The US Franchisor's Path To Canadian Expansion

Canada has the second largest franchise industry in world. This fact coupled with its common language and geographic proximity to the United States make Canada a natural location for US franchisors to consider for their international expansion. While a detailed review of the issues and preparation required to make this expansion successful are beyond the scope of this article, a summary of some key points can be reviewed to give the reader an outline of where to begin.

A first step for any US franchisor considering expansion is to review the franchise business model in the context of the Canadian market. While many US businesses have become successful following a move into Canada, many required changes in products and marketing approach to appeal to Canadians. These changes are often subtle, but can make the difference between a launch that is a success or a failure. Understanding what these changes are can only come from a detailed marketing study of the Canadian market with reference to key areas like the competition, government regulations, and market trends.

Once potential changes to your business are determined and evaluated, the question is raised as to how to expand. For the type of franchise structure to consider, there are three choices – selling individual franchises, area agreements for specific territories, or a master agreement for the rights to sell across the whole country. As Canada’s geography is extensive and its culture diverse, the sale of individual franchises and/or area agreements is recommended as it allows the franchisor greater control in speed and location of development throughout the country. This approach also avoids the significant long-term risk of putting the success of expansion in the hands of one or two people who might not work out.

A second issue in considering how to expand is the handling of sales. In developing sales, franchisors can handle operations out of the US, establish an incorporated subsidiary in Canada, or utilize a Canadian franchise development specialist to be a guide to the expansion and handle the sales activities within the country. Each approach has its own benefits, risks, and costs. Typically, some form of established presence in the Canadian market is a strong benefit. Canadian franchise prospects will view an established presence highly as it shows the US franchisor is making an investment in the country and will be more likely to support a Canadian franchise for the long term.

The next area to review is the legal requirements. Legal documentation for establishing your franchise in Canada can build upon what you have prepared in the US, but will still be very unique to Canada. Franchise agreements, trademarks, confidentiality agreements, and lease agreements are just a few of the items, which must be prepared to conform to Canadian law. In addition, unlike the uniform franchise offering circular (UFOC) used for each US state, Canada only has two provinces requiring disclosure documents.

Alberta’s document falls under the laws of the Alberta Franchise Act and Ontario’s under the laws of the Arthur Wishart Act. Both share similar information requirements, but also have unique differences that must be followed.

For expansion in Quebec, provincial laws such as the Civil Code of Quebec and the Charter of the French Language must be carefully reviewed before considering expansion into Canada’s predominately French speaking province. To get a comprehensive understanding of all of these legal issues, a Canadian lawyer specializing in franchising must be consulted to ensure all requirements are properly met.

With market research completed, legal work in place, and a sales development structure decided upon, an often overlooked item to consider is patience. Developing franchises in a new country does not often happen overnight. Awareness of your business may take time to develop in Canada and modifications to your business approach may need to be implemented as more is learned. As a result, be sure you are prepared to take the time and invest the resources required to make your expansion a success. Franchisors simply looking to make short-term financial gains, and not take a long-term approach to their international expansion, rarely succeed.

The Canadian market offers an excellent opportunity for US franchisors to build their brand, expand their revenues, and gain international expansion experience, which will benefit them greatly when considering more countries in the future. The keys to success are thorough preparation and implementation as well as taking a long-term view to success. With these points in mind, the potential rewards are significant.

Rob Lancit is the Principle of Betheboss.ca, the number one Canadian Franchise Directory and news resource.

He is also the President of CANAM Franchise Development Group, Inc.

CANAM’s team of experts offer a proven system that develops, packages and launches international franchise programs within the Canadian marketplace.

To learn more about the opportunities for your company and CANAM’s services please contact Rob at 1-604-730-5553 or via email at rob@canamfranchise.com



The US Franchisor's Path To Canadian Expansion - To learn more about this author, visit Rob Lancit's Website.

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