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Food Franchise Report

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Female customer paying male barista at a coffee shop counter.

The survival of restaurants is crucial for community prosperity. When the economy is strong, the restaurant industry is strong. We are looking forward to a return to normal pace of growth but need to work with governments to ensure we can bring profitability back to the industry.
~ Kelly Higginson, President & CEO of Restaurants Canada

About 40% of the estimated 1,300 franchise systems in Canada are a part of the food industry. The Canadian Franchise Association (CFA) divides food franchises into five categories:

  • Baked Goods / Coffee / Donuts
  • Dine-in Restaurants
  • Grocery / Specialty Shops
  • Meal Assembly
  • Quick Service Restaurants (QSRs)

Below are a couple of trends currently occurring in the Canadian food franchise industry. They are followed by investment information for wannabe food franchisees, including some top food franchise options.

“Eatertainment” Takes Center Stage

According to Restaurants Canada, “Consumers are seeking immersive dining experiences that engage all the senses.”

Enter the concept of “eatertainment,” a way to use “interactive elements and entertainment to create memorable experiences that generate positive word-of-mouth,” says the organization.

Eatertainment is the combination of dining with recreational experiences in one setting. According to Restaurant Business Magazine, there has been a post-pandemic boom in this kind of concept “that is resulting in a growing array of eating-and-drinking venues with a heavy emphasis on fun,” says Lisa Jennings.

“Some call it the experience economy. There are longtime favorite activities, like bowling, shuffleboard, mini golf and arcades. But this new wave of eatertainment is also bringing a host of new games to the table, such as cricket, surfing and even curling.”
 
One of the theories for the boom in this type of concept is, despite usually higher startup costs, the entertainment side of the equation helps offset losses in profit related to food inflation.

“Eatertainment labor costs are [typically] lower and the amusement side is 80% profit,” says Robert Thompson, founder of the soon-to-come pickleball-focused Camp Pickle. “When you combine casual dining’s intense cost pressures with what is now more than a decade of consistent psychographic data stating modern generations have an appetite for experiences and will spend more to dine with them, it’s created an eatertainment perfect storm.”

Artificial Intelligence Further Integrates into Foodservice

New trending technological advancements are widespread, impacting all the ways we eat and drink out, including helping businesses customize menus, and create more personalized recommendations and event targeted diner messaging.
~ Restaurants Canada

Artificial intelligence (AI) is the hot thing in the business world currently. Businesses of all kinds are rushing to figure out how to employ the technology for greater profitability.

Among the ways, AI is being integrated into Canadian foodservice are:

Customer Insights and Personalization: AI-powered analytics are now being used to analyze customer data, including purchase history, preferences, and demographics. Food franchises can take these insights to personalize marketing efforts. For example, suggesting personalized menu items or promotions based on individual preferences and behavior via app or other communication method.

Streamlining Administrative Functions: Using AI-powered kitchen automation systems can streamline food preparation processes, improve product consistency, and minimize waste. AI-powered tools can also be used to optimize supply chain operations by analyzing a range of factors such as supplier performance, transportation logistics, and inventory levels.

Dynamic Pricing: AI can help food franchises adjust pricing in real-time based on factors such as demand, time of day, weather conditions, and competitor pricing. Dynamic pricing algorithms can help maximize profitability while still being competitive in the market. However, as Wendy’s found out, this is an area where franchises need to tread carefully.

Employee Scheduling and Management: AI-powered workforce management systems can analyze factors such as employee availability, labour laws, and historical sales data to generate optimized employee schedules to meet customer demand efficiently.

Finding Your Food Franchise

Prior to investing, prospective franchisees should do their research as well as carefully review any documentation provided to them by the franchisor.

In six provinces, franchisors are required to provide a Franchise Disclosure Document (FDD) to the prospective franchisee that contains detailed information on all systems, procedures and costs associated with that franchise. These provinces are Alberta, British Columbia, Manitoba, New Brunswick, Ontario, and Prince Edward Island. By law, the FDD must be presented to the prospective franchisee before a prospective franchisee pays any money or enters into an agreement relating to the franchise.

It’s important to note that while many initial and ongoing costs are detailed in the FDD, there are some costs inherent to business ownership, like employee wages or utility costs, which aren’t.

The Initial Investment and Opening Costs

The amount necessary to open a franchise varies depending on the unique business system and execution requirements.

The opening costs for a food franchisee can depend on many factors, including but not limited to the franchise fee, land and building costs, training expenses (such as travel and living expenses, not the actual training courses), grand opening advertising and marketing costs, and more.

One of the most important variables in how much it costs to open a franchise is the type of franchise being opened and how big it is.

Commonly, the two types of food franchise offered are traditional and non-traditional. Traditional franchises are usually the bigger of the two. They are typically standalone buildings where the service of the franchise is the only business offering. Non-traditional franchises are smaller, and typically found within another building like an airport or gas station. Other food franchise types include kiosks and food trucks.

Prospective franchisees should keep in mind that any estimate given to them to open a franchise is just that—an estimate.

Prospective franchisees should review the figures presented with a business advisor, taking into consideration their unique circumstances, before making the decision to enter into a franchise agreement.

Ongoing Franchise Fees

Throughout the length of the agreement there are costs for being a part of the franchisor’s business system. These costs include items such as royalty fees, charges for technical support, and continued advertising/marketing costs.

The most common is the royalty fee. Royalty fees are assessed for the continued use of the franchisor’s trademarks and patented processes, along with certain types of operational support. In addition to regularly assessed fees, other fees are charged on an “as needed” basis such as audit fees, or costs for additional, non-mandatory, training.

Start your food franchise search today by searching our collection of a number of food franchises actively seeking franchisees in Canada.

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