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Franchising in Canada

Franchises have been developing in services and in retailing for 50 years now.
Franchisors have set up local or national networks; and on the international level, brands are getting implanted beyond the country of origin’s borders. Franchising has become acknowledged as a system of business creation and development. The United States’ proximity contributed to this development. Indeed, the geographical position favoured the entry of American franchises to a country which shares with the United States a common history, culture and language.

But in Canada, there are also Australian, French, Spanish, and English franchises; they chose Canada as a starting point for their expansion on the American continent. It seems easier to get implanted in Canada first before attacking the 10 times larger American market. Indeed, Canada has a relatively small population of 33 million inhabitants distributed on a wide geographic area. Most of the Canadians live in a zone which is less than 100 miles away from the American borders. This is probably the reason why American franchisors don’t consider Canada as an international zone of expansion. They consider it as a logical location for close expansion.

Canada disposes of an educated staff, a competent workforce and a particularly favourable North American mentality. Also, the country has abundant resources as well as infrastructures favourable to all types of freight. Moreover, there are performing telecommunication networks which enable distance reduction. Most of the cities are considered as safer than cities of western countries. As for business practices and laws, they are very close to American ones. This is why this country is often chosen as the first destination for business development, franchises more particularly.

Canadians have normalized and regulated the practices for franchise networks about 30 years ago. The political system is based on a federation. All powers are distributed in the hands of national and provincial political federals. There are 10 provinces; 3 territories with autonomous power can also be added. Everything concerning trade, competition and justice is under federal laws, especially anti-trust laws. Regulations are applicable nationally, even if provinces have jurisdictional competencies regarding trade relations.
Most of the laws concerning franchising are applicable on the entire country. Three provinces have set up obligations that are stricter concerning the franchising contract. Those obligations concern the franchisor’s investments, his experience, his operations, as well as a clearly written document on commercialized products.
To some extent, regulations for a foreign franchisor are classical in Canada, and they are very similar to practices found in numerous countries.

By Larry Weinberg

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