Is Your Franchise Fit For Canada ?
The Canadian franchise industry is the largest franchise market per capita in the world and the world’s second largest franchise market, after the United States. Canada has close to 76,000 franchises operating nationwide, operated by nearly 1,000 brands. The franchising industry employs over 1 million people in Canada and produces over $100 billion in sales each year. This represents about 10% of Canadian GDP.
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With a total population of 34.6 million people, Canada is not a homogeneous country, which the Canadian franchise market reflects: 85 percent of the franchises operating in the country are situated in Ontario, Quebec and British Columbia. Of all the franchises operating in Canada, 97% have passed the five-year stage that is critical for survival and growth. Also, 86% of Canadian franchises that opened in the last five years are still under the same ownership.
Before starting to franchise in the Canadian market, there are certain legal requirements you must adhere to.
- When starting a franchise, the first step is to register all business trademarks with the Canadian Intellectual Property Office. Trademark rights are regional and so will not be protected nationally unless they are registered.
- A franchisor will need to establish a subsidiary to manage its Canadian operations. However, the Canadian law does allow franchises to be managed from overseas.
- With the help of an experienced intellectual property lawyer, a franchisor will need to draft a franchise agreement. A franchise agreement details the rights that are being transferred to the franchisee and protects trademarks and trade secrets from being revealed.
All members of the CFA (Canadian Franchise Association) are required to produce a CFA Franchise Disclosure Document (FDD). An FDD is a legal requirement only in Alberta, Ontario and Prince Edward Island. As each province has different legislation it is recommended that any perspective franchisor seek legal advice before starting their franchise.
Finally, if you are registering a franchise in Quebec, be advised that the majority of the population’s first language is French. A franchisor should be aware that some documents will have to be translated and a franchisor might want to protect their trademark in the French language.