ACT
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Issue 1 - March/April 2008
canada
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In this issue: The Hempire Bug PIPEDA and franchising What is means to you Single unit franchising and its alternatives Dollar & Sense Tax Time Tips
Canadian Franchise Association identifies 2008 Hot Sector Trends Franchise News • Franchise Advice Global Market Trends • Business Advice w w w. f r a n c h i s ee k .ca
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Seeking an international franchise?
www.franchiseek.com Looking to become a master franchisee? Looking for greater growth? Looking for global expansion? Franchiseek.com is the global franchising website that helps franchisors and franchisees realise their dreams Franchiseek.com is a truly international site with more than 1,500 pages of free, global franchise advice and news – and that’s not including the many hundreds of pages of international franchise opportunities.
Franchiseek Limited 5 Britannia Place, Station Street, Lymington, Hampshire SO41 3BA, United Kingdom. Tel: + 44 (0)1590 689755
www.franchiseek.com • The Franchiseek Global Alliance Network
CONTENTS
Kim Divell
Trevor Hart
Welcome to the first issue of Franchise Focus Canada E-Zine. Our commitment to our readers is to provide an immediate version of our popular Franchise Focus International magazine that is focused solely on franchising in Canada and includes the content you have grown to love and expect from us. We are currently working on our May/June issue gathering articles and inviting franchise experts to address your common questions about franchising in Canada and invite you to be part of the process. Drop us a line through our “about us “ page and tell us what you’d like to see us include, what questions you would like asked, which franchise concepts you would like to see featured, and of course, what you like about Franchise Focus . Each year, hundreds of thousands of Canadians dream of leaving their old working lives behind and striking out into territory that is new, exciting, stimulating and, yes, financially rewarding. What they are looking for is a whole new life as business owners in control of their own destinies. And each year some succeed in realizing their fondest ambition. If this new life of pride, accomplishment and independence is your dream destination, franchising is the vehicle that can help get you there. It’s a kind of magic, allowing you to avoid the pitfalls of business start-up, while reaping the benefits of both a widely recognized brand and the support and experience of your franchisor partner. And Franchise Focus together with Franchiseek.ca our website, are where you will find detailed information about the broad spectrum of franchise opportunities in Canada, plus industry experts that provide insights and information to help you source, and succeed in, the ideal franchise opportunity for you. So, welcome. Come on in, and make yourselves at home. Kim Divell, President Trevor Hart Franchiseek Canada
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Contents 6 Ask the Experts
Connect with Canadian franchise industry professionals
7-9 Canadian franchise news 10-11 The Hempire Bug 14-15 Single unit franchising and its alternatives 20-21 ProFleetCare 22-23 PIPEDA and franchising
Peter Dillon of Siskinds explains what it means to you
24-25 Canadian Franchise Association identifies hot sector trends for 2008 26-27 Managing Results
John Boyen highlights five fatal flaws in management
28-29 Global market trends
Pet food and pet care products predict top global trends to 2012
31 Dollars and sense
ACT
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Clic k add on ad vert ress s e links s and , email web t o adv c o ntac site ertis ON ers dir t LY $ ec per 280 t issu e
Gordon Haslam's tax time tips
32-33 Using gift and loyalty card programs Matthew Hunt show you how to grow your business
Publishers Canadian Global Alliance Inc 306 Collins Drive, Orilla, Ontario, Canada, L3V 1E4 Tel: 705-326-8863 Toll Free: 1-866-706-SEEK (7335) Fax: 705-326-7744 canada@franchiseek.com Advertising Tel: 705-326-8863 Editorial Kim Divell Trevor Hart editorial@franchiseek.com Production Franchiseek Limited Tel: +44 (0)1590 689755 Special thanks to our contributers Lori Karpman, Larry Weinberg, Amber Cameron, Canadian Franchise Association, Tony Wilson, Peter Macrae Dillon, John Boyens, Lee Linthicum, Gordon Haslam & Matthew Hunt Disclaimer The inclusion of any article or advert does not constitute any form of endorsement or approval by Franchiseek. All submitted articles will be considered. We reserve the right to refuse any advertisement or article which we consider unsuitable. Whilst we make every effort to ensure all advertisements and articles are correct, Franchiseek, will not be held responsible for errors or omissions. © Franchiseek Ltd 2008 All rights reserved. No part of this magazine may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or using any information storage and retrieval system, without permission in writing from Franchiseek, except that brief passages may be quoted by a reviewer in a magazine, newspaper or broadcast review. This publication is designed to provide its readers with accurate and authoritative information with regards to the subject matter covered. If legal advice or other expert assistance is required, the services of a competent person should be sought. ISSN: 1747-9479
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FRANCHISE ADVICE
FRANCHISE ADVICE CANADA
What is
Franchising
By Lori Karpmann
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www.franc h i s ee k . ca
FRANCHISE LEGAL
FRANCHISE LEGAL CANADA
When buying a Franchise, you buy a lot more than the bricks and mortar and the inventory that stocks the shelves. In fact, what you’re actually buying are the things that you can’t see and often the things that you can’t see are more important than the things you can. The principle of franchising and its success is based upon 2 principals: Consistency and Goodwill. By consistency, I mean that the customer can expect to have the same experience in every outlet. A Big Mac is a Big Mac wherever you may be. This essential element leads to the second intangible element, goodwill. Goodwill refers to the fact that once the sign goes up above the door, customers will automatically be drawn to your store just by virtue of fact that they’ve recognized the name and that they know what to expect from the customer experience. It means that the franchisor, by insisting that all the franchisees follow the rules and regulations of the system, has achieved consistency. So, when looking to buy a franchise, an essential step is to visit several of the franchise outlets and evaluate for yourself whether or not consistency exists. Pretend that you are a mystery shopper, look around the stores. Do they look the same? Is the staff trained in the same way? Did you walk out with basically the same experience from all them all? Keep in mind that there will be variations among different outlets to respect the personalities of the individual franchisees and the trade market area. Another important element that is often overlooked by prospective franchisees in the pre-purchase process is an investigation of the franchisor’s management team and growth plans. It’s easy to get caught up in investigating the actual business opportunity but don’t forget to pay attention to the people behind the opportunity as well. Given that you are investing your money not only in your particular outlet but also in the system as a whole, you want to know about the foundation upon which the system is built. The provinces of Ontario and Alberta require prospective franchisees to receive a disclosure document as the first step in the franchise purchase process. However, in Quebec, no such documentation is required. In the disclosure document, relevant information regarding the personal and professional backgrounds of all senior members of the management team is provided. As well, various .financial and legal information regarding the management team and the franchisor is provided. Given that providing this information is not standard procedure in Quebec, it is very important that you be an advocate for yourself and request it. Remember that this management team is the team that will lead your franchise and the system to future growth. Therefore, you want to know about the financial security of the company and it’s ability to finance future growth. You also want to assess how w w w. f r a n c h i s ee k .ca
committed they are to future growth and what their development plans and strategies are. One telling question is whether the corporate stores contribute to the royalty and advertising funds. Another important element is whether there are any outstanding actions against the Company by franchisees or suppliers. One of the biggest indicators of the success of the system is how often outlets have been sold, how many franchisees typically renew or sell their outlets at the end of the term and how many multi-unit operators there are. This will give you an idea as to whether the present franchisees in the system are committed to growth and whether they foresee a future for the system as a whole. It is important to speak to other franchisees to determine what kind of support they have received from the franchisor during the term of their franchise agreement. Other franchisees are a valuable source of information. The franchisor will furnish you with a list of franchisees to contact. However, it is important that you also contact franchisees that are not on that list, keeping in mind the source of the information. Disgruntled franchisees are not likely to give raving reviews!
Lori Karpman Lori Karpman & Associates. Toll Free: 1-888-888-3183 or Lori@LoriKarpman.com
Last but not least, the greatest intangible that must be evaluated is quality of life. When evaluating a franchise opportunity, have a good look at the time commitment that will be required on your part and how this assists in the quality of life that you seek. For example, if you are not a morning person, do not buy a franchise that would require you to be in at 4:00AM. However this would be an ideal situation for example, for a couple with school aged children so that one parent may be home in the morning and another after school. All in all, buying a franchise requires an investigation not only of the business itself, but also of the people behind the business. It involves a detailed investigation of the things you can’t see because these things impact directly upon the success of the actual day to day operations of the business. As stated earlier, the key to successful franchising and the key to the successful franchise systems that exist today are consistency and the goodwill of the name. A solid franchisor has a committed management team and a committed network of franchisees dedicated to following the rules and regulations of the system. This in turn will generate the necessary goodwill to drive customers to your door when your sign goes up! Lori Karpman is an attorney and President of Lori Karpman & Associates Ltd., a Montreal based full service franchise consulting providing professional marketing/sales, operations, training and legal services.
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ASK THE EXPERTS
ASK THE EXPERTS CANADA
Ask the experts Welcome to the Franchiseek Ask an Expert area where we connect you with franchise industry experts that have volunteered to answer your questions for free! Here’s how to make it work for you: Step 1: Think of a question and locate the expert that best matches your question. You can browse for an expert by category Step 1: Click on the photos and you will be directed to their page.
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Step 3: Post your question using the form supplied under each expert Response time varies from expert to expert. One week is pretty typical. It’s not realistic to expect an immediate answer.
Accountancy Name: Gordon M. Haslam Company: Ledgers Canada Area of Expertise: Accounting and Taxation
Finance Name: Matthew Hunt Company: Canadian Merchant Account Services Area of Expertise: Debit & Credit Card Processing Solutions for both online and off-line. Canadian Merchant Accounts.
Consultancy Name: George Kinzie Company: Franchise Recruiters Ltd. Area of Expertise: Franchise Recruitment
Legal Name: Tony Wilson Company: Boughton Law Corporation Area of Expertise: Franchising and franchising law
Consultancy Name: Lori Karpman Company: Lori Karpman & Associates Area of Expertise: Franchise Law, Management & Operations Consulting Concept Development.
Legal Name: Lawrence M. Weinberg Company: Cassels Brock Area of Expertise: Legal Services
Consultancy Name: Wayne Maillet Company: Franchise Specialists Area of Expertise: Strategic planning, business plans, lease negotiations, operation manuals, franchise recruitment
Legal Name: Geoffrey B. Shaw Company: Cassels Brock Area of Expertise: Franchise Litigation
Consultancy Name: Richard Cunningham Company: Richard Cunningham & Assoc Inc. Area of Expertise: Dispute resolution, mediation. Management and Operations, Franchise relationship management.
Legal Name: Peter Macrae Dillon Company: Siskinds - The Law Firm Area of Expertise: Franchise Licensing & Distribution Law; Intellectual Property Law (Trademarks) www.franc h i s ee k . ca
FRANCHISE NEWS
ASK THE EXPERTS CANADA
Franchiseek joins Canadian Franchise Association With thousands of potential franchisees looking for the right franchise opportunity, Franchiseek Canada is a valuable online resource that enables them to begin that search in full confidence, regardless of their knowledge of the industry. Franchiseek is pleased to announce that it is now a Franchise Support Service (FSS) member of the Canadian Franchise Association (CFA). The CFA, which was founded over 30 years ago, is today the senior, largest and most trusted voice in the Canadian franchise industry. Members of the CFA agree to follow the CFA Code of Ethics, with an emphasis on honesty, integrity, and fair practices. Franchiseek, which was founded in the UK more than 8 years ago, has partnered with Kim Divell, now president of Franchiseek Canada. With Kim’s vast industry knowledge and experience, Franchiseek Canada has quickly established itself as one of the most respected franchise internet sites. “We understand the values of the CFA and aim to compliment the association’s mission and mandate. At Franchiseek Canada, we’re delighted to be joining a community of businesses, suppliers and affiliates within the franchising community, all of whom support the mission of the CFA and agree to adhere to the CFA code of ethics” said Kim Divell.
The site is also an ideal environment for franchisors and industry suppliers to make news announcements, in addition provides a focal point for individuals and companies within the Canadian franchising community.
Kim Divell President Franchiseek Canada
“We aim for quality as a result you will not find any ‘get rich quick’ schemes or flimsy marketing propositions on the site. We thoroughly review all franchised businesses and industry experts before they’re allowed to advertise” stated Kim. From news and advice to facts and stats, Franchiseek Canada contains more than enough information to assist potential franchisees make an informed decision about their franchise investment. Franchisors and industry suppliers looking to gain exposure on the site can also benefit from a free basic online listing. Pending thorough review, they are then able to upgrade to a full listing, choosing from a number of innovative and economical packages put together by Franchiseek. Members of the CFA are further encouraged to enhance their listing with a 20% discount off published rates. As an added bonus all advertisers receive the additional benefit of an inclusion on the International portal.
Cassels Brock franchise lawyers profiled in The Franchise Voice agreements, dealing with disclosure issues and defending class proceedings on behalf of franchisors at all levels of court. Geoff Shaw and Larry Weinberg are mentioned in the Fall 2007 issue of The Franchise Voice for being recognized by the Best Lawyers in Canada 2008 in the area of franchise law. The main focus of Geoff Shaws franchise litigation practice is to assist franchisors to resolve their business disputes through trial, appeal, mediation or arbitration. Geoff has significant experience enforcing franchise w w w. f r a n c h i s ee k .ca
Lawrence M. Weinberg
Larry Weinberg provides all necessary legal services to franchisors. He is the first Canadian Director of the American Bar Association Forum on Franchisings International Division, co-edited their book entitled Fundamentals of Franchising-Canada, and co-authored and edited the chapter on Canada for their book entitled International Franchise Sales Laws. Geoffrey B. Shaw franchise focus 7
FRANCHISE NEWS
FRANCHISE NEWS CANADA
Sol’exotica Tanning Salons Undertaking Aggressive Expansion Plans Across Ontario Sol’exotica Tanning Salons, a Canadian leader in the tanning industry has recently expanded its horizons and opened a new location at 167 Church St. (@ Shuter), in Toronto, Ontario bringing the chain to 12 locations. Sol’exotica Tanning Salons provide an accessible, beautiful and feel-good experience to promote a glorious pre vacation tan and to maintain the look and feel of the tropics all year round. They deliver unlimited sunshine, essential Vitamin D and a no-hassle bronzed glow for any occasion in a clean, fun and friendly environment. The first Sol’exotica Tanning Salon was established in 1996 in Stony Creek (Ontario) by a forward-thinking and dynamic entrepreneur named Sevag Kalachian. It quickly became the tanning salon of choice for people seeking a beautiful tan within a trusted environment. Early and rapid success lead Sevag to open 6 more salons and capture the entire market share of indoor tanning in the Golden Horseshoe area of Ontario. Customers flocked to all the Sol’exotica Tanning Salons for their personalized and friendly service, spotless environment and state-of-the-art tanning beds. That’s how the Sol’exotica Tanning Salon chain was born. And that’s the unmatched Sol’exotica Tanning Salon client experience! Sol’exotica is now expanding to your area! The success of the franchise operations is due to the relationship between the head office and the franchisees
Maid2Clean opens first North American Franchise Michael Hanrahan, Managing Director of Maid2Clean Inc., is pleased to announce the opening of its first North American franchise in Thornhill, Ontario.
David and Annette Reid
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“We are extremely pleased to bring our successful management franchise to the Canadian marketplace. The Thornhill operation is the first of many to be opened in Canada and eventually throughout the US.” stated Mr. Hanrahan, when asked to comment. David Reid, the Thornhill businessman awarded the first Canadian franchise, added, “We are delighted over the prospect of providing the Thornhill and North York communities
who are treated as well as clients! Unlike other franchisors “we invest ourselves in you to help your Sol’exotica Tanning Salon business grow and succeed.” Franchisees benefit from extensive product training, equipment selection and customer service, not just in the pre-launch phase, but throughout the whole relationship. “We are actively committed to the success of each franchisee in the System”, said Director of Operations, Mike Nafekh. “We are with them every step of the way. Both Sevag and I have been in the tanning industry for over 10 years so we have the expertise required to assist you with all stages of development”. Their customized program includes operations and administration training and a host of marketing and sales ideas and tools that work. Combined classroom and on-site training will teach every aspect of running a Sol’exotica Tanning Salon with confidence. Site-selection and leasing suggestions, design and supervision of the construction of the location are all part of the services provided at no cost on top of the initial franchise fee. You can also convert your existing tanning salon into a Sol’exotica quite quickly and easily to take advantage of the fabulous programs and expertise and benefit from the awareness of the Sol’exotica Brand. To assist in their aggressive expansion plans the brand has engaged Lori Karpman & Associates Ltd, a boutique consulting and legal firm specializing in brand development and chain growth. “These gentlemen know how to do franchising right” says Lori Karpman, “they understand that the franchisee is their customer and that makes them truly invested in the success of each location. We are now pursuing an aggressive expansion plan aimed at the Ontario and Western Canada regions.” with what we believe is a highly reliable and affordable domestic cleaning service.” Maid2Clean has over seventy franchises throughout the United Kingdom and presents a new and exciting management franchise opportunity in the growing home cleaning market. The company offers low start up costs and a comprehensive training program. There is no cleaning involved for the franchisees who manage the customer experience and provide their clients with a low cost cleaning alternative to big name services that cost much more. For further information about a Maid2Clean Franchise in your area, please contact Mike Walsh, Franchise Consultant at 1-877-265-MAID (6243) www.franc h i s ee k . ca
FRANCHISE NEWS
O’Briens launches new Canadian Master Franchise O’Briens Sandwich Bars, has launched into Canada with a new master franchise operated by husband and wife team, Manny and Meryem Singh. O’Briens, established in 1988 in Dublin, has almost 300 stores providing the healthier fast food option in 19 countries across Europe, Asia, Australia and Africa. This follows hot on the heels of the opening of two stores in Beijing, China. O’Briens Canada, which is based in Toronto, joined the O’Briens international portfolio
when it launched on Wednesday 9th January 2008 with a flagship store that offers sit in, takeaway and catering services. The couple are already planning to open a further two outlets in the area before the end of 2008. Commenting on the opening, Manny said “O’Briens is the perfect fit for us because of its quality, fresh, healthy food offer. It is the kind of food that we love to eat ourselves. On top of this, we firmly believe that the O’Briens concept and product range will prove very attractive to Canadians. We are
very excited about launching such a strong brand into Canada.” “While we continually look at international growth based around countries where we already do business, it is exciting for us to be launching into Canada and China.” said Fiacra Nagle, C.E.O., O’Briens Sandwich Bars. “We are also extremely excited about our expansion into the Chinese market and initial sales are ahead of expectations”.ss appeal - retail giant Aaron’s awards 130+ units in six months – 250 over last year.
2008 Franchise Law Symposium March 14, 2008 - Winnipeg, Manitoba The Manitoba Law Reform Commission issued a call for papers in the summer of 2007 inquiring into whether the Province of Manitoba should adopt franchise legislation (there is none at the moment). Consequently, two of Robson Hall’s (University of Manitoba Law School) research centers, the Desautels Centre for Private Enterprise and the Law and Asper Chair of International Business and Trade Law, will be hosting a franchise law symposium addressing the matter, to be held in Winnipeg, Manitoba, at the Manitoba Club. The organizers hope to frame all discussions within the context of balancing local legal interests with national business practices. Ample opportunity will be provided for audience participation. w w w. f r a n c h i s ee k .ca
Discussion topics include: (i) Scope of Disclosure; (ii) Exemptions from Disclosure; and (iii) Relationship Considerations. This is an exciting time for franchising as Manitoba has the opportunity of introducing Canada’s newest legislation in this area, with the benefit of learning from the other 3 provinces that currently have such a law.. For further information on the symposium or to register, visit: www. umanitoba.ca/law/franchise
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FRANCHISE FEATURE
FRANCHISE FEATURE CANADA
The Hempire Bug by Amber Cameron The Hempire Bug is a common vehicle to see cruising the streets of Canmore, Banff, and Fernie. How it came to be is a story of perseverance, patience, and hard work. Thanks to the Town of Canmore introducing a by-law banning sandwich boards on sidewalks, Hempire’s owner Marsha Churchill leased a brand new Volkswagon Beetle and plastered it with the Hempire logo, Rastafarian stripes, and marijuana leaves. It’s this type of “never say die” attitude that has seen Churchill move from a small beginning to a nation-wide presence. But it didn’t start there. Marsha Churchill, born in 1974, was raised without the frills in life. Her parents are both very hard workers which is a trait she definitely has inherited. She left her Ontario roots on an adventure to the west which led to a back country trip to British Columbia in 1994. During this trip, she was introduced to marjuana’s versatile and benign sibling, hemp. An active environmentalist, she started her endless research of the plant and its benefits.
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In 1997, after 3 years of working numerous jobs in the Bow Valley, she decided to work for herself and challenge the odds of success in small business ownership. Her first mission was to secure a location for the store. She had no history or credibility so was mocked at by most landlords. There was only one that gave her a chance and a small one at that. He told her that if she could come up with the deposit and the first months rent by the next day, the place was hers. Some may have viewed this as defeat at this point, but Marsha saw it as an opportunity. She sold her car, some clothes, electronics, and anything else she could easily “hawk” and presented the slightly surprised landlord with his demands. She was officially in business! But, with no credit or money her inventory was rather limited. She had applied for multiple credit cards and retained employment with 2 other establishments to keep her dream alive. With the store being open 6 days per week and working her shifts at her other jobs in the evenings and on weekends she was exhausted.
www.franc h i s ee k . ca
FRANCHISE FEATURE
FRANCHISE FEATURE CANADA
Marsha Churchill is destined for success. Over the past four years, she has been diagnosed with multiple sclerosis and lost the feeling in her limbs, given birth to two healthy babies eleven months apart and has recently been accepted into the Canadian Franchise Association. Throughout the entire existence of Hempire, she has constantly strived for bigger and better ideas. Hempire is now moving into a franchise phase which will bring Hempire Bugs and hemp products and awareness to communities throughout western Canada and nation-wide. Her first big break was the legalization of hemp farming 16 days after she opened the Canmore Hempire. And her second one was the birth of the Hempire bug which came packaged as a crippling bylaw but doubled her sales over night!
Franchise Benefits
After three years, the store was operating efficiently and without debt. Marsha’s human resource skills are second to none which provided staff and allowed her the time to focus on marketing and further research. This lead to the discovery of Fernie, B.C. which she immediately identified as another opportunity. In June of 2000, the Fernie store opened with a huge welcome. The space was in desperate need of improvements, so with the Hempire bug parked outside for three weeks and her zest for marketing, the first day of business saw a line-up out the door and onto the street. Another huge success!
• The Hempire brand is recognizable.
Three more years passed and the Banff store opened. Each location presented its own obstacles but a true entrepreneur, such as Marsha, sees the opportunity. The first space in Banff was cancelled last minute due to misinformation regarding hemp. The advertising was already out so Churchill jumped into action and secured an alternate and better location to the first. Not an easy feet in Banff in December but another huge success for Hempire! w w w. f r a n c h i s ee k .ca
Owning a franchise guarantees a greater chance of a success through the first 5 years where new businesses often don’t succeed. It is Hempire’s goal to see each and every franchise through the initial set-up phase and offer ongoing support in order to ensure your Hempire franchise becomes a successful and profitable enterprise. • Hempire’s product’s are continually on demand and growing as the trend for environmentally friendly products continues to grow. • Hempire offers support and training throughout the start-up phase and well beyond. • Become part of a market niche where the direct competition is low to none. • Franchisee’s will benefit from Hempire’s larger marketing efforts and gain valuable advice about marketing in their local market.
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FRANCHISE LEGAL
FRANCHISE LEGAL CANADA
Single unit franchising and its alternatives By Larry Weinberg, Partner, Cassels Brock & Blackwell LLP, Toronto The tried and true method of franchising involves the grant of a direct or single unit franchise to an individual owner operator, who then raises the required funds to open the franchised business. 14 franchise focus
www.franc h i s ee k . ca
FRANCHISE LEGAL
FRANCHISE LEGAL CANADA
That traditional model has not really changed over the last 40 plus years, and still is the most popular approach. However, it is certainly not the only one, and more franchisors today are also considering “multi-unit� development models as an alternative or additional approach to their franchise expansion. This is especially true when franchisors are entering a new geographic market, either in their own country or when they look to franchise internationally. No single expansion vehicle can be pointed to as ideal. A franchisor must generally balance desired control with available resources. The fewer resources the franchisor has to invest, the more likely that it will have to relinquish tight control of the system. Direct or single unit franchising is a good way to ensure that the franchisor retains maximum control over the system. However, the need to establish agreements with individual unit holders usually results in a slower rate of growth (but still faster than opening corporate stores). Single unit franchisees, who tend to be independent owner/operators generally require greater levels of support than would a multiple unit franchisee. In general, while still popular, direct franchising is no longer considered the ideal way to expand internationally.
development. Rather, it allocates ownership and risk in a unique manner. It can be used to take advantage of the partner’s capital and local knowledge, and to gain business or tax advantages in markets where locals are accorded preferential treatment. Another alternative is an area representative arrangement, under which the franchisor grants rights to a local entity, allowing it to market, offer and perhaps even train and service franchisees on behalf of the franchisor. This is more an agency or broker arrangement than a franchise structure. However, like single unit franchising, the franchisor often ends up dealing with unit franchisees directly despite the presence of the representative. This model has in recent years been used to fuel significant growth in some franchise systems.
Lawrence M. Weinberg Partner Cassels Brock.
As noted, direct franchising is not the only way to expand a business through franchising. Multi-unit franchise models are especially attractive to franchisors looking to enter new markets, and who are dealing with more sophisticated groups looking for opportunities beyond a single outlet.
In contrast, master franchising is a popular expansion structure that resolves many of the issues that direct franchising creates, especially in a new geographic market. Under a master franchise agreement, the franchisor typically grants a master franchisee the right to offer units to subfranchisees. Depending on the size of territory and whether or not exclusivity is provided, the responsibility for developing the system in the new territory rests with the master franchisee, rather than the franchisor. As a result, this system requires less resources and significantly less capital investment by the franchisor. Master franchisees are very often required to own and operate one or more stores themselves in order to familiarize themselves with the business. Area development arrangements are similar to direct franchising, except that the franchisee is permitted to develop multiple units across a designated territory. As a result, where the territory is small, such an arrangement may be very similar to direct franchising, with its associated benefits and disadvantages. Where the territory is large, this strategy leads to lower capital investment than direct franchising, as well as lower administration costs, less need for training, monitoring, and direct franchisee contact. Under a joint venture, the franchisor shares ownership of an operating entity with a local partner. In practice, this type of arrangement does not change the system, which will typically be direct franchising or area w w w. f r a n c h i s ee k .ca
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FRANCHISE ADVERTORIAL
FRANCHISE ADVERTORIAL CANADA
Survivor kicks butt and so can you! INCTM is operated by award winning businesswoman Seana Wade and fitness passionate Fred Masse. Together they have created an easy to use template system. Training consists of a template business model, operations manual, fitness program/manual, and learning how to use our interactive back-end website, which cuts down on time/money wasting. The Franchises cost is low at $7000. Boot Camp operates indoors and outdoors for high profit margin and low over-head. In the amount of time you used to spend training one client, you can be making a great living, and having fun. You can easily make over $400 per hour once your camp is established. Your future will never be the same! Begin training today and start earning now.
Visit them at the Outdoor Adventure Show Feb. 22-24th. Further details can be found at www.survivorbootcamp. com. You can give them a call at 416.848.8918 to book your appointment.
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You don’t need to imagine any longer. The SURVIVOR BOOTCAMP INCTM business model is here. In 2007 we opened 17 new locations with the help of our growing Franchise team.. SURVIVOR BOOTCAMP
“I started my franchise and it was the best decision I ever made. I went from being a personal trainer and just having a baby to a 5 figure income per month almost immediately.” Said Cherie who operates the Surrey franchise.
www.franc h i s ee k . ca
FRANCHISE BOOKS
FRANCHISE BOOKS CANADA
If all franchises were successful you wouldn’t need this book! The Author Tony Wilson is a Vancouver lawyer who has specialized in Canadian franchise and Trademark law for over 20 years, and acts for many well known Canadian franchise companies. He has written numerous franchising related articles for magazines, newspapers and legal publications, and is an occasional contributor to the Globe and Mail and Macleans magazine. His knowledge and experience representing both Franchisors and Franchisees is presented to small-business people in an easy-to-understand manner.
A new franchise opens every eight minutes of each business day and there are over 2000 franchise opportunities available.
Tony Wilson
Specific topics covered include: • How to develop a good relationship with the franchisor
What’s the big draw? Proven business models with recognizable brand names make franchised businesses a very attractive and often lucrative investment.
• Analysing the clauses of a franchise agreement to understand why they’re there
But buyer beware: Not all franchises succeed, and not understanding your franchise agreement and the obligations that go along with it can lead to disastrous financial (and legal) results.
• How easy will it be for the franchisee to resell or renew the franchised business?
•
Start and run your franchise successfully
• Who will control the lease?
Tony Wilson is a recognized expert on Canadian franchise law and has written an indispensable guide for anyone considering buying a franchise in Canada. Published by Self-Counsel Press, Buying a Franchise in Canada: is a step-by-step guide to understanding all the provisions of your franchise agreement, so that you are better informed, able to avoid the pitfalls that can come with acquiring a franchised buiness and knowledgeable on the things that Wilson also addresses the specific Canadian legal issues franchisees need to be aware of and provides a step-bystep sample agreement that is unique to the Canadian business environment.
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FRANCHISE SPOTLIGHT
ProFleetCare Family doesn’t always mean you’re related By: Kim Divell The president of Pro Fleet Care Franchising counts his business partners and franchisees as his extended family. Even though the company is continually growing, Greg Lawrie says their franchisees and customers are as close as family members. “I’m just as likely to call a franchisee to ask how their family is as I am to talk about business “With us, it’s not ‘here’s your contract, you’d better adhere to it.’ There’s a sense of family and commitment with the support we provide.” Pro Fleet Care, formerly known as Rust Oil Canada, dates back to 1984 when Bob Lawrie, Greg’s father, opened his first rust control shop. At the time, the general industry consensus was that a tar or wax product was the best way to protect vehicles against rust. Bob was not convinced that this was the solution. Instead he used a light chemical that could migrate into seams and crevices. Over the next 10 years, the marketplace also began to shift towards this chemical. As business grew so did the demand for servicing fleet customers. To better accommodate this growing segment, Bob developed a mobile service that went to them. Customers saved time and money as they no longer had to have one of their employees drive equipment from their workplace to Bob’s 20 franchise focus
shop. This also minimized their equipment downtime. The mobile system was very successful and Bob decided to wholly focus his attention on developing this market. In 2001, Greg took on a more active role in the business. Joel returned from overseas in 2007 to join his father and brother in further developing the business. It has been some 24 years since the Pro Fleet Care story began and Pro Fleet Care has now developed a sound franchise organization that provides its customers with an effective customer-focused distribution system. The mobile rust control model has given Pro Fleet Care an edge over competitors as well, has won over many customers. Greg explains, “Fleet owners understand that by our being able to service their equipment on their site, they are saving equipment and employee downtime. Customers also recognize that by protecting their equipment annually, they are increasing the life of their equipment and reducing operating and repair costs.” Justin Weaver, the Chatham-Kent, Ontario franchisee since June 2007, says he is settling in nicely thanks to the support of his Pro Fleet Care ‘family.’ “I didn’t want to start a business from scratch,” he says. “I’ve bought www.franc h i s ee k . ca
FRANCHISE SPOTLIGHT
FRANCHISE SPOTLIGHT CANADA
About ProFleetCare PRO FLEET CARE is a unique and comparatively low start-up cost franchise, in the highly profitable rust protection industry. We offer the only leading edge mobile concept in the industry, providing exceptional rust control service, on site, on time and as promised. PRO FLEET CARE Canada 1 905 667 8595 1 866 787 8645 info@profleetcare.com www.profleetcare.com
into a proven system and I don’t have the risks typically associated with starting a new business.” As a first-time franchisee, Justin says the toughest challenges he’s faced to date have to do with letting area fleet managers and owners know there’s a new mobile rust control service in town. With Pro Fleet Care guiding him in the right direction,
Jordon and Justin Weaver ProFleetCare, Chatham/Kent Ontario w w w. f r a n c h i s ee k .ca
Justin has had the kind of help that he says isn’t usually available to new independent business owners. Offering everything from setting up the mobile unit to assistance in sales calls with local fleet owners and managers, as well as training on the rust control process, Pro Fleet Care has been behind him every step of the way. “It’s like having a big brother,” Justin says. “They give me guidance. I can ask questions and if I stumble into any road blocks they’re just a phone call away. They also check with me on a regular basis. There’s a lot of interest on the company’s part in seeing their franchisees succeed.” Greg Lawrie believes that “to build a strong and effective business, you need to invest your efforts in others, just like you would a family”.
Learn more about becoming a PRO FLEET CARE Franchise at www.profleetcare.com Even if you’ve never had any involvement in the rust control industry, you can learn the business with the training PRO FLEET CARE franchise receives. The franchise package itself ranges from a $35,000 - $70,000 total investment, with an initial franchise fee of $10,000 and no ongoing royalties. The costs vary if a franchisee chooses to purchase their mobile unit outright or elects to enter into financing. We provide everything you need to get started!
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FRANCHISE LEGAL
FRANCHISE LEGAL CANADA
PIPEDA and franchising:
What it means for you by Peter Dillon, Siskinds Franchise Law Group
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www.franc h i s ee k . ca
FRANCHISE FINANCE
FRANCHISE FINANCE CANADA
As a paperless society becomes increasingly likely, the volume of information available to individuals in the digital world has never been greater. However, the high risk of misuse of this information and its ability to be rapidly disseminated to vast numbers of recipients with the press of a button has prompted the Canadian government to intervene in an attempt to strike a balance between legitimate business interests and the rights of individuals to know that their personal information is secure. The federal government placed the onus squarely on the shoulders of business owners and operators everywhere to ensure the appropriate collection, storage, and destruction of personal information by making the Personal Information Protection and Electronic Documents Act, 2000 S.C., c. 5 (“PIPEDA”) enforceable against all private commercial enterprises in Canada as of January 1, 2004. All personal information a company may acquire on an individual, including shareholders, customers, clients, suppliers, and members, is covered by the legislation. PIPEDA defines personal information as “information about an identifiable individual.” The broad definition includes virtually anything that could serve to identify a particular person, including name, home address and telephone number, age, height, weight, race, ethnic origin, religion, marital status, educational background and medical history. While some perceive PIPEDA as lacking enforcement “teeth”, the reality of the legislation cannot be ignored. Three of the key areas for both franchisors and franchisees to consider are detailed below. Privacy Policy PIPEDA requires franchisors to prepare a privacy policy that is compliant either with the federal legislation or any provincial legislation that supersedes PIPEDA. Currently, only Quebec has such legislation. From the franchisor’s perspective, it is crucial that franchisees have a full understanding of what is in their system’s privacy policy, to ensure that the policy is adhered to at all times in their internal dealings as well as with customers. The policy must also be made available to the customer, most commonly through a link on the franchisor’s Internet website. It is also advisable that a copy be included in the operations manual, both to educate franchisees but also in order to be able to provide a hard copy to a customer upon request. w w w. f r a n c h i s ee k .ca
It is not necessary for franchisees to develop their own privacy policy, but it is absolutely essential that they are educated as to what procedures must be followed to ensure that the franchisor’s policy is applied in an appropriate manner. Failure by a franchisee to do so may expose both the franchisee and the franchisor to an investigation by a privacy commissioner.
Peter Macrae Dillon Siskinds - The Law Firm
Consent As a general rule, a franchisor must have the informed and express consent of a customer or franchisee in order to collect and/or use any of their personal information. Implicit consent is acceptable regarding the use of only the least sensitive information. This creates the requirement for a ‘hierarchy’ of consents to be acquired. For example, franchisees are now placed in a situation where they must have consent from its customers to share information it gathers with the franchisor, and the franchisor, in turn, should have consent from the same customer to collect the information from the franchisee. It is the responsibility of the franchisor and, to a lesser extent, the franchisee, to explicitly detail how the information is to be used and to acquire the customers’ consent to do so. Agreements All customer contracts, sales slips, invoices, credit or membership applications, as well as any other documentation exchanged between a franchisee and customer, should be carefully reviewed to determine the level of consent that a customer is expected to provide based on the information being collected in such documents. It would also be wise for a franchisor to assess whether its existing franchise agreement and other core documentation deals with the requirements PIPEDA imposes regarding the collection of personal information both from and by its franchisees. Final Thoughts It is imperative that franchisors and franchisees appreciate that that there are no grandfathering provisions to PIPEDA, and therefore it is necessary to immediately acquire any and all consents needed to utilize information that has been gathered and used prior to the enactment of the legislation. In fact, given that PIPEDA impacts all conduct between franchisors, franchisees and customers, it would be advisable to undertake a thorough review of all system-wide operations as soon as possible to ensure compliance within the three-way relationship that exists between franchisor, franchisee, and customer. franchise focus 23
FRANCHISE ADVICE
FRANCHISE ADVICE CANADA
Canadian Franchise Association identifies hot sector trends in franchising for 2008
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www.franc h i s ee k . ca
FRANCHISE ADVICE
FRANCHISE ADVICE CANADA A recent study of emerging trends in franchising conducted by the Canadian Franchise Association (CFA) identifies Meal Preparation, Child-based Services, Senior Care, Pet Services and Computers as the top trends in franchising for 2008. The study was published in an article entitled “Trend Watchers” in the January/February 2008 issue of Franchise Canada magazine and compares the growth of franchise listings in the Canadian Franchise Association Annual Directory from 2006 to 2008. Meal Preparation Meal Preparation listings have increased by 700 percent over the last three years. Offering their customers quick, easy-to-prepare meals that are healthy and reasonably priced, Meal Preparation franchises are becoming increasingly popular in Canada’s urban centres.
Pets Listings for franchised Pet services have increased by 52 percent over three years. Statistics Canada reports that six million Canadian households have at least one pet and spend on average $747 a year on their animal companions. Computers With Canada’s online population at 21 million according to Statistics Canada, it is not surprising that Computer services franchise listings increased by 44 percent over three years, jumping from nine to 16 in 2008. With an estimated $8.3 billion spent in e-commerce sales in 2006 alone, computers and the Internet are clearly important to individuals and crucial to business. “Franchising is a dynamic and growing way for people to get into business for themselves,” says Lorraine McLachlan, CFA President & CEO. “With so many new sectors discovering the power of the franchise business model, the opportunities for individual success are almost endless.” Published by CFA, Franchise Canada magazine and Directory serve as a primary resource for entrepreneurs and individuals interested in franchising, providing essential information on the opportunities and business of franchising. About the Canadian Franchise Association With more than 430 corporate members nation-wide, representing many of Canada’s best-known brands, the Canadian Franchise Association is the national voice for Canadian franchising. The CFA promotes ethical franchising and educates Canadians about franchising, specific franchise opportunities and proper due diligence.
Child-base Services Child-based Services are booming with a listings increase of 70 percent within the last three years. Canada has been a hot market for children’s goods and services, with parents willing to spend more on their children. In 2007 alone, there were an additional 18 Child-based Services listings. Senior Care Franchise listings for Senior Care have steadily increased by 57 percent over the past three years. According to Statistics Canada nearly one in five or 6.7 million people will be seniors by 2021. The necessity for senior services has never been greater. w w w. f r a n c h i s ee k .ca
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BUSINESS ADVICE
John Boyens is the President of the Boyens Group (www.boyens. com), a company dedicated to helping their clients increase sales productivity, improve management effectiveness and optimize business strategy. John can be reached by phone at (615) 776-1257 or via email at john@boyens.com.
BUSINESS ADVICE CANADA
“Managing for Results” by John Boyens, Boyens Group, USA
I believe that most managers put in the necessary effort to be successful. Unfortunately, the disparity between effort and positive results is quite common. So what gets in the way? We have identified five “fatal flaws” of management. They are:
• Be an empathic listener – listen for context clues within the message
1) Unclear/inconsistent communication
• Be clear, specific and concise
2) Failure to acknowledge change
• State your point in 25 words or less
3) Managing everyone alike
• Check for understanding
4) Failure to establish clear expectations
• Watch your body language
5) Poor time management
Overcoming Fatal Flaw # 2 Effectively Managing Change In the business of management, the belief of “status quo” or “standing still” is a serious and dangerous delusion. You’re either moving forward of falling behind. Even if you don’t actually see the changes on a daily basis, it does not mean that they are not happening. So, why do some managers try to ignore change? Our research shows that there are four reasons why many managers ignore change:
The balance of this article is dedicated to sharing some “best practices” to help today’s managers overcome each fatal flaw. Overcoming Fatal Flaw # 1: Clear and Consistent Communication Ninety percent of all problems with managing people stem from poor communication. Do you ever feel like “nobody gets it?” Do you get tired of always trying to clarify the meaning of what you say and apologizing for not saying what you mean? If this keeps happening, perhaps it is worth looking at the way the message is being delivered. A book entitled, The Psychology of Memory states that you retain only ten percent of what you hear 72 hours after hearing it. We have found that the biggest stumbling block to good communication is poor listening skills! What can be done to improve ones listening skills? How can one deliver a better message? Five ways to be a better listener • Eliminate distractions • Get rid of excess paper to reduce distractions at your desk • Know your blind spots – assumptions and prejudices • Be an active listener – paraphrase, ask questions 26 franchise focus
Five ways to deliver a better message • Know your objective
• Emotion (fear of the unknown, anger, uncertainty, mistrust) • Perception (they do not see the need for the change) • Attitude (they believe that most changes are not for the better) • Reluctance (they adopt a wait and see attitude) Remember, your team will sense and react to change whether the manager chooses to accept it or ignore it. So how do I communicate change? One way to successfully communicate a change that is about to occur is by using our Change Message Model: Change Message Model • State the change…Be clear, concise, truthful • Payoffs…Why the change? • Support…How are we going to get there? • Optimism…Be positive about the future www.franc h i s ee k . ca
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BUSINESS ADVICE CANADA Overcoming Fatal Flaw # 3 All Salespeople are not Created Equal Members of your staff each require a different level of care and attention so it’s imperative that you adjust your management, coaching and mentoring skills to each individual person on your team. One way to do just that is through developmental coaching. Development coaching is a personal approach to growing, developing and motivating individual team members. It’s important never to assume that what is important to one team member will be meaningful to the next. So how does one go about learning the uniqueness of each team member? One handy way to begin the development coaching process with your new team members (and all existing members for that matter) is to take a “Snap Shot.” SNAP is an acronym for: Strengths: What does your team member do well? What do they most enjoy doing? Next Goals: What are their short and long term goals? What do they want to accomplish this year? What would they like to do better in the future? Assistance: How can I help them get there? What are the best ways for them to learn? Professional Development: What skills would they like to improve or learn this year? What skills are necessary for them to meet their stated goals? Overcoming Fatal Flaw # 4 Establishing Clear Expectations • Make sure all tasks are clear and understood. • At the beginning of each year, establish each individual’s performance appraisal criteria. • Establish a contract with difficult employees to ensure success. • Create smaller and achievable incremental goals that are measured on a monthly and quarterly basis. • Provide variety in the scope of work. • Form a sponsor or mentor program.
• What is the average length of your sales cycle? • How many qualified prospects must you have in your pipeline at all times? • How many suspects do you have to call to achieve your qualified pipeline? Overcoming Fatal Flaw # 5 Time Management Tips • Know what you want from your time • The proven way to do it is to set goals and to set SMART (Specific, Measurable, Attainable, Rewarding, and Timely) goals
• Create individual development plans.
• Learn the difference between urgent and important
• Establish a quarterly review process for your team
• Know and respect your priorities
For instance, if I was a sales manager, I would want each of my salespeople to create their own, individual success formula. The questions that I would ask them in preparation for that exercise include: • What is your sales quota per month? • What is your average order size? • What is your close rate? w w w. f r a n c h i s ee k .ca
• Plan your actions for achieving your goals • Schedule time for your tasks • Know how you spend your time • Analyze time wasters If you take the time to integrate some of the tips from this article into the day-to-day management of your team I am positive that your team will deliver the desired results! franchise focus 27
BUSINESS ADVICE
MARKET TRENDS GLOBAL
Pet food and pet care products global report predicts top global trends to 2012 Author: Lee Linthicum, Euromonitor The report structure for Euromonitor’s latest analysis on the global Pet Food and Pet Care industry has been revamped, the content refined down to hard analytical insight interspersed with charts and graphs, and supported with up-to-date, real-life examples in the form of case studies. The 2008 Global Pet Food and Pet Care report also has a strong future focus, with many sections ending with strategic implications in the short to medium term and the final section devoted to market forecasts and possible product trends to watch over the next five years. The report pays special attention to top current and future trends in pet food and pet care products, provides analysis on the current competitive environment and proposes strategies for further sales growth. Top Global Trends to 2012 Private label encroaches upon premium and mid-priced segments in developed markets In terms of the implications that broader industry trends will have for specific pet food product developments, they will first and foremost facilitate the growth of private label sales. Until now, pet food private label products have been largely confined to the economy segment, with the exception of Germany and, to a lesser extent, the US, but they are beginning to develop a presence in the premium and mid-priced segments. Pet food superstores are particularly well placed to exploit this trend. In the developed world, this may be facilitated by the shadow cast over branded products by the Menu Foods recall, as well as growing economic insecurity, particularly in the US, as consumers realise that they can no longer finance consumption by borrowing against the rising notional value of their
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homes. Menu Foods recall pushes traceability up the agenda In addition to the growing threat of private label encroachment, issues such as the quality and tractability of ingredients will be brought to the fore by the US Menu Foods recall. This may weaken the belief of consumers that branded pet food products are markedly superior to their private label counterparts. The key to restoring or maintaining consumer faith in the branded segment will lie in successfully communicating product quality to consumers. As a result, products that contain human-grade ingredients, particularly those that have been certified by statutory bodies such as the US Department of Agriculture, will gain a significant advantage. Producers that can reassure consumers as to the provenance of their raw materials will also benefit. US-based Petfresh is a good example of a firm which has benefited from these shifts in the marketplace. In developing economies, economy products will be the main driver In developing economies, the premium segment accounts for a much smaller proportion of total pet food sales than in developed economies. Much of the growth that will be experienced over the 2007-2012 period is likely to come from the economy segment, as increasing numbers of people are lifted out of poverty in markets such as Brazil and China and chain retailers expand and deepen their distribution to reach these consumers. The economy segment in developing markets is particularly price sensitive, so it will be very difficult for www.franc h i s ee k . ca
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MARKET TRENDS GLOBAL producers to add value. The very nature of this segment precludes significant innovation, as the market simply cannot bear significant price increases. Moreover, private label products are likely to gain a higher profile in such markets during the forecast period as retail chains proliferate, which will put additional downward pressure on margins. The pet food and pet care products industry in developing markets will be aided by the rapid growth of specialist pet retailers in an immature retail environment, as well as the expansion of urbanisation and the greater reach of mass media. However, unlike their developed counterparts, most of the growth in such retailers’ private label sales is likely to come from the economy segment, as rising employment boosts disposable income and reduces poverty, adding millions of new consumers to the bottom of the market. Branded pet food products can address these issues by aggressively pushing into developing markets in terms of both distribution and marketing. Given the small size of many of these markets and their relative inaccessibility, it could be argued that such an investment would be uneconomic. However, this view is wilfully short-sighted, overlooking the huge potential for growth in these markets over the medium and long term. Some opportunities available for premium products in developing markets As a result of the limited affordability of premium products in developing markets, the ability of pet food producers to increase sales volumes will be limited. While there will be some potential for premium products in locations with concentrations of affluent consumers, including Moscow, Beijing, Shanghai, Mexico City and Rio de Janeiro, these will be niche, rather than mass, markets. However, this very limitation may prove to be a boon for foreign pet food manufacturers, as these discrete islands of affluence facilitate the distribution of their products, removing one of the main barriers to their entry into developing markets. This may make it more difficult for indigenous pet food manufacturers to develop their own premium offerings. Premium marketplace becoming increasingly segmented Given the limited size of the premium segment in these markets, new products tend to be less innovative and high-end than in developed markets. As a result, established premium brands such as Royal Canin tend to perform well, particularly in Latin America. However, the premium pet food market is becoming more segmented, particularly in Latin America, with products aimed at specific breeds proliferating. For example, in 2006, both Royal Canin do Brasil Indústria w w w. f r a n c h i s ee k .ca
e Comércio and Total Alimentos launched premium cat food products in Brazil aimed specifically at Persian cats (Royal Canin Size Nutrition Kitter Persian 32 and Equilíbrio Adulto Persa, respectively). Freshness may become an important point of differentiation One strategy that indigenous firms in developing markets can use to gain an advantage over foreign rivals at the very top end of the premium segment is to market their products in terms of their freshness, rather than in terms of the quality and functional properties of their ingredients. In order to counter this, foreign players will have to either invest in local production facilitates through either joint ventures or acquisitions or utilise the kind of innovative packaging solutions (vacuum packing, refrigeration etc.) which are currently being utilised by the likes of Australian firm VIP Petfoods. franchise focus 29
BUSINESS ADVICE CANADA
“Dollars & Sense” Tax time tips and preparation by Gordon Haslam, Ledger Canada
BUSINESS ADVICE
Gordon Haslam Ledgers Canada 17705 Leslie St.Newmarket, ON L3Y 3E3888-4700772sales@ledgers.com
Be reasonable with deductions: You will find that CRA is apt to be reasonable with you, if you are reasonable with them. This goes for both business and personal deductions. If you cannot reasonably defend the deduction, do not make the claim.
With the New Year arriving, it is now time to consider the looming tax filing requirements for both businesses and individuals. We present here some simple tips and considerations to help you prepare for your taxes and the coming year. Consider tax consequences before you act: many people rush into things without first considering the effect on their taxes. Always consult your tax professional before making an investment or major life decision. Always file your return on time; especially if you owe money to CRA. Save money by being organized when you take your taxes to your accountant - be organized and prepared, have all information ready before you go. Make an adjustment request if you notice an error; CRA allows you to go back up to 3 years and adjust your returns. If you missed deductions or credits, you could get a refund. DO NOT ask your employer to “take extra tax” off your paycheque; all you are doing is giving CRA an interest free loan. Instead consider making regular contributions (of the extra tax amount) to a RRSP. This has a double benefit - you will be saving for your retirement AND reduce your current taxes. Watch for Capital Gains: when you dispose of a cottage, stocks, or other investments, capital gains will likely occur. It is your responsibility to report these gains. w w w. f r a n c h i s ee k .ca
Treating employees as independent contractors: This is a very dangerous area. If you are not 100% certain of the status of the employee, request a ruling. The consequences of false reporting can be astronomical. If you expect a large refund, ask yourself why?: for future years, you can request from CRA a reduction in your taxes at source - you will have more take home pay each week. Consider collecting CPP sooner: The advantages of the additional income, generally outweigh the disadvantages of collecting CPP at age 60. Talk to your tax professional first. Split your CPP Income: If you and your spouse are in significantly different tax brackets, you should consider splitting your CPP, effectively reducing your tax burden. Common Law Filing: If you have lived in a conjugal relationship for more than 1 year, or if you have a child together, you MUST file as common-law. Married Couples should always file their returns together: Unused tax credits can be transferred from one spouse to the other, if you file your returns seperately (or if prepared seperately) you may be paying too much tax. If you have self-employment income, you have until June 15 to file your return. But, if you owe taxes, you must pay by April 30th. Consider the expression: “A lawyer that represents themselves has a fool for a client” The same is true for your tax preparation - it is best done by professionals. franchise focus 31
BUSINESS ADVICE
BUSINESS ADVICE CANADA
Using gift & loyalty card programs to grow your business by Matthew Hunt Gift and loyalty cards can provide a powerful way for smaller companies to compete. US-based Tower Group, a firm that specializes in gift card research, estimated that combined gift card sales would reach $97 billion in 2007. With the holiday season quickly approaching it may be time for you to consider how a gift and loyalty card program could benefit your business. The fact is, what you get out of a gift and loyalty program will depend on the effort and commitment you invest. Gift and loyalty cards can be a powerful way to grow sales and retain customers. Smaller companies can take advantage of these benefits, but they must be ready to implement them creatively and aggressively. In this article I will help you understand the costs, profitability and psychology of gift and loyalty card programs. I will also outline some creative, real-world examples where smaller companies have used gift and loyalty cards to outmaneuver larger, chainstore competitors. The cost of gift & loyalty card programs Typical gift and loyalty cards programs can seem pricey, but not if you understand how they work. Once you understand what the costs of the program will be, it is
Gift and loyalty card programs have four main costs: Initial set-up cost
$0 - $400
Fixed, one time cost
Monthly maintenance / system access
$20 - $59 / month
Ongoing, monthly cost
Gift & loyalty cards
$0.75 - $1.50 / card
Price depends on artwork requirements
then easy to implement a profitable campaign for your business. Consider a typical small business with products in the range of $25 - $50 that has ordered 150 cards. The company sets the value of 100 cards at $25 each and sets the remaining 50 cards at $50 each. That’s $5000 in gift cards overall. 32 franchise focus
Industry averages tell us that for most companies the “costs of goods and services” is around 45% of a product’s retail price. Using this average, when you sell $5000 in gift cards you will spend $2300 of that to cover your hard costs, leaving $2700 of profit on the table. Out of the $2700 in profit you deduct your cost. In this example the costs would be roughly $250 - $625, plus your ongoing costs. With these cost of the cards factored in, you still have a profit margin of over $2000. Breakage and uplift increase profits Gift and loyalty cards have indirect benefits. Not everyone will use all of the money on their card and many people will spend more than the value of the card in your store. In fact, studies have found that people will usually spend 30% more when using a gift card, which is known as “uplift” in the industry. Add to that the fact that 15-20% of all cards are never fully redeemed - a phenomena the industry refers to as “breakage” - and you are left with even more profits from your gift and loyalty programs. Using the previous numbers, the business owner would increase his or her profits by $1300 or 25-35%. $5000 X 20% = $1000 extra profits for unredeemed product or services $5000 X 20% = $1000 X 30% = $300 in extra sales These two benefits alone will see gift and loyalty card programs pay for themselves. Go ahead, play with the numbers, you will get excited. There is a reason, 8 out of 10 “Big Store Chains” have an aggressive Gift & Loyalty Card Programs in place. An important note about your legal requirements As cards become more popular, it is important for business to be aware of new legislation that may affect your gift or loyalty program. For example, Manitoba recently passed legislation that prohibits expiry dates or fees on gift cards. Under the new legislation expiry dates www.franc h i s ee k . ca
BUSINESS ADVICE
BUSINESS ADVICE CANADA
can only be used on a gift card if the card is given away during a promotion for a specific good or service. When implementing your program, make sure that you comply with existing or emerging legislation. The psychology behind gift & loyalty programs One the most basic psychological benefits behind gift cards is that people see the value on the card as “free money” or “found money”. The psychological effect is similar to that of a credit card, only much, much stronger. As a result, people spend more. Someone with a $50 restaurant card will usually indulge in a dinner for two, spending $120. Another shopper in a retail clothing store with $15 left on his or her card will splurge on an item that is $15 more than they would otherwise be willing to spend. A person who has a $5 Starbucks gift card is more likely to visit Starbucks instead of another coffee store. What’s more, they will probably use the gift card to buy an extra coffee for a friend or colleague. Other psychological benefits include: • The cards create a “walking billboard” every time the carrier opens his or her wallet. • Cards create a bond between the customer and the store. • Cards makes payments easy, with no searching for change for coffee, etc. • Cards enhance a business’s image Strategies to make your gift & loyalty programs successful Gift and loyalty card strategies can get quite sophisticated. However, you don’t want to rely on a display at the cash to promote your program, an approach that might work for a larger company that has huge marketing budgets to drive people to their locations. Smaller businesses need to employ more creativity. The trick to having great gift and loyalty card programs is never let the card run out. This is called “cycling” in the industry. A savvy merchant will work aggressively to continuously cycle their gift cards, because as long as there is an amount on the card then customers feel the need to come back. If you allow the card to reach a zero balance then the customer has no benefit to return to your business. You do this cycling enough times you create an unconscious habit in your customers over time. The habit is to shop at your location. w w w. f r a n c h i s ee k .ca
Successful strategies in action You should have 2 goals when planning your gift & loyalty campaigns: 1. Increase your customer base 2. Maintain your existing and new customer base. Let’s look at a real life strategies that have been successful gift & loyalty Campaigns. Lunch restaurant uses gift cards for launch The owners of a lunch time restaurant, located near a university, was about to open. They wanted to create a real buzz from the moment the store opened to ramp up their business. We came up with a plan to make 100 gift cards with a value of $4.00 each. The owners knew their average ticket price was around $8, with a “cost of goods and services” around about $2.50. They could afford to give the cards away and still make a profit. Two days before the opening we hired someone to hand out cards to students, explaining that they would only be good on opening day. When the restaurant opened its doors there was a line-up out the door. A lot of students brought their friends with them and many ended up spending $12 as an average ticket price.
Matthew Hunt Canadian Merchant Account Services Matthew Hunt has been involved in the Canadian Payment Processing Industry for over 4 years and has helped 1000’s of merchant set-up profitable card marketing campaigns. For more information on his services and products he provides go to http://www.Canadian-MerchantAccount-Services.com or call 1-800-262-3033.
And since the food and service was good, still to this day this lunch time restaurant has one of the busiest lunches in that area. Other strategies at play Gift and loyalty cards can be used in many unique ways. A few other creative strategies I have seen include: • Small business owners using cards as rebates on products instead of holding a sale. A sale gets people in the store, but it doesn’t encourage them to return. Rebate gift cards do both. • A high-end jewelry store giving out $50 gift cards during the holiday season to doctor’s offices, knowing the doctors are likely to come in and purchase an expensive product due to the gift card. Gift and loyalty cards have been used successfully by mechanics, massage therapists, beauty salons, restaurants, coffee houses, home improvement companies, accountants and companies in many other industries. This is no longer a business marketing method that is limited to larger companies, but a strategy that you can put to work in your business immediately.
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