With a wide variety of industries, services, and employment opportunities franchising is becoming more popular among Canadian entrepreneurs looking to invest, expanding businesses in multiple markets, and individuals looking to try their hand at running a business for the first time. Perhaps you are one of the above, or like most people, you have some understanding of what franchising is, but don’t necessarily know how it works, and what you should know when considering owning and operating a franchise in Canada. In this first post on our franchising blog, we want to dive a little deeper into the benefits of franchising as a business, why the moving industry in Canada is a good place for franchising, and what to look for when considering investing in a moving franchise.
What is Franchising in Canada
Let’s start with the basics. If you’re still unclear about what a franchise is, you can liken it to a license or a rental agreement to use a company’s business system and brand or trademark in return for an initial fee and a percentage of the profits once the franchisee is up and running. In basic terms, when buying a franchise you are buying the value of a brand or company name and the knowledge and training of their business model. While a franchise may exist for decades, the terms of the agreement are usually signed for a period of time and re-negotiated upon the expiry of the terms.
There are around 1300 franchise brands and over 75 000 franchisees working in Canada, across fifty different sectors of the economy. Franchises account for one out of every five dollars spent by consumers in Canada and contribute approximately $96 billion annually to the country’s GDP. Depending on the brand a franchise can cost anywhere between $20 000 and over $100 000. Franchisees also generally pay between one and four percent of gross sales to the parent company.
Favourable franchising laws and regulations in Canada are aimed to make the relationship between franchisor and franchisee more transparent, protecting both sides and ensuring that they do not break away from the lawful promise to work towards a mutual benefit. In Ontario, Alberta, Manitoba, New Brunswick, and PEI, at the point of purchase a franchisor is required to provide the potential buyer with a franchise disclosure document (FDD) that truthfully and accurately outlines all the information pertaining to investing in the company, and remedy scenarios in the event the franchisor can’t fulfill the information they claim in the FDD. The disclosure will also contain information about the company’s earning potential and return on investment. Keep in mind that this information is not mandatory, and even when provided, the companies tend to make themselves look as good as possible, showing potential franchisees only the most favourable numbers and results.
A big resource for anyone interested in franchising in Canada is the Canadian Franchise Association (CFA). The CFA is a not-for-profit organization that unites more than 700 corporate members over all the franchising industries in Canada. The association also provides extensive supporting resources and advice on ethical franchising for potential franchise owners. If a franchisor you are considering investing in is not a member of the CFA you should ask why not, as most committed franchisors aim to be members.
Because of the variety of industries and services that it covers, as well as government regulation and a rich resource network, franchising in Canada today is more lucrative than ever.
Why Franchising a Business May Be Right For You
A big misconception about owning a franchise is that it is an excellent way to invest towards a passive income. In order for that to be true, several factors like brand strength, location, time, and even your attitude as an owner, have to come together. In reality, in the beginning, all franchises are a lot of work and require a time commitment and attention. Even if you hire a manager of operations, someone still has to manage them. Remember no one cares about the business as much as the owner, so expect a lot of the responsibility to be on your shoulders from the beginning. In short, if you are looking to make money fast, look elsewhere, as franchises generally require a big initial investment and don’t always run a profit from the moment they begin operating.
A franchise may be ideal for you, if you are an individual or a small group looking into business ownership, don’t necessarily have a unique brand or concept, but can compensate by learning the industry insights and know-how and applying it successfully through hard work and dedication of buying into the brand’s vision and business model.
If you are considering a franchise as an investment, think about it in the medium-to-long term. In an ideal case scenario, you will be able to harness the power of the parent company’s brand, be able to utilize their business model and support network, and hire the right people for your business. Only after optimizing and maximizing the potential of your franchise you will begin seeing a return on your investment. As we mentioned above, franchises require a lot of upfront investment and time to begin generating a profit, and a lot of them fail because they can’t recoup the invested capital fast enough.
An obvious downside to being a franchise owner is that you may not have as much freedom in how you run your business, compared to someone who owns their own company. While this may be so in the short term, the opposite is actually true of most successful franchisors: they listen to and implement the feedback and suggestions from their franchisees in order to improve the way the business is run across the board.
With the number of franchising opportunities available within each industry in Canada, it is possible for prospective franchisees to find a company with whom they can have a successful, trusting, and long-lasting relationship.
Why moving companies make a good franchise
So, with all the different industries, services, and products that franchises offer, why should you consider a moving company as your entrance into the franchise world?
Consider that agency-style franchises like moving, maid services, or mobile handymen are the fastest growing sector in franchising right now. This is partially to do with ageing Baby Boomers and an increase in the need for physical services at their place of residence. As a big chunk of the Canadian population ages, the demand for these services will only increase, requiring moving companies to cover not only big urban centres but also more remote and less accessible areas of our country. Senior-focused moving is already a specialty in most moving companies and will only continue to become more prevalent.
Baby Boomers aside, the moving industry in Canada is already booming, with roughly 5.6 million (16% of the population) people moving every year. It is also estimated that most Canadians move around 5-6 times in their lifetime, leaving lots of opportunity for repeat business – a cornerstone of brand growth and recognition.
The problem with the Canadian moving industry is not in the lack of people or trucks, or tools. The biggest issue plaguing the industry is the general lack of a customer-focused approach for most companies. Without a single regulatory body or specific government legislature on operating practices, over the last few decades, the industry has been a bit like the wild-west with companies trying to maximize profit at the expense of homeowners, and sometimes franchisees.
This is where it’s important to distinguish why some moving companies in Canada make for good franchises and others don’t. Remember, we mentioned that brand strength is a major benefit of the franchise structure. Yet, while plenty of Canadian moving companies offer franchise opportunities, a lot of them also have a murky track record of customer relations. If the whole point of benefitting from a franchisor is the strength of their brand, it hardly makes sense to invest in one with a bad reputation. Brand strength is also something that often comes with time and experience. That’s why new companies regardless of the industry don’t always make the best franchises.
Which brings us to the second benefit of moving companies for franchises: business model and training. Because so many moving companies struggle with the customer service aspect, it’s important that a prospective franchisor actually has a viable business model and training practices, rather than simply promising to pass down the knowledge and information on how to make profits. While some of this may become evident in the company’s FDD, you want to make sure that there is actual value in what the franchisor is offering in terms of intellectual property, information, and the know-how into running the business. If a moving company has a bad track record, it usually starts with complaints from the periphery where franchisees operate. If the franchisees are not able to provide service that meets the company’s standard, there is probably a gap in training or knowledge-sharing and the franchisor is not super invested in ensuring the business operates at the highest level across the board. The burden to succeed here lies more on the franchisor than the franchisee, and a committed parent company will not just see a franchise as an income source.
The third benefit of franchising is the low unit cost that franchisees have access to when buying products from the parent company. Because there are very few products actually being sold by the franchisees in moving companies, most of the investment goes into the employee force, facilities, and automotive expenses. Compared to other franchise-based businesses like restaurants, there is virtually no financial loss to products going bad or employee shrinkage. This makes a moving franchise one of the easier types of franchises to organize in terms of accounting and projected expense needs.
With the vast number of moving companies that offer franchising opportunities today, it is a matter of doing the research, just like one would when picking a moving company, to find out whether their brand and business practices are worth investing into.
Why franchise with Metropolitan Movers
An ideal franchisor is one that has a proven track record when it comes to their brand and business practices, a committed management team that is interested in growth for the company as a whole and looks beyond simply profiting from the franchisees and their clients.
These are some of the pillars on which we decided to expand our franchise structure as a company. Metropolitan Movers has been a member of the Canadian Franchising Association since 2013 and adheres to the association’s code of ethics and best practices.
Since our inception as a company in 2010, a customer-focused approach has been the foundation of our business model and brand growth. In an industry so disjointed by scammers and fly-by-night companies, Metropolitan Movers aimed to be the best by giving its customers what they seemed to be lacking the most: good, honest customer service. Our efforts didn’t go unnoticed and we won the Consumers Top Choice Awards four years in a row 2014-2018, further expanding our brand and helping us reach more households across the country.
As we continued to grow our company by offering franchising opportunities, it was very important to us that Metropolitan Movers doesn’t just grow in size and scope. We also wanted to ensure that our team grows in terms of the standards and the quality of work that is expected of them. That’s why today we put an accent on providing training, resource, and customer service support to all our franchisees across Canada. We also welcome feedback and conversation from our franchisees across the country to constantly improve and build on our training. This helped us win a Franchising Association award in 2016. We believe that by giving our franchisees the tools that will help them believe in their business, they will, in turn, represent the brand like their own and help it grow and expand.