Canada is not one big, giant market to the north
Like its neighbor to the south, Canada has a lot of diversity between its provinces. U.S. franchisors need to divide it up into at least four territories and concentrate on the population within 100 miles of the border.
Geographically challenged Americans wanting to locate Canada on the map need only to look up—to the north. Another reference point: Of the two countries that border the U.S., it’s the one Donald Trump is not proposing we have pay to build a wall between us.
Canadians and Americans have much in common. For instance, we both have attractive heads of state (Canada’s prime minister, Justin Trudeau, is the eldest child of former Prime Minister Pierre Trudeau, and the second youngest person to hold the post); we both celebrate our independence from Britain; however, Canada celebrates three days earlier than our 4th of July holiday; we’re both worrying about the effects of Brexit on our economies; and both cultures are predestined to be “nice.” The author of business etiquette book “Kiss, Bow, or Shake Hands” takes exception to that, stating French-speaking Canadians, as opposed to non-French speaking Canadians, often interrupt each others’ conversations. But in fairness, New Yorkers tend to be pushy and other regions of the U.S. harbor passive-aggressive speakers.
But while we share a common language and a “look,” the two countries can’t be considered the same when it comes to franchising.
“The Canada of the past is not the Canada of the future,” says Edward “Ned” Levitt, a partner in the Toronto office of Dickinson Wright.
There is now legislation governing franchising in five of the 10 provinces, with a sixth approved and about to come onboard, so Canadian franchisors who may not have had success coming to America before, are much more savvy and prepared now when it comes to dealing with regulations, he says.
The most well-known example of a successful border crossing is Tim Hortons. While Americans think in terms of a cup of Joe, Canadians crave “some Timmy’s.” Freshii is another export that has performed well outside of Canada, although not yet to the point where Canadians call lunch “some Freshii.”
Levitt says he’s seeing foreign franchises coming first to Canada as a stepping stone into North America. For one thing, he says, “we’re not as litigious,” and the smaller market is easier to tackle.
But that market is no more homogeneous than the U.S.’s. And just as no franchisor would consider handing over the entire U.S. to one master, no one should expect a single master to do a good job of tackling the whole of Canada.
Canada is divided into 10 provinces and three territories. The population, however, is comprised of border-huggers. About 75 percent live within a narrow 150-kilometer band that runs along the border between the two countries, according to Bloomberg Business.
Its four largest provinces by area (Quebec, Ontario, British Columbia and Alberta) are also its most populous, accounting for 86 percent of the country’s population.
In order to conquer, Levitt suggests dividing the country into four territories: the Pacific, which includes British Columbia; Central, mainly Ontario; Quebec and Maritime.
Toronto, Ontario, is a good place to start, he says, because of the density of population and it’s the most like the U.S.
While adjusting your system to a new country—and it must be thought of as a foreign country, he warns—you’re in a good position to start to learn the nuances of the other provinces. Quebec, he points out, should be saved for later. “Don’t rush into Quebec,” he says about the one place in Canada where documents and labeling have to be in both English and French.
While the majority of the population is in big cities or close to the border, Peter Viitre of Sotos LLP, in Toronto, says that depending on the concept, smaller markets may be the best fit, where they’d be “the highly recognized game in town.” In addition, smaller markets tend to be more blue-collar than the large metropolitan areas, which could be a plus for some brands.
But while it’s true that franchising has matured in Canada, the regulations don’t always have regulators to explain the ins and outs of the laws as in the U.S. Since the government isn’t providing guidance, finding a local attorney is a nonnegotiable. “You really do need to rely on your attorney and they better be right,” Viitre says. “The repercussions of not complying can be steep.”
Canada has a different standard of disclosure than the U.S., and some of the case law is still being developed, he adds.
And while he agrees with Levitt that Canadians are not as litigious as Americans (is there any country that is?), litigation matters have picked up quite a bit.
There’s also a lot to learn about dairy laws, taxes and bookkeeping that require assistance from the appropriate local professionals.
While the most common mistake U.S. franchisors make going into Canada is to not think of it as going abroad, we’re not alone. Canadian franchisors also need to be warned that as a nation, we too have multiple personalities. Along with regulators. So best to get an attorney on the opposite side of the border as well.