Canadian Franchising Magazine Winter 2012, Volume 1 Issue 1

canadian

T he

ma g a z ine

for

franchisees

w w w. c a n a d i a n f r a n c h i s e m a g a z i n e . c o m

Issue 1 - nov 2012

Franchising $5.95

Canadian Franchising

hiring

Dos and Don’ts l o c at i o n

l o c at i o n

location why choosing

the right one m at t e r s

A n I n - D e p t h L o o k at

Canadian Retail Franchising

bringing s o c ial b a c k

browns socialhouse

with SUPPLIER FORUM

LATEST NEWS

FINANCIAL ADVICE FROM THE BANKS

Page 1

TOP LAWYERS’ ADVICE

Authentic Realize dreams Training Business Franchise Pioneering Experience High Fives Giving back Entrepreneur Reputation Fans Fulfillment Support Branding Opportunities Canada’s Leadership Enthusiasm Students Worldwide #1 Tutor Lessons Networking Unique solutions Market With Oxford Learning, you’ll lead the way to better grades for students of all ages while making a positive impact on Learning Curriculum Rewarding Cognitive families, in your community, and in your life.

Results changes Feeling good Joy Better futures beginLasting with better grades Call today, or visit franchise.oxfordlearning.com Growth Creating Global Confidence Pride Goals Demand Motivation Career Growth Learning Dreams Reliability New approaches Power Professional Brain Tutoring Future 1.888.559.2212 ext. 106 franchise@oxfordlearning.com Homework Accredited Success Supplemental

Lead the way with Oxford Learning

franchise.oxfordlearning.com

Being there Development Excitement Sharing Patented methods Learning College Educate Opportunity Family-based Personal growth Changing standards Excellence Connecting Outcomes Potential Competitive Succeed Achieving Cognitive Financial Helping Page 2 Australian Credit Licence 387405.

Canadian Franchising

Franchising CANADIAN

T H E

M A G A Z I N E

F O R

F R A N C H I S E E S

w w w. c a n a d i a n f r a n c h i s e m a g a z i n e . c o m

CANADIAN FRANCHISING VOLUME 1, ISSUE 1 NOVEMBER 2012 publisher: Colin Bradbury. colinbradbury@shaw.ca

EDITOR: Christie Hall. christie_hall@shaw.ca

SALES DIRECTOR: Vikki Bradbury. vikki.bradbury@shaw.ca

Senior Sales Executive: Jenn Dean. jenndean@shaw.ca

PRODUCTION: Joanne Tuffy. production@cgbpublishing.com.au

DESIGN: Jejak Graphics. jejak@bigpond.com

COVER IMAGE: Browns Socialhouse

CGB PUBLISHING 676 Wain Rd. Sidney, BC V8L 5M5 CANADA www.canadianfranchisemagazine.com Proud member of the IFA:

SUPPLIER FORUM International Franchise Association 1501 K Street, N.W., Suite 350 Washington, D.C. 20005 Phone: (202) 628-8000 Fax: (202) 628-0812

from the

Editor

Welcome to our first issue of Canadian Franchising!

We’re excited to bring you a publication specifically geared towards franchisees in Canada.

Each issue will include expert legal and financial advice, business and marketing information, as well as profiles, feature articles, and franchising news from across the country. You’ll find useful information for every stage and season of change in your development as a franchisee.

Change, while a necessary part of life and business, is often inconvenient. Whether it’s the change that collects in a dusty jar, never getting spent, or the change that signals a new phase in our lives, we tend to fight change, choosing instead to rest in the comfort of the everyday status quo.

The Canadian government recently made the decision to eliminate the penny as a part of our nationally recognized currency. While I’m sure people have mixed feelings on that decision, this fall it becomes a reality of the retail world in Canada. With a bottom line concluding that each penny cost 1.6 cents to manufacture, it just made sense to halt production. And so the retail world will adjust to that change. When paying with cash we will round up or down.

Our first issue of Canadian Franchising has a particular focus on retail franchising in Canada. In our feature editorial story we discuss some of the trends taking place in the retail marketplace. Technology is playing

an ever-increasing role in the way we do business.

This signals a daunting change for many whose businesses are retail-based. When change occurs, we increase the opportunity for failure. However, change also brings increased opportunity for reward and success. It’s all in how we choose to look at it. Working without pennies will seem inconvenient to many of us, because we are used to having the little copper pieces at our disposal when required. But think of the advantages: transactions will occur with greater speed, pockets will be lighter, and as a country, we all save money at the end of the day. Similarly, working with new technology may seem inconvenient because we often equate new with intimidating. So many things could go wrong. But there’s an even greater chance that things will go right! Think of the increased ability to connect with customers and clients, to reach new customers, to increase sales. These are all really good positive outcomes which are likely to follow technological change.

One of the greatest advantages to being part of a franchise system is that when change like this occurs, you are not alone. With the support of your franchise network, you won’t have to figure it out on your own. There will always be someone there to answer questions, offer assistance, and guide you through change as it necessarily occurs.

So I say, let’s welcome change. Let’s open our arms to change and invite it in. That’s my two cents worth. But you better buy now, before I round up to a nickel!

Christie Hall Editor

www.franchise.org The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher. The publication is sold subject to the terms and conditions that it shall not be copied in whole or part, resold, hired out, without the express permission of the publisher.

Page 3

november 2012

On the Cover 10 Cover Story

Dos and Don’ts of Hiring Employees in Canada

Browns Socialhouse: Bringing Social Back

26

J. Geoffrey Howard, Gowling Lafleur Henderson LLP Vancouver

12

Your Franchise Location – Asset or Liability

29

Retail Franchising in Canada: Why it works Feature Article

29

26

38

John Woodburn, C.J. Woodburn & Associates

12

ca nadia n f ra nchising

Contents

In Every Issue 06 Canadian Franchising News

Industry news from across the country

29 Feature Article

Retail Franchising in Canada: Why it works

34 Franchisor In-Depth

Page 4

Northside Autosports

Canadian Franchising

Expert Advice

18 Maximizing Your Franchise’s Cash Flow Nicholas Kilpatrick, Mackenzie, George and Company

46

14 What Do Banks Want From Me? Joseph Pisani, Bank of Montreal

38 International Franchising Michel Gagnon, Davier Consultants Inc. 46 Franchising into Growth David Banfield, The Interface Financial Group

Franchisee In Action 22 Padgett

38

42 Metal Supermarkets

Page 5

ca nadia n f ra nchising

what’s new!

Fine Details - The Car Cleaning Specialists

Fine Details –The Car Cleaning Specialists opened its first location in Mississauga in 1995. Since then it has grown to become Canada’s largest franchise system specializing in interior and exterior hand car cleaning.

Fine Details offers a full range of services designed to clean, polish, protect and maintain your vehicle’s appearance.

As market trends indicate, people are keeping their cars longer than they did before, so more emphasis is on properly maintaining a vehicle’s appearance. By wanting to provide their customers the convenience of a one-stop shop, several additional services have been added to their venue including auto detailing, rustproofing, headlight restoration, paint and stone chip repairs, windshield repairs, dent removal, and automotive accessories.

Fine Details recently introduced an automated customer referral program.

Wanting to build on long term relationships with its customers, the program offers a reward to the current

loyal customer as well as promotes an introductory offer to a new client so they can see for themselves what sets Fine Details apart from its competitors.

“With multiple locations found in the GTA, and as far west as London, north to Barrie, and east to Ottawa, Fine Details is looking to continue its expansion across Ontario as well as the rest of Canada and into the United States” says Mark Shannon, President of Fine Details. Plans are also underway to begin retailing its private-label products to the public.

For further information on franchising opportunities please visit www.finedetails.ca, call 1-888-843-9274 or email finedetails@finedetails.ca

Tim Hortons Smile Cookie Campaign Raises a Record $4.2 Million for Local Charities The Tim Hortons Smile Cookie fundraiser raised a nice chunk of dough-in support of local charities across Canada last month, with a record $4.2 million. Tim Hortons’ guests showed their support by purchasing the smiling chocolate chunk cookies for $1 between September 17 and September 23.

“Everyone at Tim Hortons is thrilled with the generosity of our guests and restaurant owners. We’re all smiles today,” said Bill Moir, Chief Brand and Marketing Officer, Tim Hortons.

“Funds raised from the Smile Cookie campaign benefit local charities in every community where they are sold so we can all see the money go to work in our own backyards.”

Charities benefiting from sales of the Smile Cookie include hospitals, shelters, clubs and various other community organizations. A complete

Page 6

list is available at www.timhortons.com/ smilecookie The fundraiser began in 1996 in Hamilton, Ontario as a way to raise money for the Hamilton Children’s Hospital. Currently, Tim Hortons Restaurant Owners in Canada support more than 345 local charities through the annual Smile Cookie Fundraiser. In 2011, the campaign raised $4 million.

Tim Hortons is one of the largest publicly-traded restaurant chains in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, espresso-based hot and cold specialty drinks including lattes, cappuccinos and espresso shots, specialty teas, fruit smoothies, home-style soups, fresh Panini and classic sandwiches, wraps, hot

breakfast sandwiches and fresh baked goods, including our trademark donuts.

As of July 1st, 2012, Tim Hortons had 4,071 systemwide restaurants, including 3,326 in Canada, 734 in the United States and 11 in the Gulf Cooperation Council.

More information about the Company is available at www.timhortons.com.

Canadian Franchising

Pay in a Flash™ at Harvey’s® and Swiss Chalet® Interac Flash contactless debit technology to roll out at participating restaurants nationwide Interac Association announced today that CARA Operations Limited (“CARA”) is working with its payment processing partners to accept Interac Flash contactless debit transactions at Harvey’s and Swiss Chalet restaurants across Canada. Canadians will soon be able to purchase their favorite menu items quickly, conveniently and securely by making a contactless debit transaction at the point-of-sale or drive-thru.

“Allowing customers to pay for menu items with increased speed and convenience is exceptionally important

in a restaurant environment,” said Mark O’Connell, President and CEO, Interac Association and Acxsys Corporation.

“We’re delighted CARA has committed to accept Interac Flash at its Harvey’s and Swiss Chalet locations across Canada.”

“At Harvey’s and Swiss Chalet, we are focused on creating perfect experiences for guests of our restaurants, which includes efficient service. Interac Flash is consistent with that goal. We believe it to be a convenient and relatively inexpensive payment solution which will be well received by our franchisees,” said Dave Minnett, President, Harvey’s and Swiss Chalet, CARA Operations Limited. “We’re excited to partner with

Interac Association to provide this new contactless debit technology to Harvey’s and Swiss Chalet customers across Canada.”

Chase Paymentech, a subsidiary of JPMorgan Chase (JPMC) and a leading provider of payment processing and merchant acquiring, will be the primary processor of payments.

“Midas is a terrific fit for our retail group,” stated Larry Day, TBC chairman and chief executive officer. “We’re going to capitalize on all the opportunities and synergies created by the power of our franchise and company-owned operations to most effectively meet the growing needs of today’s tire and automotive service consumer.”

TBC Corporation has the ‘Midas Touch’ TBC Corporation (“TBC”), one of the largest marketers of replacement tires in the United States, today announced that it has completed the acquisition of Midas, Inc. through one of its wholly owned subsidiaries, with Midas being the surviving corporation. The short form merger was the final step of

the acquisition process and follows TBC’s acceptance of and payment for all of the shares validly tendered and not withdrawn pursuant to its tender offer. The transaction is valued at approximately $310 million, including the assumption of approximately $137 million in debt and pension liabilities.

Day went on to emphasize the commitment of TBC Corporation and Sumitomo Corporation of America to its franchise operations. “In addition to our commitment to consumers, we are dedicated to strengthening the success of our franchisees. They are a significant part of the industry and play a critical part in the success of our strategic plan.”

Midas is one of the world’s largest providers of automotive service, offering brake, maintenance, tires, exhaust, steering and suspension services at nearly 2,250 franchised, licensed and companyowned Midas shops in 13 countries, including nearly 1,500 in the United States and Canada. Midas also owns the SpeeDee Oil Change business, with 160 auto service centers in the United States and Mexico.

Page 7

ca nadia n f ra nchising

what’s new!

LEADING ACCOUNTING FRANCHISE CELEBRATES 25 YEARS

Leading the “Charge” against Air & Noise Pollution “Zero Emission Yard Care Powered by Solar Energy”.

That’s the slogan you will soon see in your city on specially equipped Solar Powered Trailers designed and built by Clean Air Yard Care Inc. of Victoria, BC. All of the landscape and gardening equipment used by Clean Air Yard Care is charged and powered by solar energy.

Clean Air Yard Care was founded in Victoria by “Green Entrepreneur” Barry McLean in the spring of 2010. The company has won numerous awards for “climate action” and “sustainable business practices and green energy leadership”. Pacific Carbon Trust recently awarded the company “BC’s First Carbon Neutral Landscaping Company”.

Company President Richard Larkin, recently announced the launch of its Franchise division beginning in the province of British Columbia. The focus initially will be on Vancouver Island and the Lower Mainland areas. Further expansion into the interior and other areas of the province will commence in the spring of 2013. Now in its third year

Page 8

of operation and after numerous inquiries on the business model from interested parties, it appears the timing is just right, said McLean.

Clean Air Yard Care is well known in Victoria for its brightly branded hybrid truck & solar powered trailer and the variety of services it provides. And it’s not only the customers that appreciate the quiet operation and zero emissions, it’s our operators who will benefit as well says Larkin. “Smell the grass, not the gas” has become a popular phrase around their office.

The company can be contacted in Victoria through their website at: www.CleanAirYardCare.ca, Richard@CleanAirYardCare.ca or the Direct Line: (250) 658-1904 for additional information or comments.

Interested SERVICES, in starting your own PADGETT BUSINESS ACCOUNTING & TAX PRACTICE? who helped hundreds of budding entrepreneurs across Canada turn Are you motivated to build a growing busi their dreams of running their Give us aown call. business into reality, turns twenty-five.

We are Canada’s leading Accounting & T Franchise.

It’s been an incredible journey.

To motivated individuals ready to build their own AccountingWe and will Tax provide: practice, - Expert tax provides & technology support the Padgett franchise an - One-on-one exceptional opportunity.training It offers a fresh yet proven alternative to the systems challenges of - State-of-the-art going it -alone.

It provides extensive Proven marketing toolsone& techniques on-one training, support, systems, tools Business Services and direction to Padgett help franchise owners The Small Biz Pros since 1966 reach their personal and professional 120 franchises in Canada, 400 in North Am goals faster.

To the small business owner, For information onPadgett how we can help yo takes care ofreach their Accounting, your goals Tax faster, visit us at and Payroll needs.

Padgett’s Franchise www.padgettfranchises.ca, owners prideor themselves for providing ext. 222 call 1-888-723-4388, exceptional personalized service to the small business community, which represents more than 90% of all businesses in the country.

As small business experts for more than 25 years, (over 45 years in the USA), Padgett’s 400 franchises have been providing a unique combination of business and information services to help small business owners focus on running their business.

In Entrepreneur magazine’s 2012 edition, Padgett ranked No.1 in the “Business Financial Services” category.

Training and Support are provided out of the company’s Canadian Head Office located at 775 Pacific Road in Oakville, Ontario.

Canadian Franchising

AWRS Expands to Canada chrome wheels by removing the damage from the wheel only, then paint and clear coat back to factory standards with their patented adhesion process (US 6,347,444).

They also specialize in on-site precision wheel straightening.

Their patented “NewBee” straightener can return out-of-round wheels back to manufacturers’ specifications within 15-45 minutes.

An AWRS franchise business provides service to pre-own departments of auto dealerships, rental car fleets, insurance companies and auto auctions. Service is also provided through partnerships with service departments of auto dealerships, tire stores and body shops.

Alloy Wheel Repair Specialists has announced its franchise expansion in to Canada and is actively seeking entrepreneurial-spirited individuals who would like to own their own Alloy Wheel Repair Specialists franchise.

AWRS operates in 500 cities worldwide on six different continents and is considered the world’s largest mobile alloy wheel repair company.

AWRS is the only company that provides alloy wheel repair in a fully mobile, climate-controlled, environmentally safe repair facility. They repair painted, machined, polished and some

AWRS’ national and regional accounts could provide an instant business opportunity and cash flow for new franchisees.

Franchise territories currently available:

Victoria, Vancouver and Kelowna - British Columbia Winnipeg - Manitoba St John - New Foundland Toronto, Brampton, Mississauga, Hamilton, London, and Winsor – Ontario Montreal, Laval, and Quebec City – Quebec Regina and Saskatoon - Saskatchewan

Papa Murphy’s Seeks Bigger ‘Slice of the Pie’ in Canada World’s largest take ‘n’ bake pizza company targets Canada for expansion; Empowers customers to take control of the dinner occasion.

With most pizza chains offering dine-in, take-out or pizza delivery, one concept is carving out a unique niche in the pizza category and expanding its footprint across Canada.

With 15 locations currently open and operating throughout British Columbia and Alberta, Papa Murphy’s is empowering consumers to take control of the dinner occasion with its take ‘n’ bake pizza.

Papa Murphy’s is poised to open at least 80 stores throughout Canada in the next five years, focusing primarily on the western Canadian provinces of British Columbia, Alberta, Saskatchewan and Manitoba. “Sometimes it’s hard to fit a homemade meal into our daily schedules. Finding recipes, prepping ingredients, cooking, setting the table, and cleaning up after dinner can be a daunting task,” said Chuck van der Lee, owner of Papa M Pizza Canada, noting that family time at the dinner table doesn’t have

to become a casualty of our busy lifestyle. “We’re not just about pizza. We’re about empowering people at home to put easy, high-quality meals they can be proud of on their tables.” The take ‘n’ bake market differs from the dine-in, take-out or pizza delivery markets in that customers take home a custom pizza that is then baked in their own oven.

To augment the company’s growth, Papa M Pizza Canada is seeking partners interested in expanding the brand in smaller cities and suburban areas. Franchisees come from a wide range of professional backgrounds and don’t require food service experience since Papa Murphy’s three-phased training program and ongoing support prepares them to run the business. The average cost to open a Papa Murphy’s in Canada is approximately $230,000, which includes a franchise fee of $25,000.

For information on franchise opportunities, interested parties are encouraged to contact Papa Murphy’s Canadian office at 855-425-PAPA (7272) or franchise@papamurphys.ca

Page 9

cover stroy

B rowns S ocial H o u se

Bringing Social Back where people come to enjoy a menu based on simple food with upscale twists.

The Browns Socialhouse menu features fresh ingredients, ranging from burgers and pizzas to Pad Thai and beyond – served with excellence for lunch, dinner, and weekend brunch.

Keys to Success

“People always ask me, ‘What is a Browns Socialhouse?’ And I tell them ‘We serve fresh, tasty food in a lively room that’s fun, full of energy and designed to be as comfy as my living room… without the dog hair.’” – Scotty Morison Conceived over time and launched by Scotty Morison in 2004, the Browns Socialhouse franchise concept was developed in light of a singular vision: to do more…with less. Browns Socialhouse wasn’t developed through data analysis; it’s real, experiential and intuitive. It’s driven by extremely high expectations from the franchisor, Browns Restaurant Group. And it puts franchisees front-

Page 10

and-centre, because they are the ones that truly “deliver the goods” to guests.

Scotty Morison developed Browns Socialhouse to offer guests a hybrid experience that bridges the gap between upscale casual dining and neighbourhood pub. Fancy buzzwords aside, Browns Socialhouse restaurants are great places to meet, eat and have a drink in spaces that promote socializing – hence the name “Socialhouse.” Scotty Morison has referred to his philosophies and values as “Old School Restaurant’ing 101,” providing the perfect combination of great music, great service, and great atmosphere – with great food. Browns Socialhouse offers eclectic rooms that feature “a little bit of everything” experiences, in small spaces, close to where its guests work, sleep and play.

Their focus is on the people, with the goal of having each of their patrons feel at home and comfortable as soon as they set foot in the door, and each time they return. Browns Socialhouse fosters a friendly, social, relaxed atmosphere

An advantage for their business is that a Browns Socialhouse can pop up nearly anywhere; the model fits perfectly in smaller suburban and urban communities where a demand for higher-level casual dining isn’t being fulfilled. And, to ensure great experiences every day, every shift, Browns Restaurant Group works directly with owner-operators who live in the markets they serve. Ideally, Browns is looking for franchisees that have spent some time in the casual dining industry in their particular area. They want people who know their communities and know the people. Browns Restaurant Group feels that having a vested interest in a business and community leads to better business performance, and ultimately better results.

Browns Socialhouses are designed to be highly competitive in smaller urban and suburban markets. Their main competitive advantages include: 1. Site Placement: Because of their smaller footprint, Browns Socialhouses can pop up in places where many other brands simply won’t fit. Being smaller, they can target “A” locations without fear of a huge rental factor.

For guests, Browns’ smaller footprint provides for a much warmer overall experience. At Browns, guests and team members come together and are all part of the action. This makes for a truly

Canadian Franchising

“Our restaurants are great places to meet, eat and have a drink in spaces that promote socializing.” social eating, drinking and working experience!

2. Efficiency: Building and up-keep costs stay relatively low because of Browns’ smaller footprint, and Browns Socialhouses are efficiently designed to require less staff (which lowers labour costs).

3. Owner-operator Focus: By ensuring every Socialhouse they open is operated by someone dedicated to the community it serves, Browns Restaurant Group is able to deliver the product and service excellence required to provide “WOW Experiences” to their guests.

Franchise Support Using sophisticated systems and partnering with savvy franchisees, Browns Restaurant Group successfully competes with independent restaurants and larger chains in local markets by providing their franchisees with Operating Platforms, Training Modules, Management Tools, Checklists…and

more. To capture it all, they refer to these tools as “Browns in a Box.” But that’s not to say that the team at Browns Corporate doesn’t think “outside the box” every day.

The system allows them to, encourages it even, because it’s tight, constantly tested, and totally geared for continuous improvement. By being social as a team and with their franchisees, the team at Browns Restaurant Group are forever sharing, learning and staying ahead of the curve…together.

Staying ahead of the curve has proved successful for Browns Socialhouse.

Bringing in $29.5 million last year, they earned the title of “operator with the greatest year-over-year percentage increase” on the Foodservice & Hospitality 2012 Top 100 report.

Looking to the future, Browns Restaurant Group is focussed on building on their success by adding Socialhouses across the western provinces, as well as further expansion heading east across the country over time. If you excel in

the food service industry, are ready to take your career to the next level – and you’re passionate about customer service and committed to community and neighbourhood – you could be the next Browns Socialhouse franchisee.

For more information: Email: ownership@

brownsrestaurantgroup.com Web:

http://brownsrestaurantgroup com/brownssocialhouse/

Page 11

ex per t advice

John Woodburn, President, C.J. Woodburn & Associates

Asset or Liability?

yo u r franchise location

Your business location is probably the most important and ongoing expensive part of your decision. The location has either been found by the franchisor or an agent so how do you assess its potential worth to you?

Let’s accept that in life there is no such thing as a perfect person. So it is in location selection.

First the downside.

Should you have challenges in sales or operation of your business, you can call on your franchisor for guidance or help.

As a prospective franchise business owner, you’ve read everything you can get your hands on. You’ve learned to: 1. Get Disclosure Document and comments from franchisor – read carefully!

2. Talk personally to many existing franchisees.

3. Ask for a location – franchisor or real estate agent.

Assuming you’ve done the above points 1 and 2 thoroughly, are you ready to roll ahead? We hope not!

Page 12

Not so with the lease. This lease document is binding on its parties.

It could be ‘head manned’ by your franchisor. This shows he/she has confidence in the site. However, the franchisor doesn’t control the terms and costs – the landlord does. Should you have a problem, the franchisor has given assurance as a tenant to make good as and where required or even assume the location. In other words, there’s no legal requirement for the landlord to bend or alter the lease terms.

So – investigate the location yourself before you agree to it. Does it have: a) Competitive lease costs for the area? b) A landlord who works with his tenant and doesn’t ‘hardball’ them? c) An area which contains a good density of people who could become

your customers? d) Easy entry and exit from your location? (No medians blocking or one way streets.) e) Store signs easily visible from the roadway? How close are your competitors?

If the franchisor owns the property, be careful of costs charged as compared to the nearby market area. Remember your total costs will include not only direct rent but also what is known as TMI. This is the landlord’s Taxes, Maintenance and Insurance. Your portion of these costs will be based on the size of your location in the property.

A landlord is only interested in long term profitable tenants. He may have even inserted a ‘bump up’ bonus percentage for him once your sales pass a stated dollar level.

What personal liability do you have under the lease? Yes – your company may have signed it but in the same way you’ve had a franchise lawyer advise you on the franchise documents, have him/ her also review the lease or sublease so you know what exposure you’d have personally, if any.

Now, let’s review the size and style of a location for your business. As you visit and talk with existing franchisees, ask about their location satisfaction. There’s a vast range of styles and sizes from

Canadian Franchising

which to choose. A lot of these details will be dictated by your franchisor’s/ franchisees’ experience and their typical location demographics. Let’s quickly review your options and their general advantages and disadvantages. Here’s the range.

• Freestanding individual building.

• Unit in a strip mall – local or regional. (sizes vary) • Mall • Power Centre • Neighbourhood group

Freestanding: All attention will be on you, however, the landlord must charge his total costs to recover his investment and interest to you as his only tenant.

Strip Mall: You’ll be one of a number of tenants so cost per square foot should be lower.

Make sure your position in the tenant location sequence is good for you. Avoid competition in the same strip. Is there easy access and lots of parking?

Mall: This type of location is larger in size and will have a number of tenants which should attract a greater number of customers who can also find you. It will be more expensive than strip malls.

Fewer malls have been constructed recently because of high building costs and saturation.

Power Centre: This will be anchored by one or more large, strong stores. E.g. Costco, The Bay, Sears, etc. It has fewer tenants than a mall and may offer lower rent than a mall. Typically it will be open (no roof) between tenants rather than an enclosed roof like a mall.

“Your business location is probably the most important and ongoing expensive part of your decision.”

Neighbourhood Group: Here you’ll find a few tenants serving neighbourhoods. These will be mostly services such as dry cleaners, convenience stores, etc. Costs should be lower than freestanding power centres or malls but will be more expensive than a strip mall location.

Here are some suggestions.

• Ask the landlord for an exclusive clause in the property.

• Get an exclusive radius or territory for your location from your franchisor.

This avoids a sister location cannibalizing your sales success.

Conclusion After 36 years in franchising from all sides of the field – as a franchisee, franchisor and as a consultant – we’ve passed along some concerns which we’ve seen.

With the experience of helping hundreds of people launch a new franchise business, we’re aware that often the prospect doesn’t worry about the location but simply accepts what’s offered to their possible detriment.

Look before you finally sign the lease and make your location an asset!

John Woodburn is President of C.J. Woodburn & Associates, a franchise consulting firm in Burlington that specializes in helping new and established franchisors market their systems and expand regionally, nationally and internationally.

John has been involved in franchising for over 36 years and has experience throughout Canada, the United States, Europe and even the Middle East.

Phone: 1-877-322-2153 (toll free) Email: john@woodburnassociates.com

Page 13

ex per t advice

Joseph Pisani, Franchising Services Department, Bank of Montreal

What do Banks want from me?

“For a prospective franchisee, using the information available from banks, existing franchisees and professional groups will improve your odds of obtaining initial bank financing.”

Purchasing a franchised business is not an easy process. As a prospective franchisee, you must take your time, performing a great deal of research and due diligence before finally making the decision to buy.

Following this decision, your focus will turn to financing and the several funding options available to you. In most situations, this will bring you straight to the doors of your local bank. As you take the next step in your journey, it is important to know what to expect.

Page 14

You may find this experience frustrating or confusing; you may also feel uncertain about how to effectively and convincingly prepare for meeting a banker. How do you communicate what is needed? What should your application include? Who should you approach? When is the best time to involve the bank? Thankfully, by finding the right banker and developing a detailed financial proposal, you can address the key points you need in order to fund your new franchise venture.

What are bankers looking for?

Very simply, bankers expect to see (and have you verbally communicate) a realistic business plan; including what you believe are reasonable and achievable results. Business projections must be based on strong supporting data and sensible assumptions. This data is typically presented in what is called a bank financing proposal, a written document designed to deliver: • a comprehensive business plan, including details as to how your business’s goals will be achieved; • the amount of money required and from what sources;

• how the money will be used; • how your loans will be repaid; • what the banker may expect to see in terms of overall business results (consider preparing a three-year financial forecast); and • what security will be provided (such as a general charge over all business assets, personal guarantees, etc.). All major financial institutions provide publications on this subject, which often provide examples of what should be included and how to best present it.

Given these resources, one should be aware of the bank’s expectations.

When preparing your proposal, be thorough and accurate, there are no short cuts to be taken in this process. Also, keep your proposal simple and factual.

Acknowledge any possible risks or potential pitfalls. Not only is this honest, it will also illustrate that you are aware of the relevant risks and will show the banker you are able to anticipate and manage them. Include a one or two page summary that briefly describes the business opportunity, its history, where its future lies and the money you require to get it there.

Canadian Franchising

Overall, your proposal should include: • a cover page with your name, address and any other key contact names (e.g. your lawyer and accountant): • a table of contents (including page numbers); • a summary of financing being requested;

• an overview of the industry you plan to enter (e.g. key drivers, demographics, trends); • your management structure (people, background, qualifications and responsibilities);

• descriptions of product/service offered; • details about your prospective new market (e.g. size, competition, supply, overall standing); • a financing outline (emphasizing the use of requested funds);

• basic corporate information about your franchised business (names of your shareholders, lawyer, accountant, etc.); and • appendices (these can include individual biographies, product literature, historical financial statements, forecast income and cash flow statements).

The banker’s questions There are no secrets to effectively dealing with the bank. Banks openly publish articles on the subject of franchise financing, as well as how to submit a comprehensive financing proposal. Be prepared to provide information and/or commentary on the following (if you are in a province where franchise legislation exists much of this information will be contained in the franchisor’s Disclosure Document): • Franchise business track record.

How successful is the franchise business – network growth, profitability, franchise problems or failures, etc.

• Consumer demand for the franchise product or service. Is demand growing or stable? How do offerings compare with the competition and how much competition is there likely to be?

• Franchise agreement. Have you

reviewed it with a lawyer who specializes in franchise law? Are you clear on the rules/terms/conditions? Is it in line with your expectations?

• Franchise structure and ongoing fees. Through what means does the franchisor derive its income? Do you consider the franchisor’s costs and fees to be fair and reasonable relative to other franchised businesses in that sector? If they seem high, ask why (there may be a good reason). Ensure you understand every fee obligation, from royalties and supplies to advertising funds and renewal fees.

• Financial strength of the franchisor.

Is the franchisor financially stable?

Is it willing to provide you with any information you could review with

your accountant or banker? What is the background and experience level of its senior management?

• Franchisor’s financial interest. Does the franchisor own the location or simply lease it?

• Growth and expansion plans. Is the franchises growing and if so, how and where? Will you have exclusive rights to an area? Are there any plans to change product lines, site appearance, etc?

• Franchisor’s market intelligence and research capabilities. How does the franchisor conduct research for locations, product lines, market changes, etc? What forms of support will be provided to you, both at the outset and ongoing, at head office and

Page 15

ex per t advice

Joseph Pisani, Franchising Services Department, Bank of Montreal

your business is only the start of the banking relationship. In most cases, business credit facilities are subject to the bank’s annual review of the business, its financial results and overall account performance. Going forward you can strengthen and expand your relationship with your banker by: • providing consistent updates and financial reports concerning results, plans, successes and challenges (highlight the good news, but do not hide the bad);

• holding regular meetings to discuss business results, including a visit to the premises to give the banker a firsthand look; and in the field? Does the franchisor assist with the development of your business plan?

• Franchisor’s selection criteria. What sort of franchisee is the franchisor looking for? Are there any special training requirements? Can you see yourself working with the franchisor’s key people? Are your expectations in harmony with the franchisor’s?

• Financial profile on your franchise location. What is the total cost to establish a franchise location?

Get details on all areas, including equipment, leaseholds, inventory, prepaids, etc. What is the minimum equity requirement on your part? How do you plan to finance the rest?

Finding help During the preliminary stages of developing your proposal, it is in your best interest to engage other resources and professionals, such as existing franchisees and your franchisor, your accountant and other business associates.

However, at the end of the day, you have to be confident with your proposal and prepared to respond to any reasonable questions the banker might ask.

Before you complete your financing proposal, you may find it beneficial to have a preliminary discussion with your existing banker, so long as he or she is well-versed in commercial lending (these people are usually referred to as commercial account managers).

Page 16

Even better is a banker with specific experience in franchise financing.

If your current banker’s expertise is in personal lending, ask for an introduction to someone else in the institution who specializes in commercial lending. Share your ideas and seek advice on financing availability, any restrictions, various loan facilities, as well as potential cash management and electronic banking services.

Consider your initial encounter with the banker as an opportunity to establish an ongoing, supportive relationship. Early in the process, you should be able to say ‘yes’ to three questions: 1. Does this banker understand my business?

2. Do I really want to do business with this banker?

3. Will I be able to rely on this banker for help and advice in the future?

What happens next?

While your primary objective is to obtain bank financing, do not assume all your banking arrangements are in place once you’ve secured your loan. Consider other needs—cash management, electronic banking, payroll and credit cards, just to name a few—and ask your banker about what else you require to operate your business successfully.

Remember as well that your first experience arranging financing for

• using the banker as a connection to other professional resources and business contacts who can help you grow your business.

Are you ready?

For a prospective franchisee, using the information available from banks, existing franchisees and professional groups will improve your odds of obtaining initial bank financing. This information can also enhance your chances for long-term success and the continuing support of the banker.

If you’re ready to get started, be sure to engage a banker with these ideas in mind.

The right bank can help provide you with the expertise and guidance you need to find customized solutions to meet all your financial needs.

Joseph Pisani has been in Commercial Banking for over 12 years. Joseph joined the Bank of Montreal’s Franchising Services Department in 2006. His past experiences include roles as Commercial Banking Account Manager, and operating a small business.

Based out of Toronto Joseph’s role as National Manager Franchising Services consists of identifying, developing and managing a portfolio of financial service programs aimed at facilitating financing and cash management products for selected franchise networks.

Phone: (416) 927-6025 Email: joseph.pisani@bmo.com

KWW Z KhEdz &KK ^ &ƌĂŶĐŚŝƐĞ ƚŚĂƚ ĚĞůŝǀĞƌƐ ŵĞĂůƐ ƚŽ ƚŚĞ ŚŽŵĞ

< <] <] <Z

<( < Ã < <Ã Ã Ã < <] <-Z < Ã < < <] Ã <

<fT<\ Ã <Ã < <

<Z < Ã < < < Ã < Ã < <, Ã < I< < < < < <O( < < < Ã Ã Ã <) <N <+ Ã < < <

tĞ DĂŬĞ ƚŚĞ DĞĂůƐ͕ zŽƵ ƵŝůĚ ƚŚĞ ƵƐŝŶĞƐƐ͊

ǁǁǁ͘ĐŽƉƉĞƌĐŽƵŶƚLJĨƌĂŶĐŚŝƐĞ͘ĐĂ

ex per t advice

Nicholas Kilpatrick, Partner, MacKenzie, George & Company

maximizing your franchise’s

Cash Flow control compared to the corporate grind that they have lived in for many years.

There are scores of people who dream of owning their own business and the suggested freedom that comes with it.

These people line up to submit their application forms to purchase a franchise unit, anticipating profits and a lifestyle over which they have a certain amount of

Page 18

However, in order to realize this type of success, both financially and in terms of lifestyle, franchisees need to have a definitive and disciplined approach to profitability and cash flow management that can serve as a stepping stone, or guidepost to the realization of their business dreams. This article addresses what new, and sometimes, seasoned, franchisees, need to be monitoring in order to realize success and profitability in their franchise operation. This is not an exhaustive commentary on what makes a franchise succeed, but certainly highlights issues that franchisees need to address in order to build that successful business that they are all after.

In my experience as an Accountant to franchisees, I’ve documented what I believe to be the three underlying components that determine the financial success of any business operation, particularly a franchise. Those are: 1. Profitability

2. Return on investment 3. Solvency

Each of these three components can easily take up an entire book of their own; in this article, however, I’d like to take a few words to address point 3 – Solvency.

As you know, this word addresses the business’s state of liquidity (ie: is there enough cash in the bank to sufficiently cover the business’s expenses, provide residual financial resources for additional working capital needs, and provide ownership with additional compensation).

Profitability does not mean much if you can’t collect on your accounts receivable and deposit the money in the bank; similarly, without collecting payment from your clients, your return on investment is going to fall far short of your initial dreams.

For your business to work, you need to increase your bank balance. Not only that, it needs to increase at a level that justifies your efforts.

Canadian Franchising

Your business’s cash flow can be affected either with your cash inflows or your cash outflows, so let’s look at both of these areas in more detail:

Managing Cash Inflows If you think about the things that can affect the inflow of cash into your business, then you have a skeleton template of the areas that need to be monitored in order to maximize your cash inflow. Areas that affect your cash inflow are: 1. Revenues 2. Accounts receivable management 3. Strategy implementation 4. Seasonality of business There may be other words that can fit on this list, but invariably they would fit into one of the four items listed above.

Depending on the franchise system that you have purchased into, the percentage net income before taxes usually circulates around 20 per cent. If your net income level is below this threshold, then you need to look at not only expenses (ie: cash outflows), but also revenues. You regularly need to ask yourself, am I consistently executing a marketing plan that will result in increased revenues?

Am I collecting on my sales/ services? Is my Accounts Receivable balance within acceptable levels?

Revenues Everyone reading this article will agree that it’s no use talking about managing cash flow if you don’t make sales in the first place. Generating revenues in today’s competitive economy means generating recognition and trust. You won’t make a sale the first time someone hears from you, but the more they do hear from you, the more you are recognized in their minds as a competitive merchant worthy of their disposable income. You need to have a strong business strategy in place as well as a strong marketing strategy that complements that business strategy and that will facilitate its success.

“Franchisees need to have a definitive and disciplined approach to profitability and cash flow management that can serve as a stepping stone, or guidepost to the realization of their business dreams.”

Accounts receivable management Revenues and growth will not amount to much if you cannot collect on your accounts receivables. Some franchises, including those in the food industry, are primarily cash-based. But for those operations that accept credit, you need to have a monthly, and in some cases weekly, monitoring of your accounts receivable to ensure that you’re collecting on those invoices. It’s very easy for accounts receivable to get out of hand and seriously impair that cash flow of the operation.

Strategy implementation This point is important because it determines revenue growth, which then drives accounts receivable collection.

Regardless of the franchise in which you’re involved, strategy implementation is key to growing your business and realizing business success. In many cases, however, the strategy considers the type of client desired in order to maximize cash flow. This is why your cash flow management process begins right at the point of building your business plan. Contrary to how many people approach business, you can’t think of your business one-dimensionally – trying only to make sales, and that’s it. There are many other areas that need to be systematized in order to run effectively and efficiently and, ultimately, produce a cash-generating operation.

Seasonality of business An important consideration in the discussion of effective cash flow management is the seasonable nature

of your business. During the down season, your business will spend more money than it will bring in. Business owners usually deal with this issue by either utilizing credit facilities and then paying the of during the busy season or cutting operating costs, or possibly a combination of those two methods.

Regardless, business seasonality forces you the business owner to carefully manage your cash flow by ensuring that you minimize your cash outflows and possibly create new revenue streams to offset the temporary downturn in your business operations during that time.

Managing cash outflows When discussing how to effectively manage cash outflows, we usually look at the income statement and balance sheet and see where we can minimize costs. This is certainly true; however, unnecessary cash outflows can result in other ways. The main areas of cash outflow management are the following: 1. Operating expenses 2. Wages 3. Wastage 4. Lease 5. Financial internal controls

Operating expenses It’s a good idea to have your financial statements prepared with a comparative column for the previous year as well as a ‘common-size’ column showing the percentage of revenues that a particular expenses draws. This percentage column quickly points out expense items that may be drawing too much from the money pool. Look at these expenses monthly, or weekly to keep close tabs

Page 19

ex per t advice

Nicholas Kilpatrick, Partner, MacKenzie, George & Company

Financial internal controls

on how your business’s money is being spent. Quick tweaks are sometime essential to maintaining effective cash flow management.

Wages Wages are normally the biggest single expense or any business, followed by leasing costs. Effective cash flow management always involves close monitoring of your wage costs. Always make sure that you employees are being fully utilized and that there is no ‘wasted’ employee time. If you find employees standing around too often, this may mean overcapacity in your human resources and unnecessary cash outflows. There will be down times during the business day, but at your peak times, all employees on shift should be working at a healthy (but not at a sprint) pace. If so, this suggests that your business is optimally staffed.

Wastage Wastage (ie: food, product, supply, theft) is rarely seen and even more rarely tracked. However, wastage can easily lead to unnecessary cash outflow.

To properly manage cash flow and profitability, franchise owners should regularly (ie: monthly) monitor their spoilage and wastage costs. Wastage can be defined as anything that was paid for but was not used for its intended purpose.

Under this definition, your money to pay for the item has essentially been wasted.

It’s amazing what business owners can

Page 20

learn and how their operating methods change once they realize the money that is being wasted through subpar work practices by employees on incorrect operating procedures. For business owners wanting to maximize their cash flow, they need to regularly track wastage expenses. Such tracking may very well lead to the creation of updating of employee manuals and practices, since it is employees who daily perform tasks that can lead to the wastage of items within the business.

Lease After wages, this cost is usually the second largest cost incurred but the business. We all know, however, that this cost has to be offset against any competitive advantage that may be secured because of any premium paid, such as location, access to suppliers, networking advantages. The decision of leasing costs usually is unique to each business, and the business owner needs to recognize the requirements of his individual business and how a leasing space can facilitate those requirements.

If the business owner has confidence that the potential increase in business, networking opportunities, and access to clientele will outweigh any lease premium paid in relation to other possible locations, then it may be a prudent business decision to decide to pay the lease premium. Leasing decisions should not be guided solely by cash flow management parameters.

Last but certainly not least, financial internal controls are the last (and sometimes strongest) defense against sub-optimal cash flow management.

Policies, procedures, and monthly checklists designed to properly manage and monitor cash inflows and outflows are essential in properly managing your business’s cash flow. Monthly checklists that force personnel to calculate wastage, assess whether or not employees have performed their duties to required levels, or investigate whether financial transactions have been properly approved, will prompt the business owner to correct any weaknesses in the operating process that lead to poor cash flow management – in other words, such procedures expose problems and force the business owner to ‘right the ship’.

Ultimately, cash, not profitability, will determine whether or not a business will survive or fade away. It’s always better to refrain from additional revenue generating activities until the operation can perform optimally at each level of profitability. When your business is running well at each level of profitability, you can be confident that your cash flow is optimal and that the business is ready to add more revenue.

Nicholas Kilpatrick is a partner at MacKenzie, George & Company, Certified General Accountants and specializes in restaurant and franchise operations.

Prior to entering the accounting field, Nicholas owned a franchise restaurant and tripled revenues and profitability.

He learned over this period of time to pay close attention to the accounting and finances of the business, control costs and employ a consistent, strategically targeted and feasible marketing plan at the franchise.

Now he likes to help franchisees and franchisors do the same. He enjoys communicating with his clients, and working with them to help them achieve their short and long-term business goals Phone: 604-327-9234 Email: info@mackenziegeorge.com

Canadian Franchising

Page 21

f ra nchisee in action

Padg et t B usiness Ser v ices

A World of

Opportunity

Did you know that over 90 per cent of businesses in Canada are small businesses employing fewer than 20 people? Or that the total number of small businesses in Canada is nearly one million, and growing!

This booming market translates into a world of opportunity for people looking to help other small businesses succeed and grow.

While small business owners are working hard at selling their product or service, it leaves them little time to focus on the daily and monthly financial challenges of their business. Thatâ&#x20AC;&#x2122;s where Padgett Business Services can help.

If you want to build a successful business helping others to achieve their goals, then Padgett Business Services could be the right franchise for you. For Lorne Stapleton, it was the right choice.

DIVERSE BACKGROUND After a career spanning a variety of industries, Lorne came across Padgett Business Services, and hasnâ&#x20AC;&#x2122;t looked back since.

Through Padgett Business Services, Lorne offers small business advice and consultation, tax preparation, government compliance, financial reporting, complete

Page 22

Canadian Franchising

payroll services, and other services important to small businesses.

By offering trusted advice and integral services to his clients, they are able to free themselves from the tasks, paperwork, and details that often bog down business.

“Our consultation and services allows our clients to focus on what they do best running their businesses!” says Lorne.

“I’ve had quite a diverse background which, I believe, really helps me relate to my clients and understand their needs, requirements and goals,” he says.

From working in the family construction business, to operating a hotel, working in municipal government, and working in the Oil and Gas industry, Lorne’s diverse career approached a significant crossroads when he was laid off during the economic downturn in 2009.

“It was with the layoff that I started the process of looking for another position and place to work. Almost immediately, I was asked if I could look after the accounting of a friend’s business while I was looking for work,” said Lorne.

“I accepted and shortly after that came another. I found that I was really starting to enjoy the freedoms that are associated with owning my own business,” he said.

“It was at this point that I realised that if this was the way it was going to roll out, how could I do this and make the best of it? What better way to go than to investigate a franchise opportunity where the majority of the work is already laid out in a time-tested proven system.

“During my research, I found that Padgett has been around for over 40 years and I believe that definitely had to be long enough to fine tune their model,” Lorne said.

Established in 1966, Padgett Business Services began franchising in Canada in 1987, and within a few years offices were established in centres across the country.

EXTENSIVE RESEARCH Lorne purchased his franchise in Calgary

in July 2009 after extensive research and consideration.

“At first, I wasn’t aware of any franchise that was delivering the full service offering of bookkeeping, accounting, payroll and tax until I started to do some research on the internet,” said Lorne.

“My initial expectation was to find the more common tax preparation opportunities, but I was pleasantly surprised to see that there were more options. After reviewing the available information, I contacted the ones that I was interested in and after some discussion, I requested a copy of the franchise agreement for review.

“I contacted a friend who is a lawyer and familiar with franchise agreements and he found that the terms and conditions associated with the Padgett Business Services franchise stood out to be the best,” he said.

“This was very important to me, especially given all the costs associated with starting a new business. I didn’t want to enter into a situation where there could be open-ended expenses incurred that were out of my control, and at the same time inevitable based on a contract,” he said.

LEARNING THE BUSINESS Lorne says that the process once the franchise agreement was signed was energising.

“Here I was learning about my own business,” he explains. “The training provided exposure to the software we use, the services and offerings that we have available and the support that comes from the corporate head office to ourselves as franchise owners and to our clients.

“The value here definitely justifies the monthly royalties. A perfect example is when a client has a unique situation; as a franchise owner you are not left stranded on your own island looking for a solution which may or may not be the correct course of action. At Padgett, the situation can be presented to the corporate office where a recommendation is provided based on current resources and experts in their field. That’s something that a standalone office cannot replicate,” Lorne said.

“A bonus was with the materials that are provided. As a business starting out, the materials that were immediately available would have taken endless hours to create.

You can’t make money while you are sitting there trying to design the various stationary and marketing materials.

“Just like I mention to business owners,

Page 23

f ra nchisee in action

Padg et t B usiness Ser v ices

if you’re spending time trying to do the accounting, you are not making money.

Give yourself the peace of mind that it is taken care of and get at what you got into business for in the first place! I’ll look after the accounting, tax and payroll side of things,” said Lorne.

In addition to extensive training and support programs, Padgett Business Services provides franchisees with the tools to run their office from day one, and keep it growing down the road.

A portfolio of proprietary software solutions has been developed that are the essential tools of the franchise owner, including the Padgett Accounting System, Padgett Connect, Paytrak Payroll Services, a high powered CRM solution, and the Padgett Reality Check - an exclusive service that tells clients how their business is doing in comparison with other businesses in their industry.

VALUABLE SUPPORT Lorne says that the ongoing training and support he receives from Padgett is vital to adding to his knowledge, resource and best practices base.

“Every year, Padgett schedules a tax seminar where all of the office owners come together to learn about all of the changes coming in the New Year. In the summer, there are either national or regional meetings where new information is provided and these meetings also give the franchise owners the opportunity to meet and network,” said Lorne.

“With respect to support, I have always found it to be another one of the bonuses that come with being a part of Padgett.

From website design and development to software support; many of my clients can’t believe that we provide them with software that is available to use and every aspect of it is virtually free, which includes IT support,” he said.

The Padgett Support Line is available for all franchisees if there is ever a question that can’t be answered, a problem they can’t solve, or even if all that’s needed is

Page 24

“The training provided exposure to the software we use, the services and offerings that we have available and the support that comes from the corporate head office.” a boost of confidence to answer a client’s question.

Franchisees can also leverage the community of franchise owners in a network of over 100 offices in Canada, and 300 in the U.S. Whether it’s a simple computer question or a complex tax conundrum, the Padgett support team are ready to help find answers and provide solutions.

Lorne says that like any business, you need to put in the effort to get the results, but once established, the flexibility of running your own business can be rewarding.

“On that note, with it being my own business, it is exciting and it does take on a life of its own. I do need to watch how unbalanced my life becomes, but I must admit that it does give me the freedom to schedule activities in my day that would

never happen in any employment role,” said Lorne.

“I’m just so thankful that I made the decision to take my career in this direction,” Lorne says.

“The people that I have met within the Padgett organization, those that provide support to the Padgett organization and those who have also invested into the organization - all the franchisees - we come together to provide a network where we can all succeed and be stronger together.

“It’s great for us and ultimately for our clients, the small business owners!”

If you want to build a business using your business and people skills, Padgett Business Services could be an ideal franchise ownership opportunity.

For further information contact: Phone: 1-888-723-4388 ext 222 Web: www.padgettfranchises.ca/

A hands on approach opportunity.

A new opportunity at your fingertips.

OUR CONCEPT! It begins with this simple concept: affordably priced, conveniently located, top quality therapeutic massage and facials, performed

GIFT CARDS. Ever wonder what to get that special person, friend or colleague for a birthday or holiday — so have a lot of Hand & Stone customers. Our gift

by Registered Massage Therapists and Certified Estheticians. We offer walk-in visits, same day and scheduled appointments, which allow our guests to tailor a revitalizing experience around their busy schedules and take advantage of

card is the perfect gift and provides our spa franchisees with cash on hand for prepaid services.

the spa’s 2800 available massage hours a month.

INTRODUCTORY OFFERS. Regular massage and facial treatments provide for a healthy body and mind. We believe everyone should have access to these benefits when they need it.

That’s why Hand & Stone Massage and Facial Spas offer incredibly priced introductory offers.

MEMBERSHIP HAS ITS BENEFITS. Once our guests experience our introductory offers, many join our monthly lifestyle program. As a member, they receive one therapeutic massage or facial service per month. The result is our franchisees have a base of predictable and recurring cash flow and our guests experience the benefits of regular massage therapy and/or facials.

WHY HAND & STONE? The Hand & Stone team of experienced professionals will assist you in all aspects necessary to start-up and run your new business with confidence!

THE BRAND. A strong branding concept with a logo that is recognizable and a name that immediately conveys our message.

BENEFITS OF OWNING A HAND & STONE. • Proven business model • Relaxed spa environment • Pride of business ownership • Multiple revenue streams – gift cards and retail sales • No prior spa experience required

Hand & Stone Massage and Facial Spa

Contact our VP of Franchise Development:

1550 – 16th Avenue, Building D, Unit #4

Duncan Macpherson

Richmond Hill, ON L4B 3K9

dmacpherson@handandstone.ca

T. 905.737.6467 • F. 905.770.1738

www.handandstone.ca

ex per t advice

Geoffrey Howard

Dos and Don’ts

of hirin g employees in canada

According to the Canadian Franchise Association, the franchise sector represents ten percent of Canada’s GDP and directly employs over a million workers.

Because many franchise systems are in the service sector, they are highly labour intensive. This means hiring and

Page 26

managing employees is one of the key challenges facing franchisees and even franchisors. Yet for many franchisees, starting up their franchise business is the first time they have taken on the responsibilities of being an employer.

With that responsibility comes the risk of unwanted claims and liabilities. This article provides a list of practical ‘dos and don’ts’ for franchise employers in the hiring of staff, focusing on the areas of highest risk. A second article in the next issue will cover the ‘dos and don’ts’ of terminating employees.

Don’t trigger discrimination complaints with job postings or interviews Human Rights legislation (‘Human Rights Laws’) across Canada prohibits discrimination in employment on a long list of prohibited grounds that varies slightly by province but includes well known grounds such as sex, religion, race and disability but also includes lesser known grounds such a family status in some provinces. All provinces ban discrimination in employment even in hiring, including in job postings and interview questions. Only in rare cases

can an employer justify a job requirement which infringes a protected characteristic (e.g. a vision requirement for pilots) as a ‘Bona Fide Occupational Requirement’ (BFOR)that is recognized as a legal exception. Such BFORs must be proven to be necessary, often with expert evidence, not just employer opinion.

It is easy to unwittingly slip into a breach of Human Rights Laws. Posting a job ad for an “energetic young sales rep for new franchise” is actually age discrimination. Ontario has recently gone further by introducing specific requirements for job postings to explicitly invite disabled applicants. So, when drafting job requirements or postings, ensure they avoid prohibited grounds of discrimination and that all physical or other qualifications relating to prohibited grounds can be justified.

Discrimination complaints based on disability are now the most common.

When dealing with disabled job applicants, it is important to understand the full scope of employer obligations under Human Rights Laws. To the surprise of some, employers are required to consider whether they can extend ‘reasonable accommodation’ to

Canadian Franchising

“Because many franchise systems are in the service sector, they are highly labour intensive.

This means hiring and managing employees is one of the key challenges facing franchisees and even franchisors.”

issued guidelines about the scope and use of Internet-sourced information in hiring which can be found on their websites.

Information obtained on-line may also include information about protected grounds under Human Rights Laws, which can create the risks discussed above.

Don’t oversell the position a disabled applicant to allow them to take on a job, even though the applicant has yet to be hired. For example, if a disabled worker needs time off to administer medication during the day or to be excused from non-essential tasks incompatible with the handicap, the employer must consider if that can be accommodated without unduly disrupting the work. There are a few specific guidelines on how far an employer has to go to accommodate and while larger employers are expected to shoulder more expense and inconvenience, smaller franchise businesses are not exempt from this obligation.

Job interview questions can also violate Human Rights Laws. In some provinces, it is expressly prohibited to ask questions relating to protected grounds. For example, the seemingly innocuous question “are you married?” violates the prohibition on requesting information about the prohibited ground of “marital status”. In all provinces, while not explicitly prohibited, asking for such information can be used by the applicant to build a case that he/she was denied employment because of their response.

The solution is to ask questions that do not directly require information about prohibited grounds of discrimination. To illustrate, for an employer worried that a young parent applying for a job may have problems working evening shifts due to child-raising obligations, rather than ask “do you have young children?”, ask “do you have any commitments which could cause you to miss evening shifts?”

Do keep privacy laws in mind when gathering information about job applicants A thorough hiring employer gathers

background information on job applicants beyond what is in their resume or provided by nominated references.

Two frequent sources of background information are former employers not nominated by the applicant and the Internet. Both can raise privacy issues, at least in those jurisdictions with private sector privacy legislation, currently B.C., Alberta, Quebec and federally regulated employers (few of whom tend to be franchises). This legislation will be referred to as ‘Privacy Laws’.

A prospective employer can normally justify gathering additional reference information as “reasonably related” to hiring and thus permitted under Privacy Laws. However, there is no corresponding permission for a former employer to provide reference information without the former employee’s consent. Hiring employers wanting such information need to get the applicant to consent, most conveniently by signing a written consent to such enquiries, and former employers should decline to provide information without some form of confirmation the former employee consents.

Trolling the Internet for information about an applicant is becoming standard practice, but remember the Internet is not always a reliable source. It is difficult to be sure the information found relates to the particular person, particularly for applicants with common names. More importantly, information on the Internet is often out of date or simply wrong.

Remember, there is no accuracy editor for Internet content, nor can applicants expunge erroneous content about them from websites. In some cases, false information about an applicant may have been posted by someone else, perhaps as a joke. Privacy commissioners have

The law expects job applicants to be truthful in their applications and resumes, but expects the same from employers. In some provinces, such as B.C., there are specific prohibitions on certain types of misrepresentations such as overstating pay or hours under employment standards legislation (‘Employment Standards’).

In all provinces, where an employee can show an employer made an intentional or negligent misrepresentation about the job which the employee relied on, the employee can sue for damages suffered when the misrepresentation becomes known. The damages can include loss of income at a prior job the employee left, loss of earnings or moving costs. A few examples of misrepresentations to avoid include: a) For an hourly employee where hours of work may vary, promising specific hours of work; b) Failing to disclose that a new position has been created on a ‘trial’ basis and thus may be eliminated if things do not work out or otherwise only temporary; c) Giving misleading information about possible commission earnings e.g. only telling an applicant what your top sales rep with five years’ experience is earning when average earnings of your other sales reps are much less.

Do require all employees to sign an employment agreement Investing in an employment agreement to be signed by all new employees is well worthwhile. Not only do employment agreements confirm the key economic terms of the relationship, but they can define and substantially reduce the employer’s liability to give

Page 27

ex per t advice

Geoffrey Howard

notice of termination or severance and add protections from some forms of post-employment competition (‘restrictive covenants’). Working with an experienced employment lawyer, it is relatively inexpensive and easy to prepare a template form of agreement to be adapted for each new hire. The agreement should cover basics such as wages, vacation, and any eligibility for benefits or incentive pay (e.g. bonus or commission) including terms of incentive pay.

The termination provisions are the most critical since the parties may never refer back to the agreement until termination.

If there is going to be a probation period, that should be explicitly stated, as the courts do not automatically assume it.

Most importantly, the agreement should spell out what notice, pay in lieu or lump sum severance must be paid if the employer needs to terminate ‘without cause’. Since proving ‘just cause’ for firing employees is difficult in Canada, the vast majority of terminations, including those due to restructuring, lack

Page 28

of work or financial constraints through to “lack of fit” and poor performance not serious enough to be just cause or for which inadequate warnings have been provided, will be ‘without cause’.

Some employers aware of statutory minimum termination notice/pay in lieu requirements under Employment Standards mistakenly assume that this is all they need to provide when terminating. In fact, unless there is a termination clause in place, the courts will award unpredictable discretionary amounts of wrongful dismissal damages which employers often find unduly onerous. For example, in one recent case, a highly paid software sales rep whose sales were poor terminated after only 13 months was awarded five months (!) severance, a decision upheld on appeal.

Note that in Quebec, employers have slightly less freedom to define contract termination notice or pay in lieu than in the rest of Canada.

While restrictive covenants which prevent employees from earning a living after leaving employment are frequently

held unenforceable by the courts, more narrowly drafted protections, for example, restricting solicitation of the clients served by a sales rep for six months or prohibiting the employee from hiring away other employees, can be enforced in some cases. This is an area where employers will need expert advice.

Do stay tuned for more on termination.

The next issue of Canadian Franchising will include an article on the hardest and last phase of the employment relationship: termination. In the meantime, use these tips to reduce risks when hiring employees.

Contact: Gowling Lafleur Henderson LLP Vancouver Email: geoffrey.howard@gowlings. com Phone: 604 891-2279 Note: This article provides general legal information only and should not be relied on as legal advice. Readers should seek the advice of an experienced employment lawyer on specific problems.

feature

Retail Franchising in Canada:

Why it works

feature

Retail

Now is a good time for retailers in Canada. With the training and support provided by franchisors, itâ&#x20AC;&#x2122;s an even better time to be a retail franchisee.

Itâ&#x20AC;&#x2122;s a nearly universal truth: people love to shop. Whether itâ&#x20AC;&#x2122;s for the necessities of life, gifts for friends and family, or indulging in our own weaknesses, there is something that we find so satisfying about finding just the right item, and taking it home with us. As a result, the retail industry in Canada is alive and well, contributing in excess of $70 billion to the Gross Domestic Profit in 2011.

Current retail trends Retailers are driving traffic through the use of direct mail, online ads, digital and group buying coupons, locationbased offers, QR Code-based marketing, in-store marketing, social media, and mobile application technology. In fact,

Page 30

one of the major trends in the retail industry right now is a move towards a more technologically based marketplace, driven by mobile applications.

According to the Retail Council of Canada (RCC) 40 percent of Canadian retailers will use mobile technology to interact with their customers within the next three years, 24 percent this year alone.

At this point, Canadian retailers are slightly behind the US in terms of the breadth of our app-related retail technology, but that may be to our advantage as it gives retailers not yet on board with mobile technology the opportunity to learn from and improve on what has already been done. Canadian

Canadian Franchising

retailers have also been found to be more willing to outsource, a move which puts us in position for bigger leaps in innovation.

The shift to mobile technology is largely in response to customer demand. We’ve reached the tipping point where mobile applications have become an expectation in the retail world, be it a specifically designed iPhone or Android app for mobile purchasing, or something as simple as a mobile-optimized website.

In a survey compiled by IDC and RCC it was found that 42 percent of retailers had plans to increase their capital spending as an investment in their business. Of that 42 percent, 44 percent said they would be increasing their spending on technology.

This includes technology for workforce management, as well as for mobile apps.

While there is cost involved for retailers in setting up this technology, there are some definite benefits as well, and reasons why it’s important for retailers to give careful consideration to the role that technology will play in their business.

Mobile apps have the advantage of making purchases convenient, leading to increased sales. This in turn produces a greater customer experience and customer loyalty. Brand presence is also crucial in today’s market. No one wants to be left behind where there is an opportunity for brand exposure. All of these benefits go a long way towards outweighing the cost associated with the set up and maintenance of mobile apps.

For a retail franchise, mobile apps are one of the areas where franchisees will really feel the benefit of belonging to a franchise. The costs associated with mobile technology are going to be prohibitive for a small single unit business. But with a franchisor behind the app development, a single app can be used by multiple franchises at very little cost to individual franchisees.

Another interesting trend in Canadian retail is a move towards more sustainable and environmentally friendly business practices. Retailers are choosing to support sustainability by reducing waste,

saving energy, and curbing emissions.

This is a challenge in an industry that is driven by product proliferation and consumption, which raises the question: Is sustainability compatible with economic growth?

In 2011 the Canadian Tire franchise spent an estimated $6 million for ongoing integration of environmentally sustainable practices which included lighting and HVAC upgrades, changes in product packaging, and increased efficiency in transportation of inventory.

As with technology upgrades, while the initial expense may seem prohibitive, there are numerous benefits.

Being ahead of the curve in sustainable practices allows a business to capture the market advantage, improve competitiveness, boost brand reputation, and win customer loyalty. You just can’t put a price tag on some of these items.

And just like with mobile applications, being part of a franchise makes the move to more sustainable practices that much easier and more cost effective. Each

Page 31

feature

Retail

you don’t have to start from the ground up in building a brand reputation, you can expect profitability on a much shorter time frame. Sangsters Health Centres Franchise has been leading the way in the natural health industry in Canada since 1971. Nutrition House, also an early leader in the natural health industry, has thirty years of history behind its brand.

Both of these franchises bring with them the credibility and recognisability that consumers look for in a retail brand, especially when it comes to something as important as health products. Even if you have all the right knowledge and product, if you open your own natural health retail store, it’s going to take much longer and greater effort and expense to market yourself as an expert. Aligning yourself with a trusted brand takes some of that effort and risk out of the equation.

Cost is another factor you’ll want to consider when choosing between a retail franchise, or a stand-alone location.

While franchise’s require an initial investment, you’ll find that in many cases, that amount is less than what you would invest into an independent business, especially when you consider that start-up time for a franchise is going to be significantly less, and as we all know, time is money.

“When you don’t have to start from the ground up in building a brand reputation, you can expect profitability on a much shorter time frame.” individual unit owner does not need to re-invent the wheel for every sustainable practice they put in place.

The franchise company can take responsibility for researching best practices and how to implement them to best meet the needs of franchisees.

If you are giving some thought to buying a franchise and you feel strongly about operating a business in a sustainable and responsible manner, you’ll want to do your research and ask those types of

Page 32

questions of your prospective franchisors.

Other reasons to consider a retail franchise If you are considering a career in retail, there are a number of additional reasons to consider a franchised business, as opposed to starting your own brand and working alone.

One of the advantages of operating a retail franchise is the established brand history in the retail community. When

The training and support you’ll receive from a franchise for your business opening will make the process significantly easier than going it alone.

Hand & Stone Massage and Facial Spa provides all new franchisees with an extensive three week training program, and continuing support right through the grand opening. This training includes a focus on business management skills, marketing, membership sales, staffing, administration, and basic accounting.

Hand & Stone Massage and Facial Spa wants each of their franchisees to have the processes, tools, training, and support required to provide a positive experience to each of their franchisees’ guests. If an individual has to invest the time and money to self-train, it slows the progress of the business, and delays a successful and profitable opening.

Youâ&#x20AC;&#x2122;ll find another cost-saving benefit to being a retail franchisee in your inventory. Ordering small quantities of product for a single retail outlet can be prohibitive. Retailers end up either taking a hit in their profits, or passing that cost on to the consumer. Either way, nobody wins. Metal Supermarkets franchise is the worldâ&#x20AC;&#x2122;s largest supplier of small quantity metals. Ordering small quantities of a specialty product can often be expensive, but the buying power of the franchise allows Metal Supermarkets to distribute product to all their retail units, and the savings and convenience are passed on to their customers.

The future is bright Consumers generally look for the best value for their money, without considering the long-term ramifications

of their shopping choices. One of the ways we see this take place is in crossborder shopping. In the most recent federal budget, the individual 24 and 48 hour limits on goods that may be imported duty and tax free by Canadians returning from abroad. While at first glance, this seems like bad news for Canadian retailers, there is also good news. In response to the increased duty-free amounts, the RCC has begun working with the government to reduce or eliminate tariffs on the import of finished goods for retail sale. This will create a level playing field to compete with cross-border shopping. The Canadian governmentâ&#x20AC;&#x2122;s economic action plan, and the proposed review of tariffs for imported finished goods, are both good signs that the government is placing a priority on the Canadian retail industry.

Retail Franchises Featured in this Issue: Metal Supermarkets........................ 42-45 Hand and Stone........................................ 25 Northside Autosports............................ 34 Sangsters..................................................... 37 Midas............................................................ 41

f ra nchisor in depth

N or thside A llia nce G roup

Automotive Enthusiasts

callin g all

other items. Basically the concept was turning into the location for everything standard garages and dealerships had trouble servicing and selling. And it was all in one place.

By 2005 the business had grown into a 4000 square foot outlet in Halton Hills, servicing upwards of 3000 retail customers and over 100 standard garages and dealerships in the area. In 2008 the company expanded into York region, opening its second location in Vaughan, Ontario.

If you’re an automotive enthusiast, you’ve probably already heard of Northside Autosports.

They are the main brand operating under the parent company of Northside Alliance Group (NAG) and are known as Canada’s fastest growing aftermarket automotive chain – with good reason!

Page 34

The reason behind that claim is simple.

They are doing what no one else does.

And they do it well, providing an unmatched level of product and service to their clients, and intensive training and support to their franchisees.

In October 2002, after two years of home-based operations, Graham Ovenden opened a “Northside Automotive” location in Halton Hills, Ontario. The outlet quickly grew in popularity and was soon drawing customers in from as much as a two hour drive away. The outlet operated as the region’s first “automotive speciality shop.” In 2004 Graham and his team added to this proven concept by adding in detailing services, tire and wheel service, a full range of installations, audio and security sales and a large selection of

In 2009, Graham and his team announced the opening of a new company (Northside Alliance Group O/A “Northside Autosports”) for the exclusive and dedicated purpose of building relationships with strong retailers, as a franchise.

Northside Autosports: a ThreeFold Concept Sales - From the sales floor all locations have access to the top brands in tires, wheels, performance parts, audio & security parts, vehicle outfitting parts, accessories, exhaust & muffler supply, synthetic lubricants, and a ton more. If it’s made and distributed in North America the team will find it!

Detailing and Polishing - All locations are fully equipped to deal with all detailing and polishing needs. The brand specializes in complete packages and services for retail clients, fleets, dealerships and garage business.

Specialty Installations and Service - All

Canadian Franchising

locations can do tire and wheel service, performance modifications, hitch installations, accessory installations, audio installations, security installations, etc. Everything sold at Northside Autosports can also be installed and serviced on site.

Currently there are eight Northside Autosports locations in operation, five in the Greater Toronto Area, one in Ottawa, and one in Winnipeg. There is an additional ten franchises units in the planning stages in Saskatchewan, Newfoundland, New Brunswick, and in other parts of Ontario.

NAG feels that rapid growth is needed, at a rate of one unit opening approximately ever month, but is careful to not allow this growth to exceed its ability to properly support its systems. The protocols which it needs to follow to properly approve someone for a franchise also gives the brand an added layer of security protocol to protect from this ever happening.

Northside Autosports is the amalgamation of everything the service industry has to offer outside of what your normal mechanic and dealer does.

Their focus is selling and installing new technologies/modifying vehicles for varying uses (performance, fuel mileage, commercial conversion for work, etc).

There will be always be a demand for vehicle modifications of some type.

Northside Autosports has built relationships with over 50 global supply

“Franchisees need to have a passion for the automotive industry, and also be trainable.” and distribution companies, allowing their franchisees access to over 10,000 different brands, more items than 99 percent of the North American competition, without requiring a large amount of inventory on site. The suppliers believe in the concept and are diligently working at ways to provide stronger logistical solutions, allowing Northside Autosports to not only be a market leader but be the first to put all specialty facets of the automotive market under one roof, in an easy to use business system. Northside Autosports is a similar to a department store in the range of products it offers, and is a truly versatile business concept which is of high interest to several high impact demographics (enthusiast buying, professional firms, high-end luxury purchases, contractor supply, high-end vehicle maintenance).

All outlets work off similar floor plans, and break down their offerings into three main areas: sales floor, detailing area, service and installation area.

Consistency is a staple throughout the concept. Most inventory on the sales floor is deemed “point of sale” only. This keeps the showrooms easy to maintain, keeps inventory costs to a minimal level, and allows the franchisee to maintain a consistent floor plan and feel to the location’s showroom at all times.

Becoming a Franchisee The initial investment for a tier one location is about $109,000. That’s the full investment, with approximately $29,000 required as an initial investment.

Franchisees need to have a passion for the automotive industry, and also be trainable. Management experience or a sales and marketing background are also key assets. Franchisees don’t need to be mechanics, but if they choose to offer standard service, they would need to hire trained mechanic staff. In terms of location, a 1300-5000 square foot facility is required, including a storefront, drainage, GFI outlets, and space to incorporate a life, tire machines, a compressor, and an area for servicing.

Northside Automotive provides two levels of training for all franchisees.

Some of the Level One modules can be completed at home and cover topics such as: Managing Employees, Managing and Understanding Customers, Managing Business Systems, Administration, Relationship Building, Marketing, and Operating Protocol Review.

Level Two training is generally administered by trainers at your location once construction is complete, and consists of 8-10 specific training modules which cover the basics of all service

Page 35

f ra nchisor in depth

N or thside A llia nce G roup

facets of the concept (performance upgrades, detailing, polishing, audio, truck and van accessories, etc).

Regardless of the franchisees previous experience, all applicants must complete the Level Two course, to maintain brand consistency.

At the end of both levels of training all applicants complete their “MQ1” multiple choice qualification test. Completion of this test, with a grade of 85 percent or higher, qualifies one to run a Northside Autosports location.

Support Programs NAG provides a full range of support for their franchisees. There are grand opening campaigns pre-planned to help with opening a new location. “Health

check audits” examine the appearance, marketing, sales, management and protocol implementation of each unit.

Website and internet marketing support and strategies are in place, including social media support. A localized quarterly marketing plan review ensures maximum impact and consistency with national marketing campaigns. All of these support strategies are implemented by a head office support team who take a keen interest in the success of each of their franchisees.

Brand Expansion In 2012, NAG launched their second brand, Dominion Auto Centres, which will have three locations opening in early 2013. Dominion Auto Centres is a basic service garage which also does windshield chip repair, towing and hitches, tires and more. This concept is a smaller version of what is in the market right now with a lower operating budget and lower consumer costs of service.

“With both of our brands, we look for franchisees who are personable, with good networking ability,” says company founder Graham Ovenden. “Passion for

Page 36

cars is also something that has to be in there.”

For more information, contact Northside Alliance Group: Web:

www.canadianfranchise opportunity.ca/Home.html

Products Replacement auto parts, tires, wheels, accessories, lighting, hitches & towing accessories, performance parts, race equipment, audio, alarms, remote starters, vehicle tracking systems, auto body supply, exhaust systems and mufflers, body kits, hoods, diffusers, suspension components, lubricants and fluids, vehicle outfitting

Services Detailing, tire and wheel service, installations, exhaust repair, light service, performance upgrades, audio and electronic installations, on-site installation and service jobs available for dealerships and companies with fleets

Canadian Franchising

put a passion for healthy living to work for you

BUSINESSÑOPPORTUNITIESÑAVAILABLEÑINÑ ÑRETAILÑMODELSÑTOÑFUL´ÑLLÑYOURÑGOALSÑ ÑDREAMSÑ

jÒÒnatural remedies jÒÒvitamins jÒÒnatural body care

jÒÒsports nutrition jÒÒorganic foods jÒÒherbs

jÒÒeco cleaning items jÒÒnatural cosmetics jÒÒgluten-free foods

jÒÒnatural meats jÒÒnatural pet care jÒÒvegan foods

for more information visit us at

www.sangsters.com/franchise

Page 37

ex per t advice

Michel Gagnon, President, Davier Consultants Inc.

INTERNATIONAL FRANCHISING

A few years ago on a trip to some North African and Middle East countries, we presented a series of seminars on franchising to local business people.

With the support of the regional Canadian Embassy Trade Commissioners, we were witnesses to a growing trend to start franchise systems

Page 38

from existing businesses and a strong interest to acquire the master franchise rights from North American franchisors and in particular from Canada.

Franchising has really taken a growing role in the world economy Over the last 10 years, as more and more countries have made modifications to their legislation to recognize issues such as intellectual property protection, trademark registrations, and other legal aspects important to franchisors.

Many countries in Western Europe are already quite heavily involved with franchise systems of their own, such as France, Germany, Italy, to name a few, which have tens of thousands of franchisees from thousands of different franchise systems already in place.

Countries like China and India are interested in attracting established Canadian, American and European franchisors in their country with eager potential master franchisees interested in developing known and serious brands in their market. Already the two largest countries in the world have thousands of

Canadian Franchising

systems either home grown or from Europe and a few from Canada.

provide management competency and not only have a large bank account.

This opens up the door for Canadian systems, which are welcome in mostly all countries in the world, to seriously consider expanding outside of the continent and into markets where the consumer is eager for new products and services delivered in a constant and recognizable format.

There must be a sharing of some core values and a shared long term vision.

This will only be achieved with face to face meetings in both countries.

There are interesting opportunities for Canadian growth in North African markets, some of which have gone through dramatic changes recently.

Eastern Europe markets are also embracing franchising as their middleclass grows and demand for North American products and services increase.

Typically, Canadian franchisors will cover well their home markets: Ontario, Western and Eastern Canada and Quebec, and then will expand in the rest of Canada. When that is accomplished, they have covered a market potential of 32 million people spread over thousands of kilometres. There are markets in the world with that many people in a city! (A slight exaggeration, of course!)

It is time for Canadian franchisors to spread their wings on a global basis. Of course, international expansion is not for everyone. It should be reserved for mature, structured, flexible and patient franchisors.

franchisees.

Australia is a well-developed franchise market and always looking to expand outside its borders. Already there are a few Australian concepts in Canada, with Canadian master franchisees!

A country like South Africa, the largest franchised African Country which boasted over 430 franchisors and almost 24,000 franchisees in 2002, has been expanding some of their brands in North America and in Canada in particular.

Morocco is now a relatively large franchised market with hundreds of

It should not an opportunity for a quick cash grab of initial franchise fees and then leave the local master franchisee to himself or worst sell the rights to the first organisation with money but with no valid expansion plan in mind or competency in building a franchise system.

Choosing the right master franchisee Thia is in fact more complex than recruiting our local franchisees as you can appreciate. Business conditions, consumer taste and behaviour will very likely be different. Building conditions, real estate, financing, the legal environment and procurement must be mastered locally. The master franchise organisation must have proven success in growing a business in that market and

We teach new Canadian franchisors to think long term and consider that the real objectives are the royalties on growing sales from an increasing number of franchisees and not to rely on initial franchise fees as the main source or revenues. International is the same or should be viewed as the same objective.

How do we accomplish our goals in Canada?

With proper franchisee selection, good training programs, strong real estate selection, creative marketing strategies, adequate financing and ongoing support in all aspects.

It is no different in another country but we typically partner with a local and knowledgeable master franchisee who will work with the franchisor reaching the same objectives!

Letâ&#x20AC;&#x2122;s discuss the financial considerations When a franchisor grants a franchise here in Canada, the typical arrangement is as follows: There is an initial franchisee fee paid at the time of signing the Franchise Agreement. The average fee as we know is $25,000 for a five to 10 year agreement with renewal options. The initial fees is meant to cover the costs related to recruit and train the franchisee and absorb some the initial set up costs of the franchise system. Thereafter there is an ongoing royalty on sales, averaged at 6 per cent of sales. Of course there are many permutations to both this initial franchise fee and the royalty rate, but to simplify this article, I am using the averages as indicated in the usual franchise publications. The royalty is the main source of revenues for most franchisors and the fairest as it is tied to growth for both franchisees and franchisor.

If the system includes a master arrangement in another province such as

Page 39

ex per t advice

Michel Gagnon, President, Davier Consultants Inc.

Quebec for example or an area franchise arrangement is put in place, there is a sharing of these initial fees and royalties with the master or area franchisee which will be based on the sharing of the duties between franchisor and area franchisee.

With a master agreement for a country, the logic is the same. The fair deal is to arrive to a compromise in which all parties can make money by growing the franchise system. The initial franchise fee will typically be higher since the master has now the opportunity to recruit many franchisees and collect franchise fees and royalties. But the master franchisee will have substantial costs in setting up an organisation to recruit and develop the brand in a new market. It is common at this stage to agree to the potential of new franchises in the market over time in order to determine a sensible initial fee for the rights to the country.

It is crucial that the master franchise candidate and his senior management team be properly trained at Head Office and probably on site. It is common that the agreement insists of the setup and running of at least one corporate unit for a certain time as well.

Usually there will be a sharing of the ongoing initial franchise fees collected by the master from his own franchisees.

The master should retain most of these fees since he is doing most of the work in finding, recruiting and training these franchisees.

The same should be done for the ongoing royalty stream. The franchisor usually collects between one and two per cent of sales, leaving the master to retain the balance in order to provide for a strong support team and organisation to grow the system.

The key is to find the right people, make sure that you have done jointly your homework on what needs to be done to have your brand successful in another country and properly train and support your partner and he must do the same for his franchisees.

Opportunities are created every day Canadians should embrace change and play a greater role in the international

Page 40

â&#x20AC;&#x153;It is time for Canadian franchisors to spread their wings on a global basis.â&#x20AC;? arena and franchising is one of them!

Michel Gagnon is the President and Senior Consultant of Davier Consultants Inc, a Management and Franchise Consulting firm established since 1994. Davier Consultants has worked for a number of large and small franchise systems in Canada over the years and has been involved

internationally in prior years in Europe and Africa. Michel is also serving a four year term on the Board of Directors of the Canadian Franchise Association.

Contact: Phone: +1 514 620 3770 Email: info@davierconsultants.ca Web: www.davierconsultants.ca

Midas Franchise Opportunities

Midas is one of the worldâ&#x20AC;&#x2122;s largest providers of automotive service. We offer a range of total car FDUH RSWLRQV WR ÂżW WRGD\ÂśV FRQVXPHUVÂś GHPDQGV $V D 0LGDV IUDQFKLVHH \RX EHFRPH SDUW RI D PXOWL ELOOLRQ GROODU LQGXVWU\ VHUYLQJ D JURZLQJ YHKLFOH population. Join us while we continue to expand throughout Canada. :LWK QHZ WUDGH DUHDV DOUHDG\ LGHQWLÂżHG ZH DUH UHDG\ WR KHOS \RX HVWDEOLVK \RXU 0LGDV ORFDWLRQ

Build your future with a leader . . . put your trust in the Midas touch!

Contact Us Now! You can visit our ZHEVLWH www.midasfranchise.com or call 800.365.0007

f ra nchisee in action

M etal Sup e r ma r kets - M a r k H o enen

from

meat to metal Working as a butcher for a small local shop, Mark Hoenen was ready for a change. He decided it was time to be his own boss.

After reading a newspaper article about Metal Supermarkets, Mark found the concept interesting and investigated further.

“The franchise was a relatively new concept in the metals industry. Most larger metal service centres have minimum orders and the customer can only purchase full lengths of materials.

With Metal Supermarkets, we have ‘no minimum order’ and can sell the customer exactly what they require,” Mark said.

Page 42

Mark purchased his Metal Supermarkets franchise in 1996.

Metal Supermarkets is the world’s largest supplier of small quantity metals, and prides itself on being the number one source for small quantities of any metal, cut and ready fast.

With no minimum order, Metal Supermarkets provides over 8,000 high quality metal products, shapes and grades, and will cut to size. With unsurpassed service and fast delivery or local pick up, Metal Supermarkets is a one stop shop for all metal needs.

Successful concept Metal Supermarkets began with a single store in 1985 in Ontario.

The unique concept was so successful that numerous franchised and corporate stores were added in the ensuing years.

Now with over 50 franchised locations

and 25 licensees in the United States, Canada, England, Scotland and Austria, Metal Supermarkets has steadily grown to become the largest provider of small quantities of metal worldwide.

For Mark, owning his own Metal Supermarkets franchise has been very rewarding.

“Owning your own business has some great satisfaction,” says Mark. “You feel like you have accomplished something at the end of the day.

“Like owning any business, it has its ups and downs, but if you work hard you can reap the rewards it offers.

Metal Supermarkets has the base of the program down and are willing to help you with any questions that may arise,” Mark said.

“Also, the other franchisees are very helpful and are only a phone call away,” he said.

Canadian Franchising

“You will invest in solid business assets and inventory not prone to theft, spoilage or obsolescence.”

Support Mark says that in terms of training and support, Metal Supermarkets have been there every step of the way.

“Metal Supermarkets provide 24/7 on call phone support, monthly safety bulletins, up to date IT information, franchise advisory council meetings, comprehensive marketing program, monthly sales meetings via conference call and webinar, and the yearly conference, which we attend.

“One of the things our two stores use daily is that we can look at all the inventory across all of the stores in North America. This really helps if you need to source something unusual. You can find out where that franchisee has purchased the material, for how much, and the contact details. This is a real benefit because the contacts are already in place for you with good pricing and delivery times, so you can reply to your customer’s quotes fast!

“As one of our sayings goes ‘At Metal Supermarkets our commodity is Metal, but our business is Service.’

Take control of your future Andrew Arminen, Vice-President Franchising Metal Supermarkets, says Metal Supermarkets’ franchisees can utilize their previous business development and management skills to their fullest extent.

“You will invest in solid business assets and inventory not prone to theft, spoilage or obsolescence. As the only national or

international franchisor organization in this field, we understand what it takes to operate in this business environment,” Andrew says.

As was the case with Mark, you do not necessarily need to have a back ground in ‘metals’.

“Although ‘metals’ as a background is helpful, it is not a necessity in undertaking a franchise,” says Andrew.

“Many of our successful franchisees have not been from the ‘metals’ business.

If you have a strong sales or business background, and a willingness to learn, we can train you on the ‘metals’ portion of the business,” he said.

Build a tangible business Metal Supermarkets’ customers come largely from the Maintenance, Repair and Operations areas of a wide array of companies.

“Using our business model you will acquire customers in this untapped marketplace,” says Andrew.

“It should not take long to build a loyal customer base once you’ve shown how convenient it is to use Metal Supermarkets.”

Metal Supermarkets will assist you by: • Training you on how to properly operate a Metal Supermarkets store through in-class, in-store and onsite training programs

physical layout of your store.

Working with approved vendors Metal Supermarkets will mutually: • Develop a store model with all equipment, inventory, machinery, racking and Point of Sale systems.

• Develop a store specific marketing and action plan so that you can get off ground quickly and efficiently.

• Work with you on developing the business in your local market.

• Selecting a physical store location

Experienced Field staff will:

• Work with you on lease negotiations, leasehold improvements and design the

• Work with you and assist in all aspects of opening and running your store.

Page 43

f ra nchisee in action

M etal Sup e r ma r kets - M a r k H o enen

• Assist you in implementing our sales and marketing program.

• We will assist you by generating a qualified store specific database of potential customers.

• Guide you through the steps of sales, operations, and store management to assist you in making your store a success.

The typical timeframe for opening a store is 12 weeks from the time a site lease has been signed.

A secure investment Listed below are the minimum requirements for undertaking a single Metal Supermarkets franchise location.

Upon further review of your application, Metal Supermarkets will provide more detailed information as prescribed by the Federal Trade Commission in its Uniform Franchise Offering Circular.

These costs should not be construed as the actual cost you will undertake, as some items can vary depending upon local market conditions.

• Franchise Fee: $39,500 • Equipment: $50,000 • Initial Inventory: $70,000

Total: $285,000 The franchise fee covers you for access to the system, the rights to operate the system in a particular area for 10 years, and also the ability to utilize the trademarked name and logo. Royalties start at six per cent of your gross sales, and decline on a sliding scale dependent upon the level of monthly sales you achieve. Royalties are paid monthly.

Metal Supermarkets does not provide financing for prospective franchisees. In order to undertake a Metal Supermarkets franchise, and to qualify, you will need to invest approximately $125,000 of your own capital.

We’ll help you reach your goals “Metal Supermarkets work very hard to market and support all our franchise stores,” says Andrew. “After all, our success depends on your success.”

Metal Supermarkets’ will: • Help you select your store specific site and help you negotiate the lease.

• Provide you with extensive help in setting up your new store – including setting up your opening inventory and completing your first sale.

• Initial marketing: $15,500

• Provide comprehensive training programs.

• Operating Capital: $110,000

• Provide proven direct mail and

Page 44

other marketing programs that will effectively introduce your new store to the targeted customer base in your territory.

Metal Supermarkets provides you with a variety of tools you need to market and grow your business, including but not limited to: • Advertising Materials • Metal Supermarkets® Web Site • Store Specific Software Programs • Direct Mail Programs • Training and Opening Manuals • Franchise Advisory Councils • Lease Negotiations • Trade Show Booths Sound like the right franchise for you?

Metal Supermarkets is an ideal business to consider if you have sales or general business experience, particularly in Metals, other Industrial Products or Services distribution.

If you would like to speak confidentially with Metal Supermarkets regarding the purchase of a location, please contact Andrew Arminen, Vice President Franchising, on: Tel:

Web:

(905)-362-8226 or 1(800)-807-8755. www.metalsupermarkets.com

Looking for for your your next Looking next career? career?

• I n ve s • Hom • Busi

Find out how we turn metal into money.

IFG franchisees provide short-term working capital fo Investment – less then $100K their invoices at a discount.

Home-based | Business-to-Business Outstanding ROI & Modest Investment

Let’s talk. We’re the first and only franchisor and the market leader in the lucrative Canadian small quantity metals market. With locations across Canada we invite you to learn more about our proven and profitable business.

Call now to secure the final few available markets, including the Maritimes, Oshawa, Windsor, Regina and the BC interior.

Contact Andrew Arminen Vice President Franchising

905-362-8227

aarminen@metalsupermarkets.com

NO Employees, NO Storefronts, NO Inventory IFG franchisees provide short-term working capital by NOpurchasing Long hourstheir or travel – work for small business invoices at a with local bus discount. Interface has been in the Invoice Discounting busines America’s leadingInvestment alternative funding source for sma • Outstanding ROI & Modest as a World-Class Franchise for the past 7 years by th • NO Employees, NO Storefront, NO Inventory ®

To learn the ultimate profe • NO Long hours or travel - work withmore localabout businesses David Banfield, Presiden Interface has been in the Invoice Discounting 800-387-0860 or 905-475-5701 • ifg@inte business since 1972 and is North America’s leading www.interfacefinancial.co alternative funding source for small business. IFG has been certified as a World-Class Franchise for the past 7 years by the Franchise Research Institute.

To learn more about the ultimate professional franchise David Banfield, President 800-387-0860 or 905-475-5701 • ifg@interfacefinancial.com www.interfacefinancial.com

T H E

N E A Z I M A G

HIRIN

F O R

E S m I S E ne.co N C H agazi hisem F R A nfranc

w w w. c

anadi

ISS UE

Franchising

DIAN

201 2 1 - NOV

When potential franchisees sing look for new possibilities, Franchi you’ll want them to ¿QG \RX KHUH $5.95

Canadian

CANA

a

G

Dos and Don’ts LOCA

TM

TION

TION

N LOCATIO

LOCA

CHOO

SING

GHT THA TETRI ERS

WHY

ONE

M

LOOK

GING BRIN ACK AL B SOCI

AT

Retail Canadian ing Franchis

-D AN IN

EPTH

BROWNSE WITH US SOCIALHO

1 ICE Page S’ ADV

LIER SUPP M FORU

LATE ST

NEW S

FINA NCIA

ICE L ADV

FRO M

KS THE BAN

YER TOP LAW

Contact Jenn Dean, your Sales Executive, for global solutions on your multi-media advertising approach. jenndean@shaw.ca, 250-590-7116 CGB Publishing has almost 30 years of experience in providing high quality business information, with a particularly strong focus on franchising. CGB has been a leading publisher of business publications and leisure magazines throughout Australia and New Zealand, the United Kingdom and Canada.

Successful publications include Business Franchise Australia & New Zealand, UK Business Franchise, Canadian Business Franchise, Travel Canada, and Spa & Pool.

www.canadianfranchisemagazine.com

Interested in starting your own ACCOUNTING & TAX PRACTICE? Are you motivated to build a growing business?

Give us a call.

We are Canada’s leading Accounting & Tax Franchise.

We will provide: - Expert tax & technology support - One-on-one training - State-of-the-art systems - Proven marketing tools & techniques Padgett Business Services The Small Biz Pros since 1966 120 franchises in Canada, 400 in North America For information on how we can help you reach your goals faster, visit us at www.padgettfranchises.ca, or call 1-888-723-4388, ext. 222

ex per t advice

David Banfield, President, Interface Organization

FRANCHISING into growth

But what about a business that adds something to a local community which, in turn, leads to national benefits? Many franchisees in fact fall into this category, albeit in a limited way.

The days are long gone when the thought of franchising only embraced fast food and automotive services.

There is a veritable plethora of concepts that have evolved into successful franchise opportunities, and many wouldbe franchise entrepreneurs are spoiled for choice when it comes to selecting a business model to follow.

In looking at potential franchise opportunities there are many pitfalls for the would-be entrepreneur to avoid. One of the most common is believing that you can turn a hobby into a successful franchise. Rarely does such an action

Page 46

succeed - as a hobby is just what is says it is - a hobby and not a business.

In the search for a franchise that works for an individual, one of the common goals is for an individual to seek “job satisfaction” or, perhaps more rightly, “ownership satisfaction.” In many cases, that satisfaction comes from not only embracing a franchise concept to the point of profitability, but also embracing to the extent of either giving back or enhancing the community.

Franchising as Job Creation There are many franchise opportunities that claim to be “environmentally friendly” and franchisees of such enterprises can certainly have a sense of well-being that their business is not harming the environment in any way.

The award of a franchise is effectively the creation of a new “job” and, as such, there is benefit in terms of an increase in the employment rate and the tax base, both on a local and national level. If that franchise, in turn, hires people to work in the franchise, then there are further benefits based on the number of positions that are created. In such instances, however, the number of jobs created is usually finite. Specific franchise locations rarely grow and grow - they reach a certain plateau based on the assets available to operate a specific location.

The Interface Financial Group franchise, on the face of it, does not seem to fit into the “job creation” model. Interface franchisees are invariably one person operations. They operate from a home office base with very limited physical assets needed. A typical Interface franchisee needs only a telephone, fax machine, and computer with a good internet service to get started. This is hardly a model for job creation on any sort of scale.

However when we take a look at the underlying Interface service, the picture changes dramatically. Interface has just celebrated 40 years in business. During that four decade time period, they have basically provided a single financial service. Although they have certainly

Canadian Franchising

been tempted many times to branch out into ancillary services, they have always resisted on the basis that it is better to be an expert and market leader in one area, than try to deliver a menu of services at a lower service level.

Interface has operations in seven countries, and all franchisees operate on a single system providing the same service with the same high degree of personal service in all jurisdictions. Interface franchisees are invoice discounters. We should say at the outset that this is not a factoring service - it is often confused with factoring, but invoice discounting is a stand-alone and distinct service in its own right.

Interface franchisees provide short term working capital through the purchase of a portion of a company’s invoices. This purchase program effectively accelerates the cash flow for the client company and creates immediate working capital to grow the business. Typically, in most countries, goods and services are sold and delivered on standard Net 30-day terms. These terms were originally designed to give the customer 30 days’ grace before they had to pay their supplier. Unfortunately, in times of economic uncertainty customers often take advantage of such credit privileges and withhold payments for 40-60 days. This naturally causes problems with the supplier company as monies they had been counting on to run their own business are not immediately forthcoming. Invoice discounting can alleviate this hardship by purchasing the invoice at the time that the goods are delivered, or the services are rendered, thus taking the waiting period out of the transaction for the supplier.

In this transaction the invoice discounter, the Interface franchisee, legally buys the invoice, and the customer is notified of the sale and directed to pay the Interface franchisee at the end of the agreed credit period. When the franchisee makes the purchase, they do so at a small discount, and this discount represents their profit in the transaction. It also represents the cost of financing for the client company.

There is no monetary impact on the customer, who is obligated to pay the

“In many cases, that satisfaction comes from not only embracing a franchise concept to the point of profitability, but also embracing to the extent of either giving back or enhancing the community.” invoice in full, either to the supplier or, if sold, to the discounter.

Helping Small Businesses Grow Interface franchisees typically work with small and medium-sized enterprises that are experiencing rapid growth.

They, however, are unable to attract conventional funding to fuel that growth.

For companies that are caught up with this “over trading” scenario, Interface franchisees are able to facilitate their growth and help elevate them to a level where, maybe in one or two years’ time, conventional financing will be more readily available.

How does all of this equate to job growth? Clearly it does not from the franchise point of view because, as we have previously stated, Interface franchisees tend to be one person operations. Where it does come into play, however, is with the client companies that Interface finances. These companies are using the Interface invoice discounting facility because they are growing. Once invoice discounting becomes their financing approach they will tend to grow, often at an exponential rate. This growth translates into higher levels of inventory purchase, resulting in high sales levels that Interface is financing and, as a result of those increased sales, client companies will start to create new jobs as well as enhance their position in the community. Through their increased purchasing power, they may also create more jobs with the suppliers, and so on.

Since Interface franchisees deal with numerous clients on a regular basis, the job creation situation becomes multiplied over the client base – as clients grow and graduate to more traditional forms of finance, new companies replace them and become Interface clients, and the process

starts over again. Interface franchisees are, therefore, genuine creators of jobs through the financial help that they are able to provide to their clients. The number of jobs is also not finite as franchisees deal with many clients on an ongoing basis.

For entrepreneurs seeking to create not only a profitable business for themselves, but also one that reaches out into the community, the Interface franchise contains all of the appropriate components. Interface franchisees are mature business people who have, in many instances, owned or worked in businesses that suffered from a lack of regular cash flow. As such, they are readily able to empathize with the growth pains experienced by their clients. Not only are Interface franchisees able to empathize with their clients, but they also provide a viable and lasting solution to the problem - it’s a win-win solution.

David Banfield received his professional credentials in banking and credit management in the United Kingdom, where he held positions in both the banking and factoring industries.

In 1975, after fifteen years of service in various sectors of banking operations, David was appointed Vice President and Manager of Mercantile Bank & Trust Co. Ltd. From 1978-1986, he was Vice President of Walter E. Heller Financial Corp. He was subsequently named President of Interfax Financial Services Limited, a position he held from 1986-1990.

David was named President of the Interface organization in 1991 and has played a significant part in the successful development and growth of the Interface organization.

For more information: Web: www.interfacefinancial.com

Page 47

Your single source for franchising At BMO Bank of Montreal®, we understand that a franchise is both an opportunity to reach your financial goals and a commitment to building a strong business. That’s where we can help. Our free Franchise Guide includes “Ten Things to Consider Before Buying a Franchise” as well as valuable information and advice offered by industry experts. Our Guide also provides an outline of the financial services available to help you operate your business efficiently.

For your free Franchise Guide or more information, call 1-877-629-6262 or visit bmo.com/franchise

™/® Trade-marks/registered trade-marks of Bank of Montreal.

Page 48