Frequently Asked Questions
Franchising can help businesses expand by having franchisees invest in the concept and open and operate locations under the business’ brand. A business that is suitable for franchising, no matter its product or service offering, has a history of success and a tried-and-true formula that will allow it to replicate that success in new location.
The franchisee should:
- follow the franchisor’s standards, methods, procedures, techniques and specifications to ensure consistency;
- pay a fee (typically an initial franchisee fee and ongoing royalties) to the franchisor for the right to use the franchisor’s trademarks (brand) and business system;
- take care of accounting, local marketing, staffing and 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;
- work in partnership with the franchisor, allowing for effective two-way communication between the two parties and a mutually-beneficial relationship.
The franchisor should:
- undertake to provide franchisees with operating systems and support services to help their businesses grow in ways that are effective, efficient and profitable;
- continue to evolve the franchise system through, for example, research and development of new products and services;
- handle all brand advertising and (usually) provide franchisees with assistance for their local marketing activities;
- protect and manage the brand and its trademarks while ensuring consistency and quality standards are maintained by all franchisees in the system;
- provide initial and ongoing training and support.
Through the proven business concept and support provided by the franchisor, franchisees are able to be in business for themselves but with the support and assistance of the franchisor, the advantage of the franchise system’s past success, and access to the knowledge and experience of a network of franchisee peers.
Franchising is about sharing success. The success of a franchisee leads to further success of the franchisor and the franchise system as a whole. When you invest in a franchise, you align yourself with a brand that may already enjoy established consumer awareness and loyalty in the Canadian marketplace, be it nationally, regionally or locally.
A franchise also provides you with the advantage of a tried-and-true system and an operations manual that fully explains how you are to replicate the franchise’s system at your location. While it is impossible to eliminate all risk, if you work and follow that system, you can reduce the risk of business failure and increase your likelihood of success.
Some questions you may want to ask as part of your due diligence include:
- Is the franchisor a member of the Canadian Franchise Association?
- How many years has the franchisor been operating?
- How many franchisees does the franchisor have?
- Can the franchisor provide a list of all franchisees?
- How does the franchisor choose its franchisees?
- How much is the initial franchise fee?
- What are the franchisor’s plans for future development?
- What is the competition for the product?
- What kind of support does the franchisor provide to franchisees?
- Will you be provided with a disclosure document? Does it comply with provincial laws or CFA’s minimum disclosure requirements?