2021.3.30

How to Start a Franchise in Canada

Written by Austin Chegini

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If you run a successful business, you may have considered opening a second or third location. Doing so would increase revenue and help you enter more markets? 

That said, have you ever considered franchising your business instead? Through this model, you can increase your capital and grow faster without having to manage each business. 

However, franchising isn’t for everyone and can expose you to more problems than normal expansion. Let’s look at how to start a franchise in Canada and why it may or may not be a wise move.

When should you franchise a business?

If your business is a hit, growth is the natural outcome. Whether you move to a larger building to satisfy demand or open a second location in a new market, you will take some action to increase revenue and make your customers happy. 

While opening multiple locations is effective, the process can be slow and requires a large amount of management. You need to trust the managers at each of these locations and hope they can run the business effectively. You will also expose yourself to some risk, whether it be from lawsuits or unsold inventory cutting into your profits. 

For many people, franchising is the more effective way to grow their business. Through this model, another entrepreneur pays you a fee to replicate your business in a new location. They have access to your business model, marketing materials, coaching, and everything else needed to run the business. In return, you earn a fixed percentage of all revenue they generate. 

Here are some questions to ask yourself if you are considering franchising:

  • Is your concept saleable? 
  • Can someone else replicate your success? 
  • Are you prepared to spend more time managing franchisees instead of running your business? 
  • Will the franchisee earn a return on investment after paying you?

For more information, read this guide by the Business Development Bank of Canada.

Steps to franchise a business in Canada

Here is an overview of the process of franchising a business. Read over each item to learn what to expect. 

Evaluate your goals 

Are you ready to own a franchise? Unlike running your store or restaurant, managing a franchise will mean marketing your business, screening franchisees, helping new locations get off the ground, and overseeing all businesses. You will lose personal interaction with guests and spend more time in the office growing your franchise. 

If you are in a growth mindset, then franchising is perfect for you. If you want to enjoy the perks of running a small business (facetime with guests, predictable schedule, few legal worries), then franchising may not be for you. 

Speak with a franchise consultant

If you are ready to get the process started, you should first meet with a Canadian franchise consultant. These professionals understand the industry better than anyone else. With their expert input, you can determine 1) if your business is franchisable and 2) what steps to take to start your franchise. 

Your franchise consultant will be your main resource during the entire process. From forming your business plan and valuation to choosing franchisees and beginning training, they will prevent you from making any amateur mistakes. 

Although these professionals charge a fee, they are well worth the investment. 

Ensure you’re financial prepared

Franchising your business is a fast way to build capital, but it does come at a cost. In return for paying for franchising rights, you will give your new franchisee everything they need to get started. 

With each new franchise, you will need to pay for items like:

  • Franchise agreements
  • Attorneys
  • Accountants
  • Marketing materials
  • Training
  • Branded packaging
  • Computer systems

It is important to have enough capital on hand to fund these new ventures while still being solvent. Likewise, it is crucial to ensure you receive an adequate return on investment to make the franchise worthwhile. 

So, how do you determine how much to charge new franchisees? 

You will need to meet with an accountant to review all your financials and assign value to each aspect of your business. Then, you will add these to some other factors to determine how much each new franchise is worth. This will be your franchise fee.

Document your business model

Once you determine your business can be a franchise, you need to write down every little detail that makes you successful. To start, you can review all your existing documents and compile them into a unified plan. 

Some core topics to address include:

  • Hiring and training
  • Customer service
  • Dress code and hygiene
  • Food handling (if applicable)
  • Operating the point of sale system
  • Marketing policies

On top of this, you want to speak with seasoned employees to learn about unofficial policies that have become the norm in your business. For example, your employees may have a unique upselling technique that works but is never mentioned in your training documents. 

After gathering all this information, you will compile it and create your Franchise Operations Manual.

Hire a franchise lawyer

In addition to the Operations Manual, you will have many more documents to prepare before you can franchise your business. You will need to work with a franchise attorney to prepare these documents and ensure your business is protected under these agreements. 

On top of this, you will need to keep these attorneys close by throughout the life of your business. You never know what lawsuits you will face or how laws will change, so having a legal expert to help is vital.

According to the Osler law firm, franchise attorneys help with:

  • Franchise Arrangements 
  • International Arrangements 
  • Litigation/Class Actions 
  • Intellectual Property 
  • Québec Law 
  • Information Technology and Privacy 
  • Marketing and Distribution
  • Business Law Expertise 

Market your franchise

Once your business is legally ready to franchise, you want to start connecting with entrepreneurs to find potential franchisees. You will likely want to start small and open the first few locations near your main location. That way, you can always drive over and assess if your policies, training, and operations manual are working. 

During this step, be sure to become a member of the Canadian Franchising Association. This organization can connect you with leads, learning events, government advocates, and other resources.

Onboard new franchisees

The most important step of all is welcoming your new franchise location owners. These people will need ample training to get off to a great start. 

For most franchisers, onboarding new partners include these steps:

  • Headquarters training: New location owners will visit your headquarters and learn the fundamentals of running their new business. Your training program can include formal teaching on company culture and history, operations, and reporting. It should even include simulated training in a mock business environment to get hands-on experience.
  • On-site training: New franchises will need a few weeks to get ready for daily operations. On-site learning will help prevent the new owner from being overwhelmed after opening. This training should prepare the franchisee by exposing them to unexpected events so that they can handle the real thing when it occurs.
  • Ongoing training: Each location will need periodic training. For example, you might roll out new procedures or implement new technology. It’s important to make sure these businesses are fully prepared for any changes.

Start your franchise right with the Epos Now point of sale system

All businesses need reliable technology to power their operations. One of the most important devices you’ll purchase is the point of sale system, or POS. 

A POS can help franchises with:

  • Processing payments
  • Tracking inventory
  • Managing staff
  • Running payroll
  • Selling online

If you need a reliable POS for your franchise owners, choose Epos Now. Call today to learn more.

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