Sherry McNeil explains why the Canadian Franchise Association should be an incoming entrepreneur’s first port of call
As the president and CEO of the Canadian Franchise Association, Sherry McNeil is the inarguable expert on conducting business in the country. While she promotes carefully considered expansion, she’s confident the CFA can help any business achieve their goals.
As the head of the CFA, could you give me an idea of how you support both international and domestic franchisors?
SM: The Canadian Franchise Association (CFA) is the hub for the franchise community. We are committed to helping everyday Canadians realize the dream of building their own business through franchising. We work on behalf of our member community to amplify the understanding and power of franchising in Canada, by advocating on issues that impact this dream; connecting people with opportunities, and delivering learning opportunities that make franchises stronger.
One of the most important things we do is government relations and advocacy. From protecting the franchise business model to advancing our members’ interests, the CFA is committed to protecting the franchise community in Canada.
If any franchisor is planning on franchising into Canada, it is important that they become members of the CFA. While the franchise business model is similar around the world, each country has its own nuances and legalities. By joining the CFA, franchisors can learn Canadian best practices, connect with Canadian franchise experts and suppliers to help them grow, and network and learn from other franchisors operating in the country.
As the second-largest franchise industry in the world, why do you believe franchisors are turning to Canada when taking their concepts international?
SM: Canada is an attractive market for franchise expansion. According to the University of New Hampshire’s 2019 RIFC International Franchise Attractiveness Index, Canada was ranked the third most attractive country for balanced growth due to reasonable market potential at very low market risks. This is particularly true for U.S.- based franchisors, due to low geographic and cultural distance risks, where Canada leads compared to other countries.
We are also the most educated country, with over 55 per cent of Canadians aged 25 to 54 having graduated from post-secondary institutions, according to the OECD. Canada has the soundest banking system among G7 countries and ranks second in the world. Canada also ranks second among G20 countries in terms of political stability. We have the lowest overall tax rate on new business investment and lowest business costs in corporate services among G7 nations.
Our country’s identity as a cultural mosaic also makes us uniquely appealing. Immigration has been a key part in Canadian society’s growth and our nation’s cultural mosaic reflects a cultural, ethnic, and linguistic mix that is unique in the world. Our multiculturalism is based on the belief that all citizens are equal and that diversity makes us stronger as a country. This mix of diversity and cultures creates a rich customer market for foreign franchise brands looking to expand in Canada.
Canada has been described as an extension of the U.S. market, due to customer priorities and market trends – what are your thoughts on this?
SM: While Canada shares many similarities with the U.S. due to our proximity, there are many differences in culture, laws, and market sensibilities. Canada is definitely its own entity and the assumption that it is an extension of the U.S. market is often one of the reasons why some franchisors face challenges in expanding in Canada.
An important difference that franchisors need to know is that franchise law is different in Canada compared to the U.S. We also have distinctive federal and provincial tax requirements. It is important for franchisors to join the CFA and engage in educational offerings on Canadian best practices and connect with Canadian industry experts and suppliers to ensure they are properly practicing franchising in Canada.
Are there any particular adaptations that franchisors need to be mindful of when entering the country, and are there adaptations that vary from province to province?
SM: Canada is one of the most diverse countries on earth. Canada boasts the highest percentage of foreign-born citizens than any other G8 country. On average, Canada welcomes over 250,000 newcomers per year and visible minorities account for over 60 per cent of the population of Toronto and Vancouver, and 31 per cent of Montreal. Diversity in Canada extends beyond race and ethnicity but spans language, gender, religious affiliations, sexual orientation, abilities, and economic status.
This diversity creates some challenges; however, it also creates enormous opportunities that prospective franchisors must take into account as they roll out their concept.
Franchising in Canada is regulated at the provincial level with six provinces (British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and Prince Edward Island) that have franchise disclosure legislation in place. Foreign franchisors looking to do business in Canada should ensure their franchise agreements have been adapted to Canadian laws. This may require changes in their business model due to Canadian withholdings tax, language requirements, and disclosure legislation that is in place in some provinces.
Some experts suggest opening a corporate-owned pilot location, prior to franchising in the country. Do you believe this is the way to go?
SM: Every brand has its own strategic plan for international expansion. However, as a general best practice, piloting a concept through a corporate-owned store is typically recommended before franchising. This allows the franchisor to be able to test and adapt their concept, marketing, and operations if required.
Finally, what do you foresee for the future of Canadian franchising, in terms of trends to watch?
SM: The future of franchising in Canada is bright! We expect continued growth to lead franchising to become the seventh-largest industry in the next few years. Trends to watch are continued growth of women in franchising; cannabis franchises; the rise of Gen Z in franchising; and private equity investments into the industry.