Franchising In Canada 2020 and Beyond
As the 2020 New Year starts to take shape and we begin a new decade, it is natural to wonder about how things will change and what will remain the same.
Franchising, as business growth model, will continue to be looked upon as a viable option and not just a novel approach for the brave and innovative. There has never been a time in our history when we have had the depth of business and professional knowledge about how to launch a successful franchise program than we have today. This meshes beautifully with the exploding interest in entrepreneurship and the comfort and confidence that would-be franchisees have in franchise ownership. Increasingly, the average age of franchisees is shrinking, as the purchase and operation of a franchised business is being recognized more and more as a lifetime occupation, not just a means to a comfortable retirement.
Canadian franchisors are becoming braver and more confident about expanding their systems beyond Canada’s borders. At the same time, the World has discovered Canada as a viable market for international expansion, as well as a logical starting point for a North and South American expansion.
Technological advances will benefit the growing Canadian franchise market and present challenges, all at the same time. Franchise marketing programs will have to adapt to the rapidly changing demographics. There will also have to be a greater recognition of ethnic tastes and preferences, as Canada’s diversity continues to increase.
Franchisee recruitment programs will continue to change at a breakneck pace. The Internet will continue to outpace the classic franchise show option. The trend away from unit franchising to multi-unit, area development and master franchising will not only continue, but accelerate in the near future.
Mergers and acquisitions and public listings of franchise companies will continue to grow, reflecting the increasing number of franchisor’s reaching retirement age and the growing interest in franchise companies by investors.
The franchise legal landscape has achieved a level of calm, with no expectations of dramatic changes to the number of provinces with franchise legislation and no real momentum for dramatic changes to these statutes. On the other hand, franchisees are increasingly willing to seek their remedies in court when things go wrong and there is an increasing number of lawyers who have familiarity with franchise law and the ability to challenge franchisors successfully.
For specific market segments that are embracing franchising more frequently than others, it is interesting to observe that the opposite ends of the life spectrum are the hottest areas for franchise activity, i.e. anything to do with seniors and anything to do with children.
Aging baby boomers are rapidly approaching their most medically
challenging years and desperately want to avoid living their final years in an institution. Medical systems are stretched to the limit, if not nearly bankrupt. Patients are being discharged from hospitals quicker and sicker. What a time to be in the homecare business!
For children in 2020 and beyond, gone are the days of playing board games and trading collectible cards— now, the 21st-century child matures in a whole new world of innovative play, learning and discovery. Driven by a growing awareness of the real needs of children for them to achieve their fullest potential and budget cuts for school programs, parents are constantly looking for ways to keep kids enriched, entertained and active. In response, child-centered businesses have begun to sprout all over North America. Fortunately, for interested business people, the industries of recreation, fitness and education are not just child’ s play; they also make for sound financial investments.
The movement towards the legalization of recreational cannabis has been greeted by the business world with a rapture reminiscent of the U.S. gold rush of the 19th century and the worldwide .com fixation of the 20th century. As governments are trying to figure out what controls they wish to impose on such things as production, quality, location of retail outlets, advertising and driving under the influence, entrepreneurs and investors everywhere are throwing buckets of money at all kinds of business ideas (hopefully opportunities) that are not proven and ripe with unprecedented risk. Without much delay, the franchising class has spotted an opportunity and jumped into this new, uncertain, highly regulated and rapidly evolving market segment with vigor.
“Canadian franchisors are becoming braver and more confident about expanding their systems beyond Canada’s borders.”
Canada’s franchise market is growing rapidly and changing every day. New industries are discovering franchising and societal changes are challenging the traditional beliefs about how to expand a business through franchising. Canada, for so many reasons, is uniquely positioned to benefit from these changes, but with the benefits comes risk.
Edward (Ned) Levitt is a Certified Franchise Executive, a partner at Dickinson Wright LLP, Toronto, Canada, and provides legal services to Canadian and international clients on all aspects of Canadian franchise law. He was General Counsel to the Canadian Franchise Association (20002007) and is a member of the American Bar Association Forum on Franchising, the International Bar Association and the International Committee of the International Franchise Association. As a member of the Ontario Franchise Sector Working Team, Ned was instrumental in the creation of Ontario’s franchise legislation and has had significant input in the franchise legislative process throughout Canada. Among his many publications is the leading text, Canadian Franchise Legislation (2001, LexisNexis/ Butterworths).
Ned can be reached at 416.646.3842 or nlevitt@dickinsonwright.com.