclosure documents containing all the financial information and data needed to understand the mechanics of operating the franchise.

The most important aspect of the Act is that disclosure documents must be delivered to the franchisee at least 14 days prior to signing any franchise agreement.

If the franchisee does not receive these documents on time, they can walk away from the agreement with no penalty. For the franchisor, there can be heavy penalties for not providing accurate, concise disclosure documents. The disclosure documents are often hundreds of pages long, however, so any prospective franchisee is encouraged to hire a lawyer to thoroughly read through them. ©Canadian Franchise Association, 2023

Basics of Buying a Franchise

BASICS OF BUYING A FRANCHISE

Finding a franchise that fits With the variety of franchise businesses in Canada, prospective franchisees have to ask themselves which franchise suits them best.

Prospective franchisees should begin by thinking about the skills and qualities they can bring to the role as a franchisee.

If you’re a dog lover, perhaps a pet grooming franchise would be perfect for you. But if being around pet dander all day would cause an allergy flare-up, then it might be wise to steer clear, no matter how cute those paws and tails are. It’s important to think deeply about what the day-to-day of running the business may involve.

The following questions can help prospective franchisees determine which opportunity to invest in.

• What do I enjoy doing? What am I good at?

• What am I passionate about? What do I dislike?

• What transferrable skills and experience do I have?

• What do I want to achieve by starting a business?

• Do I have family support? Am I prepared to work long hours, especially during start up?

• What level of income do I need to maintain my current lifestyle? What income would I like to make down the road?

• What is my risk tolerance? How much am I prepared to invest?

Gather all the facts Now that you’ve thoroughly assessed your interests, you can start investigating and evaluating franchise systems that meet your criteria.

Most franchise brands have a section on their websites that outlines the bigger picture details of their franchise operations, including fees and who to call for discovery. You can also refer to LookforaFranchise.ca, an online directory of all CFA members, representing a broad range of investment opportunities.!

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Basics of Buying a Franchise Listings for individual brands include necessary data like the franchise fee, investment level, the number of franchise units in Canada and in the U.S., and the provinces with available territories.

Franchise tradeshows are another great way to discover franchise opportunities. The CFA hosts yearly tradeshows for prospective franchisees in Toronto, Montreal, Calgary, and Vancouver, among other markets across Canada. This gives you the opportunity to meet franchise representatives face to face and ask any questions you may have—without waiting for an email response.

Visiting locations of the franchises you’re interested in is also a good way to witness the day-to-day operations of the franchise firsthand. Take note of what works, what needs improvement, and what services/ products bring people in the door.

Consult with the experts With several ideas for franchise businesses available to you, it’s important to connect with established franchise professionals to ensure your business starts off on the right track. Here are a few professionals that it’s

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important to recruit. Many of these relationships will continue after you’ve established your business.

• Accountants: Can help assess net worth, create a business plan, and with cash flow for your business.

• C onsultants: Can guide a self-evaluation and identify franchises that would be best suited to your needs.

• L awyers: Can help review any documentation or contracts and offer advice on issues such as irregularities or points of negotiation.

• B ankers: Can help create a business financing package, including loans and other financial products.

• I nsurance providers: Can ensure you have the insurance coverage you need to protect your franchise business.

The CFA’s franchise support services members include professionals from these disciplines and more, all of whom specialize in providing products and services for the franchise industry. The CFA’s support service directory offers information and contact details.

©Canadian Franchise Association, 2023

Due Diligence: Financial Aspects of Franchising

DUE DILIGENCE: FINANCIAL ASPECTS OF FRANCHISING

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efore starting a relationship with a new franchise, you should look into certain legal and financial aspects carefully. Ensuring that you’re not entering a bad deal with unreasonable terms is a process called “due diligence.” A prospective franchisee should have access to the franchise disclosure document and any other pertinent information, and balance the information with their own goals, attributes, and capabilities. When you’ve checked off every item on the following list, you should be ready to make an informed decision and be prepared to invest in the perfect franchise opportunity for you.

• Research the franchise system: Have you done a self-assessment, outlining your skills, assets, and abilities, before looking into specific franchise opportunities?

With a list of what you can contribute to a business, you can create a short list of franchise systems to research further.

These systems should take your strengths and abilities into consideration, along with your interests and passions.

• Submit a completed franchisee application form to the franchise system: Once you’ve started researching specific franchise systems, you can fill out and submit a franchise application form, which will provide the franchisor with important details about your background and experience, your financial information, and the skills you have to offer. This is also the time for the franchise system to carry out their own research to determine whether, based on their experience, you will be a good fit as a franchisee of their system.

• Meet with current franchisees of the franchise system: Many franchise professionals suggest speaking to eight to

10 franchisees of the concept you’re most interested in about what’s required to drive success and examine their relationship with the franchisor. These franchisees should have different levels of experience and should be chosen from franchise locations at different performance levels.

• Meet with franchise system representatives (or attend a Discovery Day): You’ll get to this stage if you’re almost ready to make a purchase. You should be prepared to travel to the franchisor’s head office for a Discovery Day, where you’ll meet with their leadership team and get a final sense of whether the culture will be a good fit. Most established franchisors have a franchise review process in place that clearly defines their practices and procedures to help prospective franchisees make informed decisions, so you can follow this process, asking any questions that come up along the way.

• Build a comprehensive business plan: A business plan lays out the goals of your franchise business, and should include cash flow projections for the first three to five years your franchise will be in business, outlining the earning potential of your location and the strategy for achieving these goals. This provides banks, investors, and lenders with an idea of the scope and specifications of the project in which you’re investing.

• Consult with franchise professionals: As you contemplate your franchise investment decision, you’ll want to enlist the help of the above franchise professionals, who can provide you with the guidance you need to make the right decision.

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Dealing with Disputes

DEALING WITH DISPUTES

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hen it comes to managing a brand, franchisees and franchisors can butt heads. Everybody wants their voice heard and everyone wants to do what’s best for the business. There may come a time when partners disagree. Instead of yelling matches, here are some dispute resolution alternatives for franchisee and franchisor disputes: 1. Open communication: Get diplomatic with it. Keep an open mind and listen. Many issues can be resolved through open communication.

2. Franchisee Advisory Council (FAC): Consult your FAC. FACs are made up of franchisees that provide a channel of communication between the franchisor and franchisee. FACs discuss topics like advertising,

field support, operations, evolving market trends, and more. Franchisees can share input and voice any concerns regarding the state of the franchise system.

3. Mediation: Many franchise agreements point to mediation as the first method toward resolution. This process is voluntary and non-binding, and the mediator must be a neutral third party agreed upon by both the franchisor and the franchisee.

4. Arbitration: Arbitration involves impartial third parties who settle the dispute.

The franchisee and franchisor each select an arbitrator. Both arbitrators pick a third arbitrator. The panel of arbitrators listen to both sides of the dispute and deliberate before making a final decision. This process can take several months.

Ombudsman PROGRAM

The Canadian Franchise Association (CFA)’s Ombudsman program is a free program available to all franchisees and franchisors in Canada.

Completely confidential (and informally done over the phone), the Ombudsman will listen to one or both sides and try to facilitate communication.

You can contact the CFA Ombudsman at 866-443-8255.

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©Canadian Franchise Association, 2023

Site Selection, Territories, and Real Estate

SITE SELECTION, TERRITORIES, AND REAL ESTATE

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ocation is everything when it comes to franchising. It can determine the amount of traffic a franchise gets, and the quality of that traffic. Knowing your customer and making sure you’re in the right area to capture them makes you more accessible, so there’s a greater chance those customers will visit you. Examining the demographics of the area surrounding your location will help you determine the likelihood of capturing your desired customer base.

For example, if you’re situated on the corner of a main street with a storefront facing both sides of the intersection, you have high visibility. If 30,000 cars pass by your location daily and 20 per cent of the surrounding area is your target client, then you have access to 6,000 potential customers per day. If you have nine competitors within a one kilometre range of your location, then you’re sharing those 6,000 potential customers with nine competitors, and you will be the tenth. This could mean that you would have access to 600 potential customers daily and fight over the remaining 5,400 with your competitors.

While this is a simplified example, these concepts are foundational to the real factors that would impact a site selection. Real estate professionals and demographers would use additional factors, like market capture rates, loyalty, and other factors to determine the likelihood of the brand’s success at the given location.

Territory rights Sometimes franchisors can assign territories in protected areas. The territorial boundaries are defined in the franchise agreement and will often state that no other franchise or corporate location under the same brand can be opened within the territory, as long as the franchisee is in good standing under the franchise agreement.

Protected areas may be defined by distance, radius, postal codes, municipalities, or cities.

Protected areas can be beneficial, as they protect the franchisee from fellow franchisees “cannibalizing” the market or competing by selling in the same community.

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The Canadian Franchising Association Members and Community

THE CANADIAN FRANCHISE ASSOCIATION MEMBERS AND COMMUNITY

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he Canadian Franchise Association’s (CFA) purpose is to help everyday Canadians realize their dream of building their own business by: • Advocating on issues that impact said dream; • Connecting people with opportunities; and • Delivering educational programming that make franchising stronger.

The Association currently has almost 600 corporate members, representing 40,000 franchisees from brands you know and new, emerging franchises.

Franchising represents every industry and touches the lives of every Canadian in communities across the country. Franchising is ultimately about those people. It’s about everyday Canadians working in partnership, sharing success, and Growing Together™.

At the CFA, we serve people in the Canadian franchise community by providing support, learning resources, and growth opportunities.

Beyond its role as the voice of the franchise industry, the CFA provides crucial government advocacy on issues impact-

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ing the franchise business model and provides prime networking opportunities for franchisees and franchisors through our annual National Convention, regional tradeshows, and calendar of virtual and in-person educational events.

Our members: CFA members represent a diverse cross-section of businesses and more than 50 industries in Canada. Our members range from very large, established franchise systems to smaller or emerging franchise brands.

Members share the conviction that their commitment to excellence improves franchising as a whole for everyone involved, including franchisors, franchisees, suppliers, and customers. We provide our members with a full range of programs and services to help them grow through the support of the franchise community. Our programs and services include advocacy, education and training, industry information and best practices, networking and brand awareness.

©Canadian Franchise Association, 2023