How About a Franchise?
Types of Franchises
Product Distribution
Arrangements
Single-unit franchise
Business Format
Franchises
Area franchise
Master franchise
The Top 10 Franchise Organizations
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Yogun Früz Worldwide
McDonald’s
Subway
Wendy’s International Inc.
Jackson Hewitt Tax Service
KFC
Mail Boxes Inc.
TCBY Treats
Taco Bell Corp.
Jani-King
Articles in a Typical Franchise Agreement
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The full initial costs and what they cover
Use of the franchisor’s trademarks by the franchisee
Licensing fees
Land purchase or lease requirements
Building construction or renovation requirements
Equipment needs
Initial training provided
Starting inventory requirements
Promotional fees or allowances
Use of operations manual
Royalties payable
Continued
Articles in a Typical Franchise Agreement
(Continued)
• Other payments that must be made to the
franchisor
• Ongoing training requirements
• Cooperative advertising fees
• Insurance requirements
• Interest charges on financing
• Requirements regarding purchasing supplies from
the franchisor and prices
• Restrictions that apply to competition with other
franchisees
• Terms covering termination, renewal rights, sale of
the franchise and similar topics
A Sampling of Canadian Franchisors
Number
of Owned
Units
Boston Pizza
Dollar Rent-a-Car
Great Canadian
Dollar Store
Molly Maid
Dairy Queen
Canada
We Care Home
Health Services
McDonald’s
Restaurants
of Canada
Number of
Franchisees
/Dealers
Initial Fee
1
--
100
46
$45,000
$15-59,000
---
42
160
$15,000
$14,000
--
504
--
335
Approximate
Investment
Royalty Advertising
Required
7%
7
2.5%
2
$650-725,000
$90-150,000
4
6
---
$65,000
$18,000
$35,000
4
3-6
$450-1,200,000
43
$25,000
5
2
$50,000
727
$45,000
17%
--
$600-800,000
5
6
5
2
$225,000
$100-150,000
9
3
6
5
--3
1.5
$170-225,000
$275-360,000
$200,000
$500,000
(including rent,
service fees
and advertising)
Midas Muffler
Yogen Fruz
Second Cup
Coffee Co.
Tim Hortons
Kwik-Kopy Printing
Shred-It
20
108
230
4654
11
25
-12
360
1500
76
33
$25,000
$15-25,000
$20,000
$50,000
$25,000
$45,000US
Source: Adapted from The 1999 Franchise Annual, Info Franchise News Inc., 1999.
Future Trends in Franchising
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Conversion franchising
Increase in the number of women involved in
franchising
Growth in non-food retail stores
Impact of computer technology
Growth of franchised medical services
Continuing importance of restaurants
Growth of auto repair franchises
Growth in such areas as automobile leasing,
packaging and rapid delivery of parcels, home
building, medical centres, temporary help services,
business brokers and financial planners
Increased number of convenience stores
Growth of franchised educational services
What the Franchisee Receives
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Brand name recognition
Support from the corporation during start-up
Training of management and employees
Access to financial support
A proven business plan and strategy
Purchasing power
Corporate monitoring and assistance
Less risk of failure
National/regional promotion
Access to additional units
What the Franchisor Gets
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A high degree of control over their franchisees
An initial franchise fee as well as periodic royalty
payments and advertising contributions
A mark-up on the supplies and equipment
franchisees are required to buy from them,
thereby increasing their operating costs
Volume rebates or other benefits from suppliers
which are not typically passed on to the
franchisees
A way to expand their business quickly with
limited capital from the original owners
Continued