Best Franchises to Buy and
Open in Canada
The Best Franchises to Buy and Open in Canada
The Best Franchises to Buy and Open in Canada
If you’re considering buying and opening up a franchise in Canada, you’ve come to the right place for some down-to-earth advice to help you make the right decisions.
When considering the "best" franchises to buy and open, you should initially look beyond the profit potential and assess what "best" means to you.
“Best” is subjective, and there’s no point in investing in a franchise just because you think it might make you a million bucks. Think first about:
- Your personal interests — you will work hard to establish your franchise and even harder to make it thrive. Heed the old adage that it will never feel like work if you love your work.
- Family obligations — heading up a franchise can take up a considerable amount of your personal time as well as the time you'd usually put aside for work. So, consider the scale of the project and ascertain whether that feels right for your circumstances.
- The cost of the investment — can you afford it?
- The location — is the proposed location convenient and conducive to your lifestyle?
What is the best franchise to buy FOR ME?
So, ask yourself, "which is the best franchise for me?"
But how do you determine from the thousands of Canadian franchise opportunities on Franchise Direct’s site which is the best one for you?
Making that choice is a process that begins with evaluating your personal circumstances alongside the potential demands of the franchise you're considering.
How to research your best franchise decision
If you're thinking about opening a franchise in Canada,
it's wise to consider the following questions:
- What are the startup and ongoing fees?
- What’s the potential for size and growth?
- Does the brand feel strong?
- What support mechanisms are in place?
- What is the potential for financial stability?
So, using this framework, let's look deeper into each question to help you decide which is the best franchise to buy and open in Canada (for you!).
1. What are the startup costs and ongoing fees?
The question we’re really asking you to consider here is: Can I afford it?
When you're trawling through the seemingly endless possibilities, it can be challenging to assess the ongoing costs of running your chosen franchise.
And this is where the Franchise Disclosure Document (FDD) becomes an essential resource.
All franchisors must provide an FDD at least two weeks before you sign your contract agreement. This document helps you understand:
- The initial costs
- The ongoing costs of running the business
As well as costs, the FDD will confirm your obligations as a franchisee and the franchisor’s obligations to you. Items 5 to 7 detail the initial investment and the ongoing costs of running the franchise.
What is included in a Franchise Disclosure Document?
Your FDD should include details about:
- Franchisor background — details about company history and what they offer to clients, including functional operating information. This should also include details about how it operates, how long it has been a functioning entity, how many other units or franchises they own, and whether they run any other brands.
- Structural details — background about the directors, officers, and critical players in the business, and which of these you will work with as a franchisee.
- Legal history — any litigation history, bankruptcy, civil actions, or convictions relating to the brand, its directors, and officers.
- Trademark summary — detailing the ownership of intellectual property (IP) and details of how the trademark can (and should) be used under the agreement.
- Cost summary — how much will it cost to start up and run?
- Training schedule — a clear outline of the training and ongoing support provided by the parent company
- Other franchisees — the FDD should include a list of former and current franchisees and their contact details.
- Financial statements — including all other essential fiscal information
How much can I afford in buying and opening my Canadian franchise?
The Wall Street Journal recommends that a franchisee should be able to invest at least 20% of the initial investment from their own money, with the remainder coming from a loan.
Remember: regardless of the insistence of the franchisor, not all franchises will turn an immediate profit.
It can take time to recoup your initial investment, so you may have to rely on your current job or savings to tide you over until your franchise comes into the profit you need to sustain you financially.
2. What’s the potential for size and growth?
Bigger isn't always better. A franchise might operate in multiple locations, but that doesn't necessarily mean it will work wherever you are.
Consider whether the business fits your locality. Is your local region able to support the franchise business? Do they need that product or service?
So, as well as considering your interests when choosing a good franchise fit, it's essential to ascertain whether there's enough local demand for the product or service.
Are you considering opening a home renovation franchise when the local homes are built from brand-new stock? Is the market more in need of another type of service, such as auto repair?
How do I find out what my local community needs?
It is suggested that you meet up with a local business consultant — an independent consultant with expertise in local markets. Alternatively, talk to a local business and ascertain some inside information. If there’s a local college or university, consult a marketing professor, or contact your local Small Business Administration (SBA) for guidance.
But don't forget to consult the franchisor — they invest resources into understanding the potential of territories that could support their brand. This means that if a franchisor is considering inquiries for franchise opportunities in your area, there's a good chance that their data suggests that it's a good match.
3. Does the brand feel strong?
Does the brand feel well-developed? Does the franchise have a clear identity? Do YOU know what the franchise does and who it serves just from its branding?
One of the principal advantages of taking on a franchise is that the brand has evolved to meet market demand. The brand knows its client base, and they know how to appeal to it. This understanding can take a long time for an independent startup to develop and get right — franchises should already know who they are and why they're there.
Katherine LeBlanc of Painting with a Twist suggests that the big appeal of franchising is:
- The existing brand equity — the value they’ve built up from operating and refining the business in line with customer need
- The understanding of their core prospect, and
- The proven branding
Speak to other franchisees who are already operational — you should find a list of past and existing franchisees in the FDD. Find out how they’re doing, ascertain any problems they face in running their business, and find out what works well.
4. What support mechanisms are in place?
Taking on a franchise isn't a magic wand to instant success. Your franchise will only succeed if you're prepared to work hard.
So, check your FDD to assess the level of support you can expect from the parent company — you shouldn't be left to find your own way.
Item 11 of the FDD provides an overview of the support your franchisor will provide. This includes a checklist of training you can expect. Carefully review this section and ask questions — never be afraid to ask!
Again, talk to existing franchisees — find out whether the franchisor's support is enough to feel confident at the wheel. They might not tell you everything you need to know, but you'll get a good idea of what you can expect in terms of support.
5. What is the potential for financial stability?
When you open your franchise, it’s wise to consider the venture as a 10-year commitment at the very least.
So, explore the franchisor’s history as detailed in the FDD, and consider:
- How long have they been in business?
- How well has the parent company fared through economic challenges?
- How well it has adapted to changing customer and market demands?
A franchise opportunity is a starting point for negotiation — you have cards in your hand as much as they do. So, negotiate if you're unhappy with a particular facet of the agreement.
However, consider how flexible the franchisor will be to get you to sign on the dotted line.
Finances are the foundations of a successful franchise business — if the franchisor seems desperate for the capital, consider what that says about the security and stability of the franchise business.
While some terms of the agreement should be open to negotiation, a franchisor too willing to accommodate significant changes may suggest that the business idea isn't quite as sustainable as they're presenting.
Some franchisors provide discounts for military veterans or people with experience in particular markets or demographic groups. Still, a franchisor offering significant discounts might not be a good thing.
Remember, you're likely to be liable for royalty fees — these are important to keep the franchise system growing and secure. If a franchisor isn't earning enough money from its franchises, it risks unsustainability — and that isn't good for a franchisee and the longevity of the business.
Weighing the best franchises to buy and open in Canada
Franchise opportunities can be satisfying and profitable, but you should never enter a franchise agreement without due diligence.
Use our checklist of questions to help you ascertain whether your chosen franchise is right for you, your family, and your local area.