Feeling entrepreneurial? Buying a franchise could be the right move

When Dawn Mucci started her Lice Squad business 23 years ago, she had no intention of starting a franchise, 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 to buy a franchise.

Barrie, Ont. “I didn’t have any franchises to sell because I didn’t intend to when I started,” says Ms. Mucci, chief executive of her company, Lice Squad Canada Inc. brick and mortar lice inspection and removal clinics nationwide. “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 legislation only existed in Alberta. Today, with 35 franchisees and approximately four corporate locations across the country, Lice Squad Canada is among an estimated 73,000 franchises in Canada generating more than $68 billion in gross domestic product and employing nearly 1.4 million people.

“The franchising industry is the 12th largest industry in Canada and a major contributor to the nation’s economy,” said David Drucker, chairman of the board of the Canadian Franchise Association and president and CEO of UPS Store Canada, a printing, shipping and business services chain based in Oakville, Ont. is owned by the franchisor MBEC Communications Inc. located in

Mr Drucker says a key factor behind the power of franchising is its business model – it provides franchisees with a proven system and support to manage and grow the business for an initial fee and, in many cases, ongoing royalty payments. franchisor or owner of the business.

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

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As with any other type of business, success in franchising is not guaranteed, Mr. Drucker says.

“But there’s no denying that franchisees have a higher success rate than independent mom-and-pop businesses,” said Mr. Drucker, a former UPS Store Canada territory franchisee who previously owned multiple Rogers Wireless franchises. “While franchising is mostly mom and pops who have their own business in different parts of Canada, what’s different is that they operate under one system and have a support team behind them.”

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

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

Think of buying a franchise as starting a new business

Edward Levitt, a Toronto-based partner with global law firm Dickinson Wright PLLC, says prospective franchisees can increase their chances of success by applying the same level of due diligence as if they were starting a business from scratch.

As a starting point, it is 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 see yourself doing—do you want to be a restaurateur, or do you see yourself more in a business-to-business franchise?” says Mr. Levitt, who specializes in franchising and distribution law. “This is really important because most franchisees work in their business every day, and for many, buying a franchise is basically a way of getting a job.”

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

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

He adds that it’s a good idea for prospective franchisees to talk to their banks about their lending practices to any franchisees in the sector, as well as to landlords who rent spaces to those franchisees.

“And go to a few of these franchises and just take the time to watch,” Mr. Levitt says. “It can give you a good idea of ​​whether it’s something you really see in yourself.”

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

“Today, we have franchises offering computer and education services such as web design services, landscaping, window coverings, drone work, coding or tutoring,” he said. “We can attribute some of that 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, franchising had already begun to diversify.”

Ms. Alvarado says that for Canadians interested in buying a franchise, this means greater opportunities to get in on the ground level before markets become saturated.

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But that also means greater risks, Mr. Levitt adds.

“Franchising is based on past success, a proven formula,” he says. “But when new franchisors come in and they do something that no one has done before, maybe in a sector that didn’t exist before, then you get a little exposure to a new system in a new industry. .”

In such cases, Mr. Levitt says, potential franchisees may be able to negotiate an agreement that stipulates this greater risk — something that is typically “impossible” with an established franchise.

Franchisors also take a risk with every franchise they sell. Mr. Levitt says that some franchisees find it difficult to follow the franchisor system because they are either entrepreneurs who are better suited to start their own business or, in some cases, try to quit.

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 franchisors, of course, are always looking for growth,” Mr. Levitt says.

At Lice Squad Canada, Ms. Mucci says that while sticking to a system is critical to success in franchising, so is the ability to embrace change.

“Franchising is always evolving – it needs to adapt to market and economic changes and consumer demand,” he said. “I’ve sometimes found that people who are new to the system tend to be good at following it and growing with it, while early adopters can get stuck in their tracks.”

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

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

Mr. Drucker agrees. Being in a franchise – as a franchisor or a franchisee – means being part of a network “where you’re in business for yourself, but not for yourself.”

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