Franchising has come a long way from the days when McDonalds handed out their first restaurant and for many years, was confined to the fast food business. Our franchise guru Peter Thompson evaluates some of the other business types that are now popular franchise opportunities.
As far as what type of business can be franchised, there is great news. Franchising has expanded over the years from restaurants to a large segment of retail and services. Today, there are "bricks and mortar" systems in areas such as food, retail, automotive, business-to-businesses, pets, beauty and more. Home-based franchises provide "blue collar" and "white collar" services ranging from maintenance, cleaning and accounting to teaching, training and internet services. The Canadian Franchise Association (CFA) website lists over 46 categories of franchise offerings in addition to an "Other" category!
There are some interesting facts surrounding the Canadian Franchise Market. Did you know that:
- Canadian franchises sell over $100 billion worth of products and services every year, making Canada the second largest franchise market in the world (after the U.S.)
- There are over 1,000 franchise systems operating in Canada, representing almost 76,000 franchise system outlets
- More than 4,300 new franchise outlets open in Canada each year – every two hours, every day
- The average franchise fee is $25,000
- The average franchise investment in Canada is between $150,000 and $200,000
- A record 1.5 million Canadians are employed by franchise operations
- 92% of new franchises pass the critical first five years – a rate nearly four times higher than independent businesses
- 86% of the franchisees opened in Canada within the last five years are still under the same ownership
- In the restaurant sector, 35% of all sales are from franchise operations
- In the retail sector, 45% of all sales are from franchise operations
- The fastest growing demographic of franchise buyers is women
More and more manufacturers are using elements of the franchise business model to motivate their sales force/distribution network with the objective of creating a business format for people who worked solely on commission before. Of course there is a fine line between licensees, wholesalers and franchisees, but in some cases, this format is closer to franchising than other forms of distribution.
The bottom line is that franchising is now a worldwide industry with 17,500 franchise systems, 1.2 million franchisees and 12.5 million employees generating $1.4 trillion U.S. annually (Portman, Franchise Africa Symposium, 2002).
Is it worth considering Franchising as a growth strategy for businesses in Canada?
YES, provided of course that you meet the basic criteria.