What is a franchise?

As per the Canadian Franchise Association's 2019 Franchise Forecast, the total GDP contribution from franchises increased to a startling $100 billion. In fact, it was predicted that year that the number of franchise-related jobs in Canada would increase to nearly 1.9 million. With those figures, it is clear how important the franchise sector is to the nation.

Understanding Franchising

A franchise is created when a single person, known as the franchiser, creates a trademarked brand and business and then charges additional people, referred to as franchisees, royalties and fees to use their trademark to do business.

These franchisees will create new business locations and run them as the owner or manager after receiving a licence from a franchisor to use their brand. Franchisees are required to run their locations as an extension of the brand-named business, ensuring that all procedures, products, and services are uniformly applied.

All types of enterprises, including those in the service and food industries as well as accountancy and law firms, use the business structure franchise. The Canadian franchise magazine is one of the numerous organisations and media that focus on the business franchising industry and its substantial economic impact.

How does a franchise work?

A franchisee must buy the rights from the company's franchisor in order to legally run a trademarked firm. A set sum known as a franchise fee, together with other investments and restrictions, are included in the start-up costs of a franchise. A franchisee is required to pay the franchisor a royalty fee, which is a portion of their gross sales.

According to Franchise Direct Canada, some of the most popular franchises in the country for 2021 include:

• Fitness 1440 (Health and fitness industry)
• TireChangers.ca (Automobile industry)
• Experimax (Technology industry)
• Global Pet Foods (Pet industry)
• PropertyGuys.com (Real estate industry)
• Sylvan Learning (Education industry)

The brand owner, or franchisor, is responsible for deciding whether a potential franchisee fits their business model and has the resources to open a successful site. Large franchises, like the fast food chain of McDonald's, can be very picky about who they allow to use their brand.

The brand owner and potential franchisee will meet before a franchise business deal is negotiated to talk over future operations and check if everyone would fit well with the brand's culture. The franchisor and prospective small business owner can now conduct interviews with one another. Franchisees should enquire about the company's operations from franchisors because the contract must benefit both sides and establish a good working rapport.

A franchise agreement and franchise disclosure form must be signed by the prospective franchisee once all parties have determined that a partnership is advantageous to both sides. These contracts will formally obligate the new franchisee to adhere to all brand standards, including those relating to franchising fees, royalty rates, marketing obligations, and access to the intellectual property of the brand such as trademarks and secret recipes.

Benefits of franchising

People opt to own and run a franchised firm for a variety of reasons. For anyone who are interested in running a profitable business, these trusted brands provide reliable opportunities. Additional advantages of franchising include:

1. chance for expansion
2. If a company is franchising, it suggests their sector has space for expansion. There is a market need for the trademarked company's goods or services, thus if they are expanding and searching for franchising opportunities, they are doing something right. Many of the biggest brand owners will only franchise their trademarked business to a franchisee provided they have the resources and motivation to open a number of locations concurrently.
3. Less Risk
4. By the time a new franchise location is opened, various layers of risk assessment have already taken place. To make sure that the brand's expansion is solid and steady from the start, the franchisor and the business owner have both evaluated the perceived hazards. Due to the huge brand's processes and resources, franchising also entails comprehensive risk management because these problems can be reduced for both the firm and the employees.
5. Funds and capital
6. The franchisor will still cover some of the costs of creating a new site and launching the firm, even if franchisees must have the money to pay for the necessary personal contributions and investments. The terms of the franchise agreement including personal financial reviews and whether the brand owner offers financing choices should be carefully read before joining a franchise system, nevertheless. In some cases, paying the start-up costs and royalties will still be less expensive than starting your own small firm from beginning. The franchisor will work with their new business partners to ensure the location is operational because they have "skin in the game," so to speak.
7. Look at the big picture
8. You can recruit a team of employees to run the company's daily operations while concentrating on the big picture as the franchisor and now owner of the particular site. Franchisees won't have to create this infrastructure themselves because it already exists, and internal procedures and employee training are all standardised. New business owners can quickly adopt quality control, operating procedures, and workflow processes using the franchise model to guarantee client pleasure right away.
9. Greater brand recognition
10. Small firms that are just getting started will need to invest a lot of time, money, and resources in growing their client base and brand awareness. Since the company is frequently a well-known brand with a sizable customer base, franchises do not face this issue. Franchisees can therefore benefit from this well-known and established brand to attract more clients right away when the location opens. Particularly when it comes to running renowned fast food establishments like Harvey's or Tim Hortons, this is true.
11. Easier market penetration
12. The established popularity of the trademarked brands is one of the franchise model's most important benefits. It will be simpler to open a new location in any location or market. Communities will already be familiar with the company's name and may even be excited about having one close to their residences.
13. Enhanced financial success
14. Operating a franchised business location will result in higher revenues due to increased brand awareness and simple market penetration. It takes years for newly founded enterprises to become profitable. Trademarked brands, however, already have a substantial client base and a wide brand reach. As a result, revenue generating starts off relatively higher than it would with a fresh business.
    Always remember that there are many people working toward the same objective when you decide to invest in a business franchise. Franchisees cannot accomplish this on their own. We can assist if you're wanting to invest in a franchise firm.