“One in 10 Canadians are employed – directly or indirectly – in a franchise system” Canada provides opportunities to many different groups of people – and for entrepreneurs, it provides a destination for success. Between the highly educated base of potential franchisees and customers alike, and the growth of industries with space for new leadership, Canada offers exciting business opportunities in a diverse market, especially when it comes to franchising. Boasting franchises across all sectors, a young base of prospective franchisees looking for their next opportunity, and an easy-to-navigate legal framework, there are many reasons why franchising is so strong in the Great White North.
Strong and stable
Franchising is the twelfth-largest industry in Canada and the second-largest franchise industry in the world. In 2019, the income from franchising represented $100 billion of Canada’s GDP. Since then, the franchise industry income has grown to $120 billion. Even through a once-in-a-generation public health crisis, Canadian franchising proved to be a stronghold of wealth generation and a shining example that this industry is resilient and poised to expand even further with the potential for long-term, sustainable growth.
Franchising is also present in the lives of everyday Canadians, with one in 10 Canadians being employed – directly or indirectly – in a franchise system. Every day, the average Canadian interacts with three to five franchise locations. They stop at their local franchise location for a morning coffee and drop their kids off for daycare, after-school extracurriculars, or even swimming lessons. After work, they pick up groceries or pull over at a drive-thru for a quick bite throughout the day. That’s why franchising in Canada is an essential industry. It has a presence in every facet of life and is part of the reason why the Canadian franchise industry is so well represented on a global stage.
Since the introduction of the International Franchise Attractiveness Index in 2020, Canada has consistently ranked among the top five countries with attractive franchise markets for balanced growth. This means international franchises, from the U.S. and further afield, have a strong chance of maintaining growth in Canadian sectors.
Furthermore, an investment in Canadian franchising is a low-cost, low-risk option for expansion into an international market: it ranks first among G7 countries for political stability. The marginal effective tax rate has also been trending downward since 2000 and is now the lowest of all G7 countries.
Seeking new partners or master franchisees? Look no further than Canadian young adults – the most highly-skilled talent market in the world. More than 55 per cent of Canadians aged 25-54 graduated from post-secondary institutions. This figure becomes even higher (73 per cent) when limited to young adults (25-34) looking to take their first steps into the workforce. Since 2018, Canadian Millennials have developed an increased interest in franchising, seeing the possibility of ownership and work-life balance, while providing more control over their future and utilizing skills and values earned through the first decade of their careers.*
Although Ontario dominates the franchise economy with the sheer number of locations, representing about 65 per cent of all operating franchise units, that simply means there’s room to grow in the Prairies, the Atlantic and West Coast markets. On a percentage basis, the largest growth is estimated to occur in British Columbia, where the number of franchise locations is expected to grow by 1.16 per cent. Slower growth in Atlantic Canada, (estimated to increase by 0.46 per cent) means there’s more space for international franchises to initiate expansion and develop an audience in this market.
Franchise law in Canada is distinct from similar regions, namely the U.S., due to federal and provincial legislation. Corporate tax rates vary, depending on the industry and type of corporation. The Canadian Franchise Association (CFA) offers a myriad of educational modules, ensuring new systems in Canadian franchising are operating with a wealth of information and according to the country’s franchising best practices.
Furthermore, industry support from financial institutions and government organizations is available for new franchisors and systems along the way.
All the major Canadian banks have established head office franchise departments, providing customized programs and financial solutions to assist franchise systems with all their funding needs.***
The Business Development Bank of Canada (BDC) promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services, including loans and grants, to entrepreneurs.
The Canadian Small Business Financing Program (CSBFP) is a government program that increases the availability of loans for small businesses by encouraging banks to lend to small businesses by co-owning the risk with the banks. The maximum loan amount available through this program is $500,000.
Furthermore, all the major banks have established relationships with the Canadian Franchise Association. The CFA network is essential for providing insight and understanding of the nuances and particularities of business ownership in Canada.
Help for international investors
While expansion into Canada has the potential to be successful, there are legal and cultural adaptations that must be considered before making the leap. Canada is very diverse, with an array of visible minorities across its major cities and welcoming 250,000 newcomers per year, so prospective franchisors must adjust their rollouts to appeal to a wider audience.
With franchising being regulated at the provincial level in six provinces, foreign franchisors should ensure that their franchise agreements have been adapted to Canadian laws. Each of these provinces—Alberta, British Columbia, Manitoba, New Brunswick, Ontario and Prince Edward Island—has specialized legislation for franchise operation.
Between withholdings tax, language requirements and disclosure legislation, foreign franchisors will undoubtedly need a helping hand when making an introduction in Canadian markets. The CFA has a wealth of resources to introduce new members to its network of entrepreneurs, investors and established franchisees. Incoming franchisors can learn the particulars of these differences and connect with franchise experts and suppliers who can prime their system for the Canadian market. The mix of diversity and cultures creates a rich and varied customer market for foreign franchise brands, as long as you can speak their language … no pun intended.
This is a sublime encapsulation of the CFA’s goal. As the national not-for-profit representing the franchise industry, its aim is to enhance, grow and protect franchising in Canada, and shine a light on the members who make the Canadian industry valuable and represent the country so well on the global stage. The CFA does this through:
- education, providing learning opportunities that make franchising stronger across the country and allow CFA members to improve their systems;
- community, by connecting its members with opportunities and the sharing of best practices;
- advocacy, evoking the benefits of franchising in the halls of power across Canada and bringing national attention to the issues that impact franchised businesses, and fighting for franchisees on their behalf;
- and lead generation, creating new connections for franchisors and franchisees, and acting as stewards of the community.
So, what’s not to love about Canadian franchising? With seemingly limitless opportunities, a diverse audience hungry for new options, and strategic partnerships available with key partners, continued growth is on the horizon, and the CFA invites you to become a part of it.
*Youth and education in Canada study: FranNet
** Based on the comparison of Franchise Canada Directory listings between 2021 and 2022.
*** World Franchise Council Country Report, Canada
Categories to watch
The following categories have experienced growth over the past year, making them strong options for those looking to invest in Canada.**
This category has gained increased interest through the innovations in the grocery industry as well as the growth of the pet care and health and wellness industries, with the always-popular meal assembly group helping to bolster the sector overall.
Business to business: +141%
While most businesses in this category were able to stay open through the pandemic, others pivoted around restrictions and came back stronger. This industry is gaining more and more attention for being a pandemic- and recession-proof sector.
Consumer services: +123%
With a wide range of services, the consumer services market offers a strong opportunity for new franchisees to parlay skills from other industries into their own ownership system, whether it be automotive services, fitness and nutrition, or winemaking. There’s something for everyone in the consumer services sector.
Children’s products & services: +16%
Looking out from a public health crisis that kept children away from school and limited socialization, children’s products – including tutoring services, STEM education and swimming lessons – have grown in popularity.
Quick service restaurants (QSR): +11%
Despite being one of the more saturated sectors in the franchise landscape, interest in quick service restaurants is still increasing, with QSR restaurants continuing to find new ways to bring convenience to Canadian customers.
Canadian Franchise Association Growing Together
The Canadian Franchise Association (CFA) helps everyday Canadians realize the dream of building their own business through the power of franchising. The CFA advocates on issues that impact this dream on behalf of more than 700 corporate members and over 40,000 franchisees from many of Canada’s best-known and emerging franchise brands. Beyond its role as the voice of the franchise industry, The CFA strengthens and develops franchising by delivering best-practice education and creating rewarding connections between Canadians and the opportunities in franchising.