What you don’t know about the Canadian market can hurt you (just ask Chik-Fil-A). Launching a successful franchise in Canada requires knowledge and a team that can foresee and avoid the pitfalls of working in this diverse country. Adam Silver sheds some light and provides the key ingredients needed to set your franchise up for success.
These are exciting times in the Canadian franchising sector. From the legalization of cannabis to the rapid evolution of technology, new opportunities abound—and savvy entrepreneurs are taking note. Some of the most successful (and controversial) franchisors in the world are realizing what an opportunity Canada represents, as Chik-Fil-A has certainly seen.
According to the Canadian Franchise Association, approximately 520 new franchises opened in Canada in 2018 alone, equalling 75,765 franchise units. While growth occurred across the board, the fastest-growing franchise sectors included maid and cleaning services (which grew 129% over the previous five years), real estate (111%), educational products and services (91%), and accounting and tax services (60%).
Yet, while many franchisors were able to overcome major market obstacles, such as Ontario’s minimum wage increase, succeeding in the Canadian market is by no means assured. For every franchise that makes it, many will fail—in fact, 35% will do so within their first four years. The key differentiators separating the two groups? A strong market entrance and the right team.
While Peter Drucker will tell you that “culture eats strategy for breakfast,” in franchising you can’t ignore the people or the strategy. So, whether you’re looking to bring an existing franchise into Canada, or you’ve identified an opportunity to launch a new franchise concept into the domestic market, here are some key considerations to keep in mind to help make your entrance a success.
Do your homework ahead of time
The Canadian market is a unique beast—with its own culture, customer preferences, tax system, employment laws, and geography. Understanding this, it’s quite possible that a successful franchise model from another country, or even another part of Canada, may not fly in your targeted market. By the same token, a successful Canadian franchise may not resonate with a foreign customer base—at least not without a few tweaks. There are many examples of concepts that resonate in some areas of Canada but not others; St Hubert’s Chicken, London Drugs and FixAuto all have great penetration in some parts of the country but don’t have full coverage across the nation. In other words, just because it works in one province, that doesn’t mean it’s going to work in another.
For this reason, before you even think about getting the wheels in motion for your franchise’s big launch, you need to gain a deep understanding of the landscape and devise a robust market entry strategy to help you identify, and overcome, potential bumps in the road.
This involves taking the time to uncover the inner workings of your target market to determine whether there’s demand for your product or service. You’ll also want to find out about your potential market’s size, whether it’s poised for growth, any imminent regulatory roadblocks, and the competitive landscape. When it comes to the latter, you’ll want to pay attention to your competitors’ customer base, strengths and weaknesses, market appeal, and secrets to their success. What separates the successful franchises from the rest of the pack? For those that are floundering—or who have failed in this space in recent years—what was their primary downfall?
Additionally, a strong market entry strategy should attempt to anticipate the financials. Specifically, how much revenue can you realistically expect to bring in and when? What percentage of market share are you likely to achieve—and what value proposition do you need to achieve it? Finally, and most importantly, how much will a launch into this market cost when all is said and done?
Build the right team—and support them
Finding the right people to support your endeavour is an important task, both before and after market entry. But building an extensive network of skilled, knowledgeable individuals involves more than simply hiring the right management team (but we can’t overstate how important it is to do that right!)
While finding top executives and managers that mesh with your personality and share your vision are unquestionably critical, in the preliminary and planning stages it’s often your third-party relationships that will greatly influence your market entry success.
A strong support team will include local accountants, lawyers, real estate experts, website developers, and marketing professionals, among others—individuals that not only understand the nuances of the local business environment, but your target customers as well. This team should ideally strive to understand your goals and provide the unbiased advice you need to determine if those goals are attainable. If they’re not, your team should also be able to outline the alternative paths available.
For instance, your advisors should be able to tell you whether your value proposition will resonate with local customers and offer real estate advice to ensure your flagship outlet is in a prime location. They should be able to help you find the right business partners—whether you’re looking for a distributor or a financer—and educate you about local employment laws.
After the initial launch, you can still gain a lot from a strong support team. These trusted professionals can help you find and hire the right internal team and identify skills gaps that need to be filled. They can also provide a valuable outsider’s perspective—one that allows you to identify overlooked opportunities for growth, potential staff training gaps, or the need for a brand revamp.
When launching a franchise in a new market, you don’t want to leave anything to chance. To give your business the best start possible—and enhance the odds of long-term success—it’s essential to start with a robust market entry strategy, surround yourself with the strongest team possible, and make the most of technology.
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Adam W. Silver is the Managing Director of the Performance Acceleration practice at Farber. The Performance Acceleration practice helps executives and boards overcome operational and strategic challenges to uncover potential and unleash performance. Adam can be reached at 416.496.3734 and firstname.lastname@example.org.