Feeling entrepreneurial? Buying a franchise could be the right move

Dawn Mucci didn’t set out to franchise her Lice Squad business when she started 23 years ago, but now there are 35 franchises and four corporate locations across Canada.AMY HUTCHISON/The Globe and Mail

Dawn Mucci’s lice removal business had been operating in Toronto for about a year when she got a call from a woman in Sudbury asking to buy a franchise.

“I didn’t have any franchises to sell because I didn’t when I started my business,” says Ms. Mucci, chief executive of Lice Squad Canada Inc., a Barrie, Ont., company. Brick and Saroj lice examination and removal clinics all over the country. “But it sounded like a good idea, so I said ‘yes.’

That was 23 years ago, when commercial franchising in Canada was still in its relative infancy and franchising laws only existed in Alberta. Today, Lice Squad Canada, which has 35 franchisees and approximately four corporate locations across the country, is among an estimated 73,000 franchises in Canada that collectively generate more than $68 billion in gross domestic product and employ nearly 1.4 million workers. They hire

“The franchise industry is the 12th largest industry in Canada and a major contributor to the economy,” said David Drucker, chairman of the Canadian Franchise Association and president and CEO of UPS Store Canada, a network of printing, shipping and business services. This is the country. Centers owned by Oakville, MBEC Communications Inc. Based in Oakville. “This is a sector that has performed very well over the last 30 to 40 years, even in times of uncertainty.”

According to Mr. Drucker, a key factor behind the power of franchising is its business model – one that provides franchisees with a proven system and support to start and grow a business in exchange for an initial fee and, in many cases, , provides continuous payment of royalties. Franchisor or business owner

Depending on which franchise they purchase and whether their license is for one or more sites, franchisees can earn a net income of around $75,000 per year or millions of dollars.

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As with any business, there are no guarantees of success in franchising, Mr. Drucker says.

“But it’s undeniable that franchisees have a higher rating than independent mom-and-pop businesses,” said Mr. Drucker, a former UPS Store franchisee in Canada who previously owned several Rogers Wireless franchises. “Although franchises are mostly moms and families hosting their businesses in different parts of Canada, the difference is that they operate under one system and have a support team behind them.”

For many franchisees across the country, this support team made the difference during the height of the pandemic, when entire divisions were shut down for weeks.

“Many franchisees were able to get better leads faster than other businesses because there was an organized team,” says Mr. Drucker. At The UPS Store Canada, we had UPS working with governments and they were able to identify us early as an essential service. Most of the shipping and printing services that were independent were not able to do this.

Treat buying a franchise like starting a new business

Edward Levitt, a Toronto-based partner with global law firm Dickinson Wright PLLC, says those looking to buy a franchise can increase their chances of success by applying the same level of due diligence they would if starting a business from scratch. .

As a starting point, it’s important for potential franchisees to understand which franchise—or type of franchise—best suits their personal and business goals.

Ask yourself what you want to do, what you do – do you want to be a restaurateur or do you see yourself more in a business-to-business franchise? said Mr. Levitt, who specializes in franchise and distribution law. “This is really important because most franchisees work in their business every day, and for many of them buying a franchise is essentially a way to buy a job.”

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Once they’ve decided on the most appropriate type of franchise, the next step is to identify which franchisees are operating in that segment and “buy, buy, buy, and talk to franchisees and franchisees in the space,” Mr. Levitt says. ». Ask franchisees how they’ve been onboarded and trained, what kind of support they’ve had, whether they’re happy or struggling.

“I think the people who get into trouble are the ones who don’t ask for help because they feel like it’s a show of failure,” Ms Mucci says.AMY HUTCHISON/The Globe and Mail

It’s also a good idea for potential franchisees to talk to their banks about their experience lending money to any franchisees in the sector, he adds, as well as to landlords who lease spaces to franchisees.

“Go to a few of these franchises and just watch,” Mr. Levitt says. “It can really give you a good sense of whether or not it’s something you can do.”

A big advantage these days for anyone interested in franchising is the wider variety of business types and sectors. Shelly Alvarado, co-owner of BeTheBoss.ca, an online platform that connects potential franchisees with franchisors, says franchising has come a long way from the days when franchising meant running a fast-food operation — usually in a mall — or Coffee Shop.

“Today we have franchises that offer web design services, landscaping, window blinds, drone work, and computer and educational services like coding or tutoring,” he says. We can attribute some of this to COVID when a lot of people lost their jobs or just thought it was a good time to make a change and decided to start a franchise. But even before Covid, the franchise had already started diversifying.

For Canadians interested in buying franchises, that means more opportunities to get in on the ground before markets become saturated, Ms. Alvarado says.

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But that also means more risks, adds Mr Levitt.

“The franchise is built on a proven formula based on past successes,” he says. But when new franchises come in and do something that no one has done before, maybe in a sector that hasn’t existed before, then you get a little bit of a new system in a new industry. “

In such cases, Mr. Levitt said, potential franchisees may be in a position to negotiate an agreement that factors in that greater risk — something that would not normally be possible with an established franchise.

Franchisees also take a risk with every franchise they sell. Some franchisees have a hard time following the franchise system, either because at heart they are entrepreneurs who are better suited to start their own businesses or, in some cases, because they are trying to cut corners, Mr. Levitt says.

Some franchisees may also reach a certain level of success and decide that is good enough for them. “And that’s good for the franchisee, but of course franchisors are always looking for growth,” Mr. Levitt says.

Lice Squad Canada’s Ms. Mucci says that while following the system is critical to franchise success, the ability to embrace change is just as important.

“Franchising is always evolving – it has to keep up with market and economic changes and consumer demand,” he says. “I’ve sometimes found that it’s people who are new to the system who tend to follow it and thrive with it, while those who are early adopters can get stuck.”

Whether veterans or newbies, franchisees can get so focused on the success of their business that they sometimes forget there’s an outside team they can turn to for help, Ms. Mucci says.

“I think the people who get in trouble are the ones who don’t ask for help because they feel like it’s a show of failure,” she says. So my advice to franchisees is to lean on your franchisor and your peers, find a peer support group, be part of an organization like CFA.

Mr. Drucker agrees. Franchising — as a franchisee or franchisee — means being part of a network where “you work for yourself, but not yourself,” he says.

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