Buying a franchise in Canada
Starting a new business can provide great opportunities for immigrants in Canada. But if you don’t have enough experience in the new market, starting a new business and brand in a foreign country can be difficult and risky. This is where buying a franchise franchise in Canada can be an attractive and less risky option.
If you belong to one of the following groups, you can apply to buy a franchise in Canada:
Citizens or permanent residents of Canada
International students
People with work visas with international students
People with a tourist visa (after buying a franchise, you need to change the tourist visa to a work visa)
Foreigners outside of Canada
To know the details of buying a franchise in Canada, reading this article will be very useful for you.
What is a franchise?
Are you planning to be your own boss and start your own business but not sure where to start? Or you don’t know what resources you need? How to market your products or services? Or how to hire and train employees?
One of the solutions for such issues is the use of franchise businesses in Canada.
But what does franchising mean?
Franchise is a method of business development in which the owner of a business, called the franchisor, gives investors, the franchisees, the right to start a business. gives Of course, in the way and style that company has already developed and also under the brand name of that company.
Usually, when it comes to franchise, the most common example that comes to mind is “McDonald’s Company”. But franchising is not limited to fast food businesses like McDonald’s; Rather, it exists everywhere and in almost every industry.
Franchising is a comprehensive business relationship and not just a buyer-seller relationship. This relationship is formed by a “contract” for a certain period, usually from 5 to 20 years and can be extended.
During the contract period, the representative company or in other words the franchisee, usually pays certain fees to the franchiser or franchisor for continuous access to the business system, training and marketing support of the central company.
Advantages and disadvantages of buying a franchise in Canada
Advantages
Opportunity to grow
In franchises, there is an opportunity for business growth in that particular industry because there is already a market demand for their services or products and this demand can increase.
Low risk
Both the original business owner and the franchisee under that business brand have assessed potential risks to ensure that the brand extension is sustainable from the start. In the franchise method, risk management is possible to a large extent because the original brand owners will have processes and resources to help mitigate employee and company problems.
Spend less money
Although franchisees must have the necessary funds to cover personal involvement and required investments, the costs of opening a new location and starting the business are borne by the original brand owner. Therefore, the necessary cost to work with franchise businesses is lower than the business that you have to establish from the beginning.
The readiness of infrastructure and internal processes in accordance with standards
The original business owner has already hired employees to manage day-to-day operations, infrastructure is in place, and internal processes and employee training are standardized. Therefore, people who use the privilege of this brand will not need to develop such things.
Famous brand and no need for branding
Small businesses that start working need time, energy and capital to create a brand and attract customers, but franchisees do not have this problem because they work under a famous brand from the beginning and already have their customers.
Easier market penetration
One of the most important benefits of franchising a business is the established popularity of trademarked brands. It is easier to open a new location in any area or market area because people are already familiar with the brand name of that business.
More profitability
Franchises will have more profit and benefit at the time of launch due to having a well-known brand and easy penetration in the market. But new start-ups take years to become profitable.
Disadvantages
Limiting creativity in business
According to the contract that is signed between the main owner of the business and the buyer of the franchise, the way of running the business must be according to the principles and business model of the parent company.
Limitation in choosing the place of agency, selling products and suppliers
Usually, the main owner of the business determines where the branch of the company should be established, or what products should be sold and which suppliers should be used.
Your dealership’s reputation is damaged by the bad performance of other branches
If some agents do not do their work properly and provide inappropriate services or products, this will also have a negative impact on the reputation of your agency.
Sharing business profits with the main business owner
Buying a franchise and taking the franchise of a brand means that you have to pay a percentage of the sales revenue to the franchisor or brand owner.
The possibility of not renewing the contract
At the end of the contract between the franchisor and the franchisee, the original business owner may no longer wish to renew the contract.
Conditions for buying a franchise in Canada
Having enough capital to buy and start a franchise (its amount depends on the type of business).
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Experience and high management skills in the desired business field
Ownership of more than 50% of the purchased business
Presentation of business plan
Having physical health and no bad history
No need for a language score (but you must be able to convince the owner of the business brand whose brand franchise you intend to buy for the franchise that you have the necessary language skills to communicate with employees and understand the specialized topics of the work, and you can start the business.)
Costs required to set up a franchise business in Canada
The average capital required to buy a franchise in Canada is between 50,000 and 500,000 dollars, the exact amount of which depends on the industry of the franchise and its size or smallness.
If you are planning to start a franchise business in Canada, there are several costs to consider. A part of these costs is given to the owner of the commercial brand; Such as the cost of the right to use the trademark, training costs, marketing support costs and a percentage of sales revenue.
Another part of the costs is related to the investment to start the business; Such as the cost of supplying raw materials, purchasing supplies and equipment, insurance, legal and accounting services, as well as the cost of hiring and training employees.
In the rest of the article, we will talk about these costs in more detail.
Franchise Fee
Normally, the head office or franchisor receives a fixed fee from the representative office or the same franchisee for the right to use its brand franchise. This amount can vary from a few thousand dollars to more than 75,000 dollars, which depends on various factors such as the franchise industry, the size or smallness of the business, the brand, the location of the representative office, and the goals of the franchisor in developing their business.
The more famous and prestigious the brand you are going to work under, the more you need to pay for its brand value. For example, the Franchise fee for an internationally known brand such as Taco Bell is one and a half times what you would pay for a brand known only in Canada such as Tim Hortons.
Franchise Fee can include other costs such as the cost of attracting, selecting and training investors who are going to open a representative office as a franchisee.
Royalty Fee
Dealers must pay a percentage of their gross sales (between 4% and 8%) to the head office on a weekly, monthly or quarterly basis. This percentage varies depending on the nature of the business. Royalty fees are usually higher for service franchises than for retail businesses. Sometimes, instead of a percentage, the franchisor is usually paid a fixed fee.
In business systems where agents must purchase most or all of the supplies and materials they need from the head office, franchisors add an amount as profit to the product costs, which is called product pricing.
Advertising cost – Advertising Fund
Advertising for franchise businesses is done at two levels:
- For the main brand as a whole and
- For agencies as separate units
In the first case, advertising is done with the participation of the head office and the representative office and through capital, part of which is provided by the franchisor and the other part by the franchisee or representative office. The advertising fee paid by the representative office is usually calculated as a percentage of its gross sales (between 2 and 4%).
In the second case, dealers must independently advertise for their franchise. In the contract between the head office and the representative office, it is usually stated that the borrower must allocate an amount for advertising every month.
Required cost for investment – Initial Investment
The main business owners, or franchisors, usually ask investors who intend to start a franchise under their brand name to invest an amount in order to start their business.
Some of this initial capital may be required to be liquid assets such as cash and short-term bonds. Therefore, it is very important that you do not get too involved in loans and debts to buy a franchise in Canada.
Among the other expenses that you should invest are the cost of renting a business place, renovation of the property, purchase of equipment and supplies, labor costs, insurance costs, legal services and other costs.
An example of the costs of buying a franchise in Canada
In this example, we have broken down the setting up of a hair laser center that is a franchise of an existing Canadian company for you to familiarize yourself with the micro-costs.
Are you planning to start another franchise? These fees vary from franchise to franchise and are provided as an example only.
Investment sectors Minimum amount (in Canadian dollars) Maximum amount (in Canadian dollars)
Water, electricity and gas and prepayment of property rent $7,000 $20,000
Property Renovation $80,000 $200,000
Architectural design and decoration $3,250 $10,000
Furniture, equipment, fixtures $13,900 $27,000
Computer systems $3,900 $7,000
Insurance $1,200 $3,500
Trademarks $3,500 $10,000
Office expenses $900 $1,500
Inventory/Goods $4,300 $11,000
Certificates and permits $1,000 $2,000
Fees and subscriptions are $50 and $250
Business specialization costs $3,000 $7,000
Laser machine rental $2,100 $3,500
Education and living expenses during the training period $2,000 $5,000
Basic training
$15,000 $15,000
Opening advertising $10,000 $10,000
The right to use the brand franchise $40,000 $40,000
The sum of $191,100 is $372,750
Current franchise costs:
Percentage of revenue from gross sales (Royalty Fee): 6%
Advertising Fund: 2% of sales revenue
5 essential tips for buying a franchise in Canada
If you plan to buy a franchise business in Canada and represent one of the brands, you must first carefully research the brand and its owners.
Considering the following points before buying a franchise will give you a better perspective to make a decision.
- Evaluation of the desired franchise system
When evaluating the core system structure, always check 4 things:
Services/Products: What is being sold to the customer? How is the quality of that product or service from the customer’s point of view? Is the product or service offered in the market distinctive? Is the product or service protected by copyright or patent laws?
Price: Are the products or services priced well for their value?
Location: Are the products or services sold in profitable locations?
Advertising: Is the product well advertised and its nature known by consumers?
- Knowing the owners of strong brands
Personality: Is the brand owner or franchisor famous for something? Are they good members of relevant trade and industry associations such as the Canadian Franchise Association?
Track record and relationship quality: Are the company’s current representatives successful? Has it ever happened that one of the agencies was left out of the system? What made them leave the system? Have the terms of their departure been satisfactory for both parties?
Financial Strength: How financially strong is the brand owner? Can you check his financial information? Is this information audited or provided from outside the system?
Management: Given the brand owner’s tenure, expertise, and experience, how strong is the brand owner in terms of management? Does it have proven ability and skill to deliver?
- Considering the key success factors in the franchise system
Careful selection of agents: Does the head office have a special system for selecting its agents? Are the agencies still in the system? Have the company’s agencies had unusual turnover? Have the agencies achieved an acceptable return on their capital and are they satisfied with their investment?
Thoroughness in monitoring and controlling the system: Does the central system have the necessary financial and management controls to detect signs of danger in its overall business and in the individual activities of agents? Does it work effectively and efficiently with its agents so that they can act properly when problems and challenges arise?
System track record: Has the franchise system in question been successful to date? Have the dealerships been profitable? What is the rate of failure in this system? What is the failure rate in related and non-franchise related businesses? What is the quality of the system’s communication with key service providers such as suppliers or banks?
- Assess your overall capital
What is the total cost of your investment? How much input stock is required?
What are the current financial obligations, including the cost of using the brand franchise, renewal program or amounts and minimum stock purchase?
When does the business become profitable? What is the business’s potential for profitability?
Does the franchise system have a package of financial services for dealers?
- Checking the franchise purchase agreement
Does the contract protect your rights and the rights of the brand owner? Are the rights and obligations of both parties clearly stated?
Does the contract cover all the verbal commitments of the brand owner in detail?
What are the conditions for renewing the contract? Are there provisions for negotiation? Does it cover cancellation terms?
Does it cover purchasing materials from headquarters and parties outside the system?
Are the details related to setup, training and collaboration sufficiently stated?
How to buy a franchise in Canada
If you have decided that owning a franchise business is the right choice for you, follow these steps to buy it:
Step 1: Be clear about your reasons for becoming a franchise owner
Becoming a franchise owner is a big responsibility and commitment. Before you buy a franchise, think about your reasons for wanting to do so. If you think that owning a franchise is easier than owning any other type of business, you should know that every business has its own challenges. Therefore, act with solid and well-thought-out reasons to buy a franchise in Canada.
Step 2: Research what type of franchise is right for you
Just because a franchise is popular doesn’t necessarily mean it’s right for you. Do your research on the franchise carefully and spend at least a few weeks looking for the following criteria:
Excellent sales track record: It is recommended to choose a franchise that has a proven track record of profitability.
Growing Market: To be successful, the franchise you choose must be in a growing market.
Social responsibility: People tend to do business with companies that are socially responsible. Research what your target franchises are doing for this purpose.
Local Competition: A little competition can be good, but too much competition in a close-knit area can ruin your business.
Opportunities to upsell products and services: McDonald’s is a great example of a company that excels at upselling products and does so with options.
that he does in his business, like adding fries to his burgers.
Get support and support: Make sure you get good support and marketing services from the head office.
Step 3: Start your application process
When submitting your application to buy a franchise and start a new branch of the main business, having an experienced lawyer can help you a lot. At this stage, the franchisor or brand owner will check your conditions in the following ways:
It checks your financial situation to make sure you have enough capital to open the branch.
It examines your educational, work and reasoning for starting a business.
Checks where you are going to set up the dealership.
You need to answer the question why are you interested in their franchise and how much do you already know about it?
Step 4: Interview the owner of the desired brand
After the preliminary investigations have been done by both parties, you as a party to the transaction must have a face-to-face meeting with the franchisor known as “Discovery Day”. Before the Covid-19 pandemic, these meetings were held face-to-face, but during the pandemic, these meetings were moved online.
In this meeting, both parties can get to know each other better and before committing to buying a franchise, you can ask all your questions in this field.
Step 5: Apply for financing your business
If you don’t have enough capital to buy a franchise in Canada, you can ask for help from sources such as banks, the federal government, and other related institutions to finance it and apply for a loan.
Step 6: Make a contract and check its terms carefully
The content of contracts is usually long and confusing. In order to avoid possible mistakes, it is better to consult with an experienced lawyer before signing the contract.
Step 7: Rent or buy a place
You have already chosen the city of your business location, so at this stage you need to rent or buy a place in the city and set up a franchise agency there.
Step 8: Get the necessary training and support
You are entering a reputable brand that has a logo, instructions and products. It is necessary that you receive training from the central office in the following areas:
branding
How to sell and where to buy products and services
Product placement and point of sale displays
Payment technology such as credit card processing
Sales tactics for this particular type of business model
How to finance franchises in Canada
If you are planning to buy a franchise in Canada but you don’t have enough capital to start it, there are different ways to finance your business:
Bank loans
Canadian commercial banks lend to many franchise businesses. Of course, these banks are more willing to finance franchisees that work under successful business brands with a successful financial history.
Canadian Small Business Financing Program
Funding from the Government of Canada
Funding from the central office
Financing from angel investors
SBA loan
Businesses suitable for buying a franchise in Canada
While many people may think of franchising as limited to “fast food”, franchise businesses can be found in all sectors and industries such as the automotive industry, travel industry and travel companies, home care, education or health. and fitness.
A business is suitable for buying a franchise that, regardless of the type of products or services it provides, has a history of success in that business and a tested rule and formula that allows the franchise buyer to achieve success in the new branch as well. to experience
Top 10 franchises in Canada
Tim Hortons
This brand is one of the most famous Canadian brands in the world and also the largest franchise in Canada, which was founded in 1964 by hockey player Tim Horton. This coffee shop giant is one of the most profitable franchises in Canada.
To get representation of this brand, you must have $500,000 in net assets and $100,000 in investment.
Canada Bread
Pizza Pizza
Marlin Travel
Mr. Lube Canada
Booster Juice
Boston Pizza
Canadian Tire Gas+
Pet Valu
Belron Canada
Procedures for obtaining permanent residence in Canada through the purchase of a franchise
If you are outside of Canada, you probably think that by buying a business, you can have a safe business for yourself that will be a source of income and go through the process of obtaining permanent residence in Canada.
Yes, you are right, and here we will introduce you to the steps of obtaining a Canadian work permit visa and Canadian permanent residence in the method of buying a franchise.
The first step: checking the conditions of buying a franchise and concluding the necessary contracts
Second step: Preparation of business plan and preparation of documents for work visa application
The third step: obtaining a work visa and entering Canada
Step 4: Setting up a franchise in Canada and gaining Canadian experience
Step 5: After 12 months of work experience, start applying for permanent residence in the Canadian CEC experience method
Benefits of obtaining permanent residence in Canada through the purchase of a franchise
You start an active business that generates Canadian income.
The processing of franchise work visa cases is much faster than other immigration programs.
You can extend the franchise work visa up to 7 years.
You apply for a companion visa for your spouse and they work in Canada without restrictions. Your children will have free education in Canadian schools.
After entering Canada through you
Your spouse will be able to apply for permanent residence in Canada in various immigration programs.
MasterVisa Canada services in buying a franchise in Canada
If you are a manager or owner of a business in Iran and after reading this article you found that you are eligible to buy a franchise in Canada, but you don’t know where and how to start, don’t worry! We are by your side in this process from zero to one hundred.
To take action in this field, we will help you in the following steps:
- Assess the situation
- Accurate calculation of the necessary costs for buying a franchise
- Introduction of suitable franchises
- Communication with Canadian banks to finance the desired franchise (people who buy a franchise from outside of Canada have tougher conditions for financing from banks, but we will advise you properly in this regard)
- Introduction of experienced accountants for business
- Research about the franchise owner and his business system
- Preparation of business plan
- Review of the franchise purchase agreement by the company’s legal counsel
- Applying for a work visa and finally a Canadian permanent residence visa
In the following, you can see the list of some Canadian franchises in various industries that you can purchase with the help of MasterVisa Canada.
Canadian visa master
(mrvisacanadaa)
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